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How Is Netflix’s Movie Strategy Different from HBO’s?

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Netflix’s movie strategy

In fiscal 2017, Netflix (NFLX) intends to spend 5% of its content spending on original movies. Although movie production is expensive, Netflix believes it’s worth it to spend $1 billion on producing original movies rather than the same amount on SVoD (subscription video on demand) rights from movie studios. Netflix believes that by producing original movies and releasing them simultaneously in theaters and on Netflix, it’s offering subscribers the latest movies with quality content.

The company talked more about its film strategy at the UBS Global Media and Communications conference earlier this month. Netflix said that its two movies from Adam Sandler have proved to be a success for the company in each of its international territories.

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Netflix further explained that around 33% of its subscribers watch movies, which indicates the popularity of the film genre on its service. The company further stated that in territories like Canada, Netflix has entered “five major studio output deals,” while in the United States, it has no major studio deals except for its deal with The Walt Disney Company (DIS).

Netflix already has an exclusive syndication arrangement with Disney for the Pay 1 and Pay 2 windows for films released through 2018. The company is also engaging in “opportunistic licensing” of movies. Spotlight, the movie that won the Academy Award for Best Picture earlier this year, will be available exclusively on Netflix in the United States.

Time Warner’s HBO programming strategy

The majority of Time Warner (TWX) HBO’s movie viewing occurs on its linear television network rather than its streaming service. However, earlier this year, Time Warner announced that HBO’s programming viewership is being driven mainly by digital platforms like HBO On Demand, HBO GO, and HBO Now. The company also stated at its fiscal 3Q16 earnings call that it has observed “substantial growth” in subscribers for HBO Now and expects this to continue with all its OTT (over-the-top) platforms including HBO GO.

In fiscal 3Q16, HBO made up 19% of Time Warner’s total revenues with revenues of $1.4 billion.

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