Netflix has quickly reached the conclusion that subscribers steadily spend “1/3 of the time” watching movies on Netflix, regardless of the market (US vs. Canada) or the availability of top ranked movies. Die hard fans will not wait for 6-7 months to watch the movies on Netflix; it is not worth it for Netflix to pay for the expensive licenses of the big-box releases. Instead, Netflix emphasizes on repetitively viewed movies, such as Disney’s films. Netflix also knows its limits, not to compete with the big boys for bidding the high royalty fees of the live spots.
Netflix is aware of its leadership position in original content production. Q3 2016 results blew away all expectations and guidance. The company credited the beats to new original content, specifically the second seasons of “Narcos” and “Stranger Things.” It is the high front-end cash investment which translates into its high quality.
That said, Netflix is at the junction of blurring the line between its original content and traditional Hollywood production. Case in point, the highly anticipated “Crouching Tiger, Hidden Dragon: Sword of Destiny” has been a disappointment for Netflix. Ironically, the supposed original-content sequel is more like a Hollywood made film than its “original” Hollywood release.
Even the newly released “Narcos,” the moneymaker for Q3 2016, is ranked 14th of Netflix’s top 21 original series, per SymphonyAM, a research company.
While Netflix experienced a significant increase in international subscribers in 12 countries, they also admitted the defeat of licensed services in the Chinese market. On the other hand, the well-known success of “American Idol” and “Britain’s Got Talent” also prompted the strategy to invest in local unscripted realty shows.
Netflix is good at placing users in different countries at different stages of its “product life cycle.” As most emerging countries still have less effective internet connection, similar to just a few years ago in the U.S., Indian subscribers would download their favorite movies overnight and watch them the next day. As the availability of real-time streaming is not critical, for oversea markets, there is a significant effort to introduce offline streaming.
The real question for Asian countries is that movies from the west equate to Hollywood movies. As Netflix’s original content production is still in its infancy even in the U.S. and Europe, it will take a long time for the emerging countries to appreciate the concept of original content.
Finally, Netflix knows not to pick fights with the Chinese government. Citing “challenging regulatory environment,” Netflix conceded the licensed products to local foreign operators.