The Big-3 SVoD players – Netflix, Hulu, and Amazon Prime Video – will shift an increasing percentage of their content budgets from licensing third-party films and show to originals, according to new report, Big-3 SVOD and the Original Content Arms Race – Analysis & Forecasts, published by actionable intelligence specialist The Diffusion Group. By 2022, the amount invested in originals will triple to $10 billion (€8.05bn) annually.
“The Big-3 SVoD players own 60 per cent of TV streaming time,” notes Brad Schlachter, TDG senior advisor and author of the new report. “They are looking to grow this share by creating compelling originals that serve both to attract new users and retain existing subscribers even as subscription rates increase.”
Just how important are originals to retaining subscribers? According to TDG’s latest primary research, extremely important.
Among Netflix subscribers, 21 per cent rank originals as “absolutely critical” in their decision to keep using Netflix, while 41 per cent rank them as “very important”. Only 14 per cent said originals were of no importance in this decision. “The data is unequivocal,” says Schlachter, “though the relevance of original programming varies by service.”
Much like HBO decades ago, the Big-3 now have a much better understanding of the limits of licensed content and the benefits of a viable slate of originals. “Of course, not all originals find an audience or generate a huge buzz,” says Schlachter. “But when they do, it can change the fortunes of a company. Just look what The Handmaid’s Tale did for Hulu, or what House of Cards did for Netflix.”
As studios such as Disney pull their most compelling content from Big-3 SVoD libraries, the necessity of a strong schedule of originals becomes more obvious, suggests TDG. But the Big-3 are not the only players eyeing a larger slice of the originals on-demand streaming market. Companies as diverse as Facebook and Apple are investing in original TV-quality programming to distribute directly to consumers. Certainly, Disney’s initiatives to launch its own D2C ‘channels’ will make it a potent competitor in this space, concludes TDG.