Analysis: SVoDs scaling to compete with studios

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The first quarter of 2021 saw the highest number of Original movies commissioned by Netflix in its history, according to research firm Ampere Analysis.

Driven partly by the phenomenon of Covid-catch-up (making up for time lost to lockdown production shutdowns), the ramp up is also a reflection of the on-going importance of movies to both Netflix and Amazon in the face of renewed competition from movie-rich studio majors.

While Netflix is following a strategy similar to that used for its high-end TV productions by focusing on Originals, Amazon’s strategic focus on movies is fuelled by licensing and by its recent agreement to acquire MGM and its library of 4000+ titles. Netflix’s Original movie strategy, in particular, is focused on growing access to franchise-able IP as it leverages adaptations and reboots, drawing lessons from its TV Originals.

Netflix has long been by far the largest SVoD commissioner of Original movies, which have consistently accounted for around 25 per cent – 30 per cent of its first-run commissions each quarter since Q4 2018. A bumper slate of new projects in Q1 2021 represents the highest number of movie orders in a single quarter.

Now Netflix is looking to play the studios at their own game by developing new movie franchises or acquiring franchise-building Intellectual Property (IP). Franchise building is a key driver of Netflix’s movie commissioning strategy. Of Netflix’s Original movie commissions made this year, 46 per cent have been remakes, sequels, spin-offs, or adaptations of existing IP.

Netflix has been adopting an acquisition-to-Original model in its movie commissioning strategy, acquiring the rights to make sequels to existing box-office hits. Most recently, Netflix bought the rights to make two sequels to Knives Out in a reported $450 million pay-out. But the platform was already implementing this model on a smaller but international scale earlier on in the year, commissioning sequels to titles including On the Other Side of the Tracks in France, and Happiness is a Four-Letter Word in South Africa.

The shake-up of the theatrical market caused by Covid-19 has catapulted movies to the forefront of new streaming services’ competitive strategies. In the face of blockbuster studio releases from heavyweights such as Disney and Warner Bros. launching direct to consumer, players including Netflix, Amazon, and Apple have rushed to bag films previously intended for the box office.

Amazon acquired Sci-Fi Action movie, The Tomorrow War and Apple bagged the rights to Sundance indie hit, CODA, set to be released on Apple TV+ in August. With Paramount and Disney following Universal’s lead and shorter theatrical release windows looking increasingly likely to become the norm, exclusive licensing deals such as the one Netflix agreed with Sony in April 2021 will remain crucial as streamers scramble to establish their own rival properties.

Continuing to grow its slate of Originals organically through in-house production makes sense for Netflix with its rapidly expanding global production capabilities, but not necessarily for Amazon Prime Video which continues to focus on the markets where its parent company has the greatest foothold. It is instead looking for ready-made franchises to acquire to boost its already strong position in offering a huge choice of movie content.

MGM’s studio’s film library was the driving motivation behind Amazon’s recent acquisition. Prior to the expiration of the company’s licensing deal with MGM subsidiary Epix in June 2021, Prime Video was already home to over 70 per cent of all MGM-distributed movies available on streaming platforms in the US. The permanent addition of those movies alone to Amazon’s catalogue would see its store of in-house movies overtake that of Netflix. With a touted further 2700+ movies in the MGM vault, the acquisition will substantially increase Amazon’s already considerable movies offering.

Although Amazon has by far the largest number of movies of all the SVoD services, currently its in-house movie content accounts for around 1 per cent of those. Its acquisition of MGM could see it lead its rivals in terms of in-house content, and gives it ownership of properties such as the Rocky/Creed films from the United Artists catalogue which will be crucial to efforts to build on film franchises with lasting appeal, as will horror franchises such as Poltergeist and the upcoming Candyman reboot. It has also got its hands on the blockbuster James Bond property which offers a new and hugely lucrative potential theatrical revenue stream.

“While the platforms’ strategies necessarily differ, both Netflix and Amazon are pursuing the same goal of competing with the traditional studios on the level of tentpole titles,” advises Alice Thorpe, Analyst at Ampere Analysis. “Netflix can now lay claim to true studio status in terms of the global production infrastructure it has established in recent years, but it is still chasing franchise success when it comes to movies. What’s clear from its recent commissioning is that the platform is not just relying on sequels to the likes of comic book adaptation ‘The Old Guard’ to make that happen; building local franchises with crossover appeal in multiple territories is also key to its strategy. Meanwhile, Amazon is buying into the franchise game to enable it to scale up from its critical successes. The global brand recognition that comes with a property like Bond will help further assert Prime Video’s independence from Amazon’s ecommerce business by making it a destination for bona fide blockbusters as well as buzzy indie titles.”


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