About Netflix and Amazon not buying other people’s content
After Netflix and Amazon bought a combined 15 titles at least year’s Sundance Film Festival they walk away with exactly zero this year because of an evolving digital content strategy:
They showed up, took the meetings and put in bids but ultimately they came home empty-handed. Why?
They know the value of owning content
With the success of originals like House Of Cards, Orange Is The New Black, Stranger Things and others, they’re coming at the content business from a position of power. The power is knowing their audience intimately through data. It’s not like they don’t have the budget to spend with Netflix projected to spend $7-8 billion in 2018 and Amazon projected to spend more than the $4.5 billion they spent in 2017. But they will only spend up to a certain amount to acquire someone else’s content because they know the greater returns they get by spending more on something they own outright.
Quality = revenue
There are a few more steps in between but if you do the first part right, the rest happens. Focus on a quality product that people want and the revenue will come. That sounds like a leap of faith. If only there was an Excel formula for your financial forecast:
Netflix has figured this out. They went from a streaming service that started with lots of quantity but little quality. In true Innovator’s Dilemma style they moved upmarket to develop up their game by offering their audience something they couldn’t get anywhere else. And House Of Cards wasn’t just acceptable, it was exceptional. This is what drives Netflix, as explained by Rich Greenfield of BTIG: “The key asset that Netflix has is size. It’s 100 million subscribers ahead of all of its peers,” said Greenfield. “This size gives it the ability to invest more heavily in content, which leads to more content that consumers want to watch, more watch time, and stickier subscriber. It’s a virtuous circle that’s really fueling Netflix.”
Being the pipe gets you nowhere
The days of being the pipe — of building a media business on licensing — is eroding. You can be outbid at any time for the rights to third party content. And that is particularly disastrous to a business that relies on one or two headliners to drive its business.