Why does Netflix produce original content? (2024)

Question: Why does Netflix produce original content?
Answer: The costs of producing original content offset Netflix’s licensing fees.

When a Netflix user watches a video Netflix has two costs:

  1. Internet: When people watch a video on Netflix, they’re downloading data from Netflix’s servers. Netflix has to pay a fee proportional to the number of bytes its viewers download. (This is why Netflix’s fees progressively increase based on the video resolution.)
  2. Licensing: when Netflix viewers stream a video whose license is owned by, say, MGM, Netflix pays MGM a fee.

Note that Netflix pays no licensing fee when it owns the content.

These two simple points give us our answer. We can ignore (1) since it is a constant — data is billed in bytes transmitted not on the quality of the content.

Estimation

Let’s suppose the following
Production cost = $10 million
Number of viewers = 10 million
∴ Cost per view = $1

If Netflix’s licensing costs exceed $1 per view they are better off producing original content.

In theory, there is no difference between theory and practice. — anon.

According to the website whats-on-netflix.com, the 2020 movie, Extraction, had an estimated 90M views in its first 4 weeks. Wikipedia says its budget was $65M. That works out to cost of $0.72 per view.

Further, remember that Netflix original content, once produced, is forever. Netflix has no recurring licensing costs to pay, no licensing renewals or negotiations.

Unlike Netflix and allied services, radio stations do not produce their own songs. Why is this? See “Why don’t radio stations produce their own songs?

Why does Netflix produce original content? (2024)

FAQs

Why does Netflix produce original content? ›

By offering exclusive and unique content, Netflix can stand out in a crowded market and retain its existing customer base . Secondly, investing in original content gives Netflix more control over its offerings and reduces reliance on licensing content from other studios.

Why is Netflix only showing originals? ›

If Netflix is able to determine that the IP being used to access their resources belongs to a VPN and or proxy provider, you will have access to Netflix Original titles only.

Why does Netflix want to create original content rather than rely on licensing shows from outside companies? ›

Cost: Licensing the most popular shows costs Netflix exorbitant sums. Originals provide more value per dollar spent. Brand identity: Originals like "Stranger Things" build Netflix's unique brand identity.

Does Netflix have good original content? ›

In this aspect, the reigning champion is none other than the original juggernaut of streaming, Netflix. As a result of both its seniority and expertise, Netflix has a higher quantity and quality of original content than any other platform currently on the market.

What is Netflix's original content strategy? ›

Original Content Investment: One of the cornerstones of Netflix's content strategy is its substantial investment in original programming. By producing exclusive content, Netflix not only distinguishes itself from competitors but also establishes itself as a premier destination for high-quality entertainment.

What is Netflix's original content? ›

Netflix's original productions also include continuations of canceled series from other networks, as well as licensing or co-producing content from international broadcasters for exclusive broadcast in other territories, which is also branded in those regions as Netflix original content.

Does Netflix ever get rid of Netflix originals? ›

In recent years, Netflix has lost plenty of licensed content, but many will be surprised to learn that some of the removals from Netflix have been Netflix Original titles. Here's the complete list of every removed Netflix Original since 2017.

Why is my Netflix not showing new releases? ›

You may need to refresh your browser, reload the Netflix app, or restart your device and relaunch Netflix to watch a newly released title.

Does Netflix only have originals now? ›

In March 2022, the number of Original and Exclusive titles in Netflix's US catalogue accounted for more than 50% of all available content for the first time in the company's history.

How does Netflix choose content? ›

Advanced AI Algorithms: Netflix's recommendation system is powered by complex machine learning algorithms. Personalized Experience: AI customizes content suggestions based on user behavior and preferences.

Why Netflix has different content? ›

The Bottom Line. Just as Netflix is in the business of streaming video to its users around the world, the studios are in the business of earning profits on their content. With current copyright laws and agreements, Netflix negotiates with each studio to arrange specific agreements to stream titles in each territory.

Is Netflix content the same all over the world? ›

Netflix is available in over 190 countries around the world. Each country has its own catalog of original and licensed TV shows and movies. The country on your account can't be changed unless you move to a new one. If you have moved recently, see Moving with Netflix for details.

Who produces the most original content? ›

Netflix provided the best high-quality original programming according to a survey from mid-2022 among U.S. adults. Amazon Prime Video ranked second with 68.2 percent of respondents stating that the streaming service has excellent or good original content, followed by HBO Max and Disney+.

What year did Netflix start making original content? ›

House of Cards was released by Netflix on February 1, 2013, marketed as the first "Netflix Original" production. Later that month, Netflix announced an agreement with DreamWorks Animation to commission children's television series based on its properties, beginning with Turbo: F.A.S.T., a spin-off of its film Turbo.

What is the most watched Netflix original movie? ›

Most Popular Films (English)
TitleViews
1Red Notice230,900,000
2Don't Look Up171,400,000
3The Adam Project157,600,000
4Bird Box157,400,000
6 more rows
Jun 20, 2023

When did Netflix start producing original content? ›

Development of original programming and distribution expansion (2013–2017) In 2011, Netflix began its efforts into original content development. In March, it made a straight-to-series order from MRC for the political drama House of Cards, led by Kevin Spacey, outbidding other U.S. cable networks.

When did Netflix create original content? ›

2013–2020s: Original content

As streaming became its primary revenue generator, Netflix shifted its focus to the production of original content in 2013. By 2023, Netflix boasted more than 3,600 original titles.

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