Netflix and Amazon are now spending more on original programming than CBS, HBO and Turner, a new report reveals.
The research by IHS Markit highlights just how big a part of the streaming landscape original content has become. Indeed, in the third quarter of 2016, Netflix outperformed expectations to race to over 86 million members around the world – a rapid rise it attributed directly to the appeal of Stranger Things, which enjoyed strong worth-of-mouth buzz all summer.
To get quality programming, though, VOD companies need to spend money. And Netflix and Amazon are seriously ramping up their investment. Im 2015. according to IHS, they spent $7.5 billion on programming — more than CBS, HBO, Turner and most countries, including South Korea and Australia.
Since 2013, Netflix and Amazon have more than doubled their annual expenditure on programming. In 2013, Amazon spent $1.22 billion; that jumped to $2.67 billion in 2015. In the same timeframe, Netflix’s spending rose from $2.38 billion to $4.91 billion.
The findings from World TV Production Report 2016 highlight how TV programme producers are adapting to the era of internet streaming.
“The levels of investment we are seeing from Netflix and Amazon are only topped by Disney ($11.84 billion) and NBC ($10.27 billion),” says Tim Westcott, senior principal analyst at IHS Technology.
Other online platforms, such as Hulu in the US and China’s Youku Tudou, iQiyi and Tencent, have also increased their investment in original programming and acquisitions.
“In what Netflix calls the era of internet TV, more and more consumers are watching content online, shaking the foundations of the traditional TV industry,” Westcott adds. “However, it’s premature to declare that the era of linear TV is already over, and Netflix and Amazon have come hard on the heels of a boom in production of original drama and comedy by the likes of AMC and FX in the US.”
There were 148 new scripted shows aired by basic cable networks in the US, up from 138 the year before and 96 in 2013, according to the IHS Technology report. In 2016 so far, there have been 113 scripted basic cable shows, compared to 78 on the networks, 31 on premium cable, and 57 online. To set these numbers in context: in 2012, there were three online scripted US TV shows, that number rose to 20 in 2014, 41 in 2015.
IHS highlights the dominance of the US in the worldwide programming market, with the country representing one-third of global investment in 2015, with $43 billion invested across free-to-air, pay TV and online.
“Amazon and Netflix, though they are US companies, are now commissioning for multiple territories, so we have treated them as global platforms,” notes Westcott.
After the US, the Western European region is the next most important, investing $38.6 billion, or just under one-third of the total. The biggest markets in Western Europe were the UK with $10.7 billion, Germany ($7.3 billion), France ($6.6 billion) and Italy ($4.6 billion).
“Notably, China is now the second largest market in the Asia Pacific region, with $8.4 billion invested last year,” comments Westcott.
Japan is the largest in the region with $9.8 billion, followed by South Korea ($2.6 billion), Australia and India — both on $2.4 billion. Leading Latin American markets are Mexico ($1.5 billion) and Brazil ($1.4 million). Canada invested $3.4 billion last year. Russia and Turkey were both around the $900 million mark.
While linear TV is far from done with, though, the trend is only set to continue: this week, Netflix CEO Reed Hastings confirmed that the streaming giant will spend $6 billion on content in 2017. In total, it will release over 1,000 hours of premium original programming, up from over 600 hours in 2016.
“The Internet allows us to reach audiences all over the world and, with a growing base of over 86 million members, there’s a large appetite for entertainment and a diversity of tastes to satisfy,” explained Hastings. “We are fortunate that our Internet-centric, on-demand, subscription-only business model allows us to support programs for both mass and niche audiences alike. Our personalisation algorithms help us promote the right content to the right viewers. And since we are not shelf-space constrained nor reliant on advertising, we have the luxury to tell all kinds of stories in less traditional ways.”