How do streaming services make money from original content?


Bonus points if you can also explain what the deal is with different movies and shows being cycled between the different services!

In: 8

Streaming services make money from original content by attracting new subscribers with exclusive shows and movies. They can also license their content to other platforms for additional revenue. Movies and shows cycle between different services due to licensing agreements with studios and networks.

Content attracts subscribers.

Original content will attract subscribers to that particular service and also has the benefit of not having ongoing licensing fees.

3rd party content will have licensing fees – but also has diminishing returns. For a spend of $x per year they might be able to hold onto a fixed library of 3rd party content but their customers will get tired of stale content, instead they negotiate fixed term contracts and cycle through content – this allows for a regular stream of new content. It’s more bang for their buck and more value for the subscribers.

Users pay streaming service to watch content.

If there is no content they will not subscribe to the service.

Streaming services can buy rights to stream stuff or they can make their own.

If they buy/rent stuff, it will be often content people have already seen in cinemas on DVD/Blue-Ray or on TV, it will also stuff they only have the rights to for a limited time and either have to pay more or give back and see some other rival streaming service end up with the tight. The rights also will most often be only for some region and not world wide.

If the make their own content, it means people, who want to watch it, can only (legally) do so on their streaming platform.

They own the right for it out right and for ever place and don’t have to spend money to keep it or to stream it in different regions.

Making you own exclusive content is more expensive but is a much better draw for customers than non-exclusive licensed content made by others.

Before streaming services the system was pretty consistent. A movie is released at the cinema and it’s only there for the next 90 days, nowhere else.

After 90 days it becomes available to buy or rent (in the old days that was VHS or DVD, today it means renting through Amazon, NowTv/ Sky TV (UK) or any other service that allows it digitally).

About 6-12 months after that, the movie would become available in the subscription window. I don’t know who that means in the US other than Netflix, but in the UK that was mostly Sky Movies, who had deals with all the major studios to take the first subscription window.

After 6-12 months on Sky Movies or Netflix, the movie would move into its second subscription window, which means whoever had that deal would get it next (in the UK that was Sky, then Netflix or Amazon generally).

The movie would go through a cycle of different companies before eventually coming all the way back around to the first company.

But note – that’s subscription. The purchase and rental deals remain available across all platforms. This is why you will sometimes see a movie to buy or rent on Amazon, but not to watch for ‘free’ (it’s not free, you’re paying a subscription).

These days things are changing. The studios now have their own platforms to distribute movies on, so they don’t need Sky and Netflix anymore. Sky used to have 95% of the previous year’s top 100 movies, now they have about 20% and it’s going down all the time.

Instead, studios are producing content for their own platforms in an effort to win subscribers. Netflix can no longer rely on deals with studios for content, so they produce their own too.

What you have touched on here is what happens when there are no more subscribers to gain. When growth peaks. Will it still be sensible to make streaming-only shows and movies? It would be for the aim of customer retention, but I assume won’t make as much money as distributing through other platforms (particularly theatrical).

By getting more people to subscribe. Plus many of them will have merchandise, meaning that they’re making money from that. Merch is also good because it means they’re making money even from the people who pirated the show.