Movies that are released in theaters can profit by ticked sold, merchandising and ad revenue but what about streaming sites originals, those only available in digital form and exclusively in their platforms?
In: Economics
So as mentioned before they get money from subscribers. They also used investor money to pay for creating the shows as it will give them a unique catalogue that brings in new subscribers and hold current ones. One advantage of having their own shows is it‘s mostly a one time investment, after the costs of creating it, the show will remain part of their catalogue without any costs, for their other shows they pay licensing fees for as long as they are offering it, making it less profitable over time
Streaming Services sell subscriptions and offer product placements in their productions, sometimes even more shameless than Hollywood movies do. You are paying for “the cinema ticket” one month at the time. Their metric is somewhat simple. They invest in productions and people don’t leave the service, and hopefully even more join in. At the end of the year they compare the cost of all productions and other investments for that year, against their revenue. If they meet their protected target, financially, that means they are making good decisions and keep doing the same thing onwards. If they underperform they adapt their business plan accordingly and hope for a better next year.
You’re paying a subscription for the streaming service…
It’s the same idea as traditional TV. They’re not selling a ticket to watch each show but they know how popular it is, and more or less how many extra viewers it’s bringing in. They use that to decide if the show was worth the money they spent on it or not.
Basically, they don’t directly. They want subscribers to stay subscribed though, and for a long time it was cheaper to make their own shows and movies rather than pay the owner of the content more and more each time to keep getting the rights to it. If their subscriber counts continue to rise, then it’s worth it for them. They can see how many people are watching the show and decide if they should renew or cancel it based on that. Now that all the streaming services are putting as many ads in as possible, they will charge advertisers based on how popular the shows are, so they still need to make “good” content otherwise their viewership and ad dollars will plummet.
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