Streamers could take advantage of studios’ experience, while studios try to replicate streamers’ experiences, but neglect their own.
What would happen if — while the major U.S. studios retreat from international content sales in order to feed exclusive fare to their DTC services — major streaming services like Netflix and Amazon enter the global content sales arena?
After all, subscribers tend to watch just a small percentage of these libraries, while the bulk sits idle, collecting digital dust on their servers (consider that The Office, the top show when it was on Netflix, was watched by 7.19 percent of viewers). We also know that Netflix users watch an average of 3.2 hours of video per day.
To analyze this, let’s turn to more available figures from Netflix, although the same could be valid for Amazon.
Since it began producing its own original content in 2013, Netflix has amassed 1,500 original titles. Na-turally, its library is larger and consists of over 15,000 titles, of which 13,612 are licensed, but not for all ter-ritories. Only 37 percent of these are for worldwide. The largest library, with 5,087 titles, is in its U.S. service. The number of titles that Netflix purchased outright is estimated at 20 percent. That’s about 2,722 titles, which, added to the streamer’s 1,500 original titles, gives Netflix a fully owned library of over 4,200 titles, which matches that of the 97-year-old MGM Studios, with its 4,000-title library. (Other U.S. studios average about the same.)
Netflix could well monetize parts of its 4,200 titles by selling some 600 titles internationally, which, by the way, is what MGM licenses, as do all of the other studios. To facilitate this new enterprise, Netflix could also use its four offices in the U.S. and 10 internationally.
Now, there are several considerations to take into account to determine the size of this potential business.
First, Netflix would have to roll the titles out across, let’s say three years, as 600 new titles hitting the market at the same time would dilute the value. Then, knowing from experience that 80 percent of the revenue will come from 20 percent of the titles, brings us to 120 valuable titles, which means li-censing 40 titles per year.
However, in order for their stock not to take a hit on Wall Street, they have to limit the number of their ori-ginal product on the market.
For television, with a minimum of eight episodes that are 60 minutes each (45 minutes effective), each episode could fetch, on average, $3.5 million worldwide or $28 million per title. If all 40 titles released were from television series, revenues could reach $1.112 billion per year. And if the licenses were limited to a three-year period, between renewals and the sale of 40 additional titles, revenues at the end of the first three-year cycle could reach $5.2 billion.
For just movies, each title could generate an average of $12.5 million worldwide, or $500 million per year, which at the end of a three-year cycle could bring in $2.2 billion.
With a mixed catalog of, let’s say, 50 percent TV series and 50 percent movies, the three-year cycle could generate $3.7 billion cash money!
The moral of the story is that, while the U.S. studios are replicating the experience of the streamers and shunning their own, the streamers could be taking advantage of their own experience, plus that of the studios, to become even more rewarded and influential on both BTB and DTC levels.
(By Dom Serafini)
Audio Version (a DV Works service)
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