Amazon, Netflix Forging Ahead With Original Content

Original content is seen as the key to growing subscribers for subscription video-on-demand (SVoD) OTT services. HBO was probably the first cable network to demonstrate the value of original content, and has found continued success in the OTT era with shows such as Game of Thrones. But Netflix Inc. (Nasdaq: NFLX) has been able to use original content to completely subvert the traditional Hollywood system and build its customer base to nearly 100 million subscribers today.

Amazon.com Inc. (Nasdaq: AMZN) followed suit last summer with its Amazon Prime Video service, announcing that it was doubling its spending on new content in the second half of 2016. It also said it was tripling its number of original shows, compared with the same time last year, trying to keep up with the OTT Jones' Netflix and HBO. (See Amazon Strategy Highlights Arms Race for Original Content.)

And this aggressive investment in original content has not slowed down. According to Variety, Amazon will launch its pilot season later this month. Using a unique process to select TV shows, Amazon will post five pilot episodes online and allow users to vote for the ones they want to see continued.

These are:

Part of the appeal of original content for Amazon is that it helps convert free trials to subscriptions and also helps drive usage of a wider set of Amazon Prime services. In fact, analysts have found that Amazon could potentially spend $130 more per subscriber because it makes it up via e-commerce transactions on the site.

Netflix also remains unintimidated by the high cost of original programming, continuing its investment, estimated at $6 billion annually. Most of that is in the US, but Netflix was at pains to highlight its investment in European programming earlier this week.

This follows rules from the European Commission in 2016 requiring streaming services to source a minimum of 20% of their content from the continent, along the lines of existing requirements for TV programmers.

At a press conference in Berlin, Netflix announced a broad slate of upcoming shows, produced in or co-produced in Europe. For example, Netflix will be co-producing BBC dramas Troy: Fall of a City and political thriller Black Earth Rising.

Netflix is also launching a new original series in German entitled Dark and Italian crime drama Suburra to add to its Spanish series Las Chicas del Cable about a group of female telephone operators. It also announced it will be buying the international rights to the French Middle-East drama The Spy from Canal Plus.

These add to an existing slate of European shows, including Marcella, Kiss Me First and Watership Down from the UK, the Spanish La Catedral del Mar and El Ministerio del Tiempo, and Rita from Denmark.

Clearly, this content offensive is aimed at keeping European regulators happy, and Netflix was keen to highlight its $1.75 billion investment in European content over the past four years. But it's also a practical strategy to engage users in each of these countries. Netflix is hoping that each local show will engage users and drive them to also try other, US-based shows via subtitles or dubbing. And of course, many Europeans are fluent English speakers as well -- younger, OTT-skewing audiences in particular.

While speaking at the Mobile World Congress in Barcelona this week, Netflix CEO Reed Hastings said the most surprising fact he had learned from Netflix's global expansion was seeing the breadth in the taste of people all over the world, and how open they were to content -- different genres, languages, regions. He cited a dark Norwegian drama (presumably Lilyhammer, Netflix's first European production) and how widely it had been appreciated, and also Narcos, a drama produced in multiple languages that had proven extremely popular. (See We'll Make Buffering Obsolete, Like Dial-Up: Netflix CEO.)

He is probably hoping the same will be true for this new slate of content.

— Aditya Kishore, Practice Leader, Video Transformation, Telco Transformation