Netflix continues to bank on its original content for good reason
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Netflix continues to bank on its original content for good reason

Streaming video on demand (SVOD) market leader Netflix is more than just top dog in the streaming world – it pretty much invented the business model. When it debuted its streaming subscription service, it was the only game in town. That meant it had access to a huge library of pre-existing content… who else would the networks license it to? Today, the situation’s a little different… but that’s looking like less of a problem than most people would have guessed – largely because Netflix has mastered the art of content creation, giving it exclusive access to top-quality shows and films.

Netflix doesn’t reveal viewership numbers, but a November 2018 listing of most popular shows on its platform featured a large number of its own content – 6 of the top 10 spots!

netflix chart 300519

Source: The Motley Fool

With entertainment juggernaut Disney debuting its own streaming service and ecommerce giant Amazon competing aggressively through Amazon Video and its Prime membership scheme (which includes access to a vast library of content), Netflix is no longer in the enviable position it once was. But, with an approach to original content that has benefited from a decade of practise and billions of dollars of investment, it may have evolved to the point where it can fend those rivals off.

Netflix’s share price has appreciated by 36% so far in 2019

netflix g 300519

Source: Yahoo Finance

With Disney now a direct competitor, Netflix will lose access to a significant stable of content. And as more and more networks debut their own streaming services, that situation will be exacerbated. That means that Netflix, for better or worse, is likely to start selling itself on the back of its original content. Based on the figures above, that may still be a winning proposition.

A shift towards more original content would come with two more benefits for the company: first, total control over the content on its platform. Netflix’s original shows have, on a number of occasions, captured the zeitgeist to great success (think of The Chilling Adventures of Sabrina’s social justice wokeness, or Stranger Things’ retro 80s nostalgia). And second, there are real cost benefits to producing your own content. If Netflix starts making more of it, and it’s as successful as its previous attempts, that could start translating into better financials for the company.

Disclosure
Dominion holds Netflix in its Global Trends Ecommerce Fund. Share price as-at 23 May 2019


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