Amazon and Netflix Look to Their Own Shows As the Key to World Domination

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This week, Amazon Video, the commerce giants answer to Netflix, invaded 200 countries. That expansion, too, was itself a sort of response: Netflix had pulled a similar globe-spanning stunt in January. Both moves were audacious, expansive, and potentially highly profitable. An neither would have been remotely possible had each company not spent the last several years investing heavily original content.

When you think of Netflix Originals and Amazon Studios productions, its tempting to focus on the flashy appeal of Luke Cage or marquee talent like Woody Allen. While important to a streaming services success, superheroes and auteurs dont in themselves allow for international scale. Golden Globes and Emmys dont power future-proof features. In short, its not the content itself that drives Netflix and Amazon Videos success. Its the fact that they control it.

The Rights Stuff

Amazon is in 200 countries, Netflix in over 190. That global reach sounds like a mighty technological feat, until you remember that both companies rely on Amazon Web Services, the most robust cloud infrastructure in the world. In January, Netflix launched in 130 new countries at the exact same time, a move that was less inventing the light bulb than flipping a switch.

In other words, the hard part isnt streaming Tumble Leaf the world round. Its making sure that when you do, theres enough waiting for people to watch. Could Amazon have launched in 200 countries this week without all those original shows?

Hell no, says Tony Gunnarsson, a senior TV analyst with Ovum.

The reason? International content rights are a mess, with local regulations and bidding wars creating a erratic web of availability. One recently illustrative example is The Big Short, which Netflix launched in every single market it operates in this past summerexcept France, which does not allow the streaming of movies within three years of their theatrical runs.

A lot of the time content owners might not necessarily hold all the rights to their content in different markets, says Parks Associates analyst Glenn Hower. International content rights are hideously complex.

Making your own shows and movies takes money, time, and logistical chops as well, but when youre done, youre done. Amazon can show Mozart in the Jungle in 200 countries today without issue. Likewise Netflix and Bojack Horseman. Better still, theyll retain those rights in perpetuity, obviating another common streaming complaint, that favorite shows and movies disappear. Original content never dies. It doesnt even fade away.

Netflix learned this lesson years ago the hard way. In 2008 it signed a four-year deal with Starz, giving it the rights to brand-new movies from powerhouse studios like Disney and Sony. The agreement sped Netflixs popularity while it lasted but caused a minor user revolt when all those A-list titles got yanked on the same day. The same may happen three years from now, when a deal Netflix signed with Disney back in 2012but just kicked in this fallwill run out, taking Zootopia and Captain America: Civil War and more with it.

‘Overall it is cheaper to produce your own series than to buy it.’

Thats why Amazon CEO Jeff Bezos recently committed to tripling his companys original content budget, and why Netflix plans to spend $6 billion in 2017. Its a big number, sure, but should be cost-effectiveand save a few headachesin the long run.

Overall it is cheaper to produce your own series than to buy it, says Gunnarsson, Particularly if the scale is on a global level.

Circumventing rights issues also makes it easier for Amazon and Netflix to offer offline viewing. Both services allow users to download content of all stripes, not just the movies and shows made in-house, just like both offer a combination of licensed and original content around the world. Again, however, the benefit comes from having that foundationand not having to renegotiate contracts.

Offline viewing also helps enable global expansion. Its going to be hugely important in markets like Africa and Asia, says Gunnarsson, who notes that connectivity can be unreliable in many parts of the world, making downloads when good Wi-Fi is available critical.

And all thats before you get to the actual, you know, shows.

Mission: Control

Think of a service like Netflix or Amazon making their own content, too, like making your own soup versus ordering take-out. You can control not just what goes in it, but how its made. The movies and sitcoms and dramas and docs that help attract and retain customers also build a brand. Rather than hoping some third-party studio makes something that resonates, streaming services are uniquely positioned to know what their audiences crave.

The key is that you have a creative agenda, you have creative needs, you have a specific audience that youre going for, says Roy Price, VP of Amazon Studios and global head of Prime Video content. You need unique shows, and shows that are tailored for your audience, and the brand and the statement that you want to make.

Amazon, for instance, limits some of its investment risk by running certain potential shows through its Pilot Season, where Prime customers can watch single episodes of proposed series and answer a brief questionnaire about what they liked and what they didnt. The winners go on to series, the losers dont. Price notes that not every series goes through this process—A-listers like Billy Bob Thornton tend to get a green light, for instance—but says that its been useful in the US.

Netflix, meanwhile, meticulously tracks user behavior to decide not just what shows it should invest in, but what sort of budget to allocate each movie and series. Theres maybe no better indication that this approach works (sometimes, at least, sorry Bloodline) than the exclusive four-picture deal Netflix signed with Adam Sandler in 2014. At the time, the move invited groans. The first of those movies, Ridiculous 6, became the services most-streamed movie ever after just 30 days of release.

Good-Looking Content

Its not just whats on the screen, though. Its how it looks.

In April of 2014, Netflix began streaming House of Cards in 4K resolution. Amazon followed with 4K streams of several of its own original series that December. Never mind that 4K televisions were barely on the market, much less in quantity. Because Netflix and Amazon controlled the productions, they could make them as future-proof as they wanted.

The same played out the following year with high dynamic range (HDR) content, a new spec that offers a brighter, more realistic picture. (Amazon beat Netflix to HDR, but by now both services offer an extensive library of 4K HDR originals).

Gunnarsson is skeptical about consumer embrace of 4K and HDR generally, but still appreciates why Netflix and Amazon invested in it so early. For them to say that everything is 4K is a massive marketing message. It gives them loads of ammunition to talk to consumer electronics partners, he says.

Higher resolution may also end up offering an even better return on investment. Remember, the rights to House of Cards wont expire for Netflix. Itll be on the service for as long as theres a service to be on. 4K HDR may still be on the fringes of popularity, but five years from now, when its as affordable as 1080p TVs are today?

Netflix and Amazons back catalogue of hits, hours and hours of binge-able series, will be waiting. Theyll be everywhere in the world. And theyll be picture perfect. All because those catalogs already belong to the same companies doing the streaming.

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