Report: Hollywood is afraid of Netflix’s, Amazon’s programming spends

Amazon-Netflix

Today’s media landscape is being described as the “Wild West” for TV programmers.

“We’re not only competing with the 500 other cable channels, but Netflix and Amazon, who seem to have unending bales of money,” Andy Cohen, executive producer of Bravo’s “Real Housewives” franchise,” told CNBC this week.

Cohen’s comments aren’t out of line. Netflix this year is spending $5 billion on original content and licensing of existing content.

While not as high, Amazon this year is spending an eye-popping $3 billion for video and music for its Prime service. A note issued to investors at the beginning of the year said the Internet giant plans to grow that number by $1 billion a year, which some say could slow Amazon’s future profit growth.

The question, of course, for business minds is, will it pay off?

Netflix has been voted the “best” original content media company compared to cable or any other internet-video service (although a CutCableToday analysis showed its content wasn’t rated the highest when compared to the likes of HBO and Starz).

According to a Forbes analysis, Netflix subscribers are estimated to increase drastically in the next five years. With a bigger base, the streamer has more leverage and can drop costs in things like marketing. It’ll probably also increase its price.

“Thus, we estimate its domestic streaming contribution margin to increase gradually from nearly 37 percent in 2016 to around 43 percent by the end of our forecast period.

The report goes on to say the more Netflix invests in quality original content, the better off its going to be.

Today, Netflix has 81 million subscribers; Amazon Prime has about 58 million to 69 million Prime subscribers. That’s important because of viewership ratings.

AMC’s “The Walking Dead” midseason premier pulled in 13.74 million viewers. Only 1.7 percent of Netflix subscribers would have to watch the premiere of one of its originals to match that statistic. According to Variety, more than 2 percent of Netflix subs watched the entire first season of “Daredevil” within 24 hours.

Andrew Dodson

Andrew Dodson is a journalist from Michigan who writes for MLive.com, the state's top online news source. Email him at andrewdodson@streamingobserver.com.
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