Amazon Prime Video, Hulu and Netflix are forecast to triple their combined spending on original content by 2020, to $10 billion annually, as they increasingly shift budgets away from licensed content, according to a new report from The Diffusion Group.
“The Big-3 SVOD players own 60 percent of TV streaming time,” Brad Schlachter, TDG senior advisor and author of the new report, said in a statement. “And they are looking to maintain if not grow this share by creating compelling originals that serve both to attract new users and retain existing subscribers even as subscription rates increase.”
TDG polled SVOD subscribers to determine what extent original content plays into a customer’s decision to keep using the service. For Netflix subscribers, 21 percent said originals were “absolutely critical” in their decision, while 41 percent ranked them as “very important,” and 14 percent said originals were “of no importance.”
Netflix reported adding 8.3 million subscribers globally in the fourth quarter of 2017, and said it plans to spend $7.5 billion to $8 billion on content this year. The company did not indicate how much of that budget is slated for original content, but Netflix has been delivering a host of original series, including major hits like Stranger Things. Netflix has also said it’s increasingly producing original content in-house.
Amazon last year spent a reported $4.5 billion on content, while Hulu’s content budget was about $2.5 billion. Hulu has been less aggressive than Netflix when it comes to original series, but has also come out with hits, even garnering an Emmy win last year for its original series The Handmaid’s Tale.
“Of course, not all originals find an audience or generate a huge buzz,” said Schlachter. “But when they do, it can change the fortunes of a company. Just look at what The Handmaid’s Tale did for Hulu, or what House of Cards did for Netflix.”
TDG anticipates original content will continue to grow in importance for SVOD, as studios like Disney pull their content from the services. The firm sees Disney becoming a potent competitor in the SVOD space as it comes out with its own direct-to-consumer service. Facebook and Apple are also entering the game by ramping up investments in original TV-quality content.
