As reported in Tech Times, the cost of content, original and licensed, at Netflix will exceed $12 billion dollars this year, which is more than 50% of its annual revenue, but a fraction of its $44 billion valuation. It is also the reason why their efforts to build a robust library of original content is so important. The article states:
“Netflix original content production is one of the main reasons viewers subscribe to the service, according to a recent survey, in which the VOD streamer overtook HBO for the first time when consumers were asked which pay TV service produces the best original content.”
This demonstrates the stakes in an environment where a streaming service must establish its own bona fides in the original content competition. Like HBO in its early days, or more recently, MTV or TV Land, reruns, music videos and old features can only do so much beyond launching a channel. At some point, the reason for a viewer returning to a channel or service must be something that cannot be found elsewhere.
HBO did that with Oz, Curb Your Enthusiasm, The Sopranos, and now, Game Of Thrones. Netflix is succeeding with House Of Cards, and the pressure to deliver more hits will only accelerate. And I expect that, as content suppliers leverage their libraries to keep competitors – like Netflix – at bay, the price of even reruns will become out of reach for streaming services.