The Cost-Effectiveness of Acquired Films for Netflix
A recent report from Ampere Analysis has shed light on Netflix’s movie strategy, revealing a significant advantage in acquired studio films—particularly those featuring a wide theatrical release. These films yield greater views per dollar compared to Netflix’s original features and series, marking them as a more cost-effective choice for the platform.
Key Findings from the Report
Titled “Unpacking Netflix’s Evolving Movie Strategy,” the report highlights that acquired films, especially those from Netflix’s pay deals with major studios like Sony and NBCUniversal, play an essential role in driving overall viewership. Author Christen Tamisin notes that such films present a lower cost-per-view, making them a financially attractive option relative to the streaming giant’s high-budget originals.
Financial Insights on Licensing
In the first half of 2023, Netflix allocated a substantial $1.07 billion towards movie licensing, resulting in 9.23 billion views for these acquired titles. By comparison, the investment in original films was roughly $0.51 billion, attracting significantly less viewership at 3.98 billion. While original and acquired TV series accumulate more total views across multiple seasons, they are considerably less cost-efficient on a dollar-per-view basis. According to Ampere’s calculations, the average spend-per-view was approximately:
- Licensed TV Shows: $0.55 per view
- Netflix Originals: $0.68 per view
- Licensed Movies: $0.12 per view
- Original Features: $0.13 per view
Top Performers on Netflix
Despite these findings, Netflix’s original movies continue to attract a large audience, with titles like Millie Bobby Brown’s fantasy film Damsel leading with 144 million views in the first half of 2023, followed closely by F. Gary Gray’s heist comedy Lift at 129 million views. In the realm of acquired films, Universal’s The Super Mario Bros. Movie secured the top spot among these titles, garnering 80 million views, while other hits like Minions and The Equalizer 3 followed suit.
Viewership Trends: Original vs. Acquired Films
One notable trend highlighted by the report is the “decay rate”of viewership for original films compared to acquired titles. Films that garnered at least 12 million views at their initial release experienced a sharp decline over the year. While original films started strong with an average of 30 million views, they fell to about 9 million views on average a year later. In contrast, acquired films had an initial viewing average of 20 million and showed lasting appeal with an average of 12 million views after one year.
Longevity of Library Titles
Among acquired films, those sourced from esteemed U.S. studios demonstrate the best longevity, with library titles—those first released prior to 2020—exhibiting the most robust viewership retention. The average viewership decay for these major titles stood at just 29%, significantly lower than the 49% decay for newer studio films and 57% for lesser-known library films.
Strategic Shift Towards Acquisitions
The findings indicate a strategic pivot for Netflix, as the count of commissioned original films dropped significantly from 190 in 2021 to 105 last year, a reduction of 45 percent. Furthermore, acquired films constituted 84 percent of Netflix’s film catalog in 2023, up from 80 percent the previous year. Notably, licensed titles represented 91 percent of the platform’s film offerings just five years ago.
Future Developments in Netflix’s Library
Looking ahead, Netflix plans to incorporate more major studio films into its library. The company recently expanded its deal with NBCUniversal to include animated features and secured U.S. streaming rights for live-action films from Universal Pictures and Focus Features. This agreement allows these films to stream on Netflix no later than eight months after their theatrical release, following an exclusive period on Peacock.
Conclusion: Netflix’s Theatrical Focus
While Netflix continues to embrace acquired studio films, its commitment to exclusivity remains strong. CEO Ted Sarandos emphasized that the core strategy is to provide members with exclusive first-run movies on the platform. Exceptions exist, such as a brief theatrical window planned for Greta Gerwig’s upcoming Narnia adaptation, highlighting Netflix’s focus on maintaining a primarily online-first approach.