What Netflix's Billion Dollar Investment Means For Hollywood

With an extra billion dollars under its belt, Netflix's strategy for original content is more ambitious than ever. Hollywood, beware.

Millie Bobby Brown as Eleven in Stranger Things

This November, Netflix will release a grand total of 32 new original shows and movies on their streaming service, including the second season of Maria Bamford's comedy Lady Dynamite, Marvel's series of The Punisher, and the adaptation of Margaret Atwood's period drama, Alias Grace. This follows a jam packed October, wherein Netflix released 29 originals, from the much-awaited second season of surprise hit Stranger Things to a celebrated documentary on author Joan Didion to the acclaimed crime thriller Mindhunter, David Fincher’s second show for the platform.

For anyone hoping to keep on top of the explosion that is Peak TV, Netflix certainly aren't making it easy. In the space of a mere decade, the streaming service has quickly dominated the market in its field and led the way in creating an expansive range of film, TV, documentaries and comedy specials that have helped them to stand out amidst an increasingly over-saturated market.

While other networks and streaming services have their benefits - Amazon has Oscars prestige, Hulu made history as the first service of its kind to win Best Drama at the Emmys with The Handmaid's Tale, and Disney will soon unveil their own exclusive service - Netflix have defined themselves by the sheer quantity of content on their platform and their willingness to spend billions of dollars in getting it. Next year, they will spend up to $8bn on creating original content – that’s up $1bn from this year - in the hopes of creating a library that's half licensed content, half Netflix originals. It's the kind of cash flow that most networks and studios would kill for, and Netflix are seeking to make it the norm year after year, even as questions of their staggering debt continue to remain unanswered. While the platform struggles to earn the legitimacy of Hollywood with its feature film strategies, Netflix are showing the upsides to their service that the traditional system can only hope to replicate.

Netflix's Mudbound

Money certainly talks, and Netflix’s investments are helping it to create some of the most expensive shows on air. The basic thinking behind this is that audiences will be driven to subscribe to the platform by the prospect of dazzling spectacle they won’t find on any other network. Other places are willing to spend big, most notably HBO’s Game of Thrones and Westworld, but with audiences’ attentions splintering and advertising revenue not what it used to be, making a profit off such ventures is easier said than done. Netflix’s model, shrouded in some level of secrecy, does not rely on viewership numbers, although they play their part when it comes to cancelling the least buzzed-about series. The platform reported that subscriber numbers soared, driven by the upcoming releases of new seasons of Stranger Things and Narcos.

On top of having the biggest shows, Netflix hopes to have the most shows. They have no need for scheduling or its problems, and their binge-watching strategy of releasing all episodes at once has proven hugely influential to the point where even traditional networks are doing it. This gives them freedom to do something as wild as release 32 originals in one month, averaging out at just more than one a day. Overwhelm the subscriber with choice and they won’t need to do anywhere else for their entertainment needs.

Millie Bobby Brown as Eleven in Stranger Things

So far, this strategy has worked out well for TV programmes, but their original movies have been a mixed bag in terms of audience and critical anticipation. That’s something Netflix is hoping to change with this new injection of cash. Not only are they making more films, they’re covering an immense spectrum of genres, audiences and budgets. There are the critical darlings like Noah Baumbach’s family drama The Meyerowitz Stories (which premiered at this year’s Cannes Film Festival), speculative genre mish-mashes like Will Smith’s “End of Watch with Orcs”, Bright, and of course, their divisive deal with Adam Sandler.

This year, the service also released First They Killed My Father, the harrowing true-life drama of the Cambodian massacre under the Khmer Rouge regime (directed by Angelina Jolie), and Dee Rees’ acclaimed Sundance favorite Mudbound, both of which Netflix will be pushing hard for Oscars consideration, and then they’ll be releasing the long-awaited Martin Scorsese film, The Irishman, with an estimated budget of $150m. All of that sounds incredibly ambitious, and it highlights an advantage Netflix has over the traditional studio system.

This summer, Hollywood suffered greatly at the box office. Box office revenue was down, audience attendance dwindled, and supposedly safe bets like the latest Transformers movie or Tom Cruise’s The Mummy failed to meet expectations. Indeed, the industry experienced one of the worst summers in recent memory, with moviegoers dismayed by subpar releases, the rising cost of tickets, and the enticing competition offered in the world of TV and streaming. People wanted to stay at home. Why pay $15 for one IMAX ticket when that could get you a month of content on Netflix? That’s the mindset Netflix are hoping will carry them far and beyond the limits of the traditional studio and distribution system. For Oscar consideration, they will have to give films like Mudbound brief cinematic releases, but the chances are far more people will see that film on Netflix than they could ever hope to from a limited New York and L.A. release in time for awards season.

On top of increased audience accessibility, Netflix can promise greater financial support to smaller and mid-budget fare. Scorsese may be one of the greats but after Silence flopped, his old studio Paramount pulled back on financing the very expensive drama The Irishman, which will use extensive CGI to de-age its actors. Unless you’re a superhero movie, getting anyone to fund your $150m film is a gargantuan effort, so it’s no surprise Netflix snatched it up while they could. If Scorsese, one of the great titans of the medium and one who vocally supports seeing films in the cinema, can go to Netflix, what’s to stop people like Spielberg?

Martin Scorsese on the set of Silence

There are obvious downsides to this strategy of immense spending and increased content. According to numbers released by Nielsen:

"20% of the time spent watching subscription-video-on-demand (SVOD) services—including Netflix, Amazon Prime, and Hulu—is spent on originals...The other 80% is spent watching the back catalog of content acquired from other TV and movie studios, like series re-runs and movies that have left theaters."

Netflix’s back catalog is admittedly impressive, but they’re losing out on major fan-favorites to Hulu, who recently announced pick-ups of old seasons of Seinfeld, How I Met Your Mother and Buffy The Vampire Slayer. Many beloved classics that used to be available for viewing on Netflix are now on Hulu or other services, and those are the shows people keep coming back for. How do you justify $150m on one movie when most people on your service just want to watch Futurama over and over again? For a service hoping to compete with the major studios in the film business, that may be a tough road-block to overcome.

For now, Netflix's approach seems to be going well for them, as investors are delighted to see subscriber numbers increase and buzz remain steady for new and returning originals. While the debt may be substantial and the risks obvious, if this strategy turns into long-term success, Netflix can spin that extra billion dollars into many many more. With the domestic box office in a tough place and studios struggling with financial decisions, Netflix are hoping to make a name for themselves as the studio who will do what nobody else will.


Yoda in Revenge of the Sith and Baby Yoda in The Mandalorian
Does The Mandalorian Even Know Who Yoda Is?