Netflix Will Spend More on International Markets Than Stateside for the First Time

As the unprecedented output of episodic television finally contracts after a decade of sharp growth, the next chapter of episodic television is starting to take shape. One prominent feature of this transition is the funding of international films and shows, especially by global juggernauts Netflix and Amazon.

Netflix is projected to spend more than half its annual content allocation on titles produced outside of North America.

This year, Netflix will spend around $8 billion of its $15.5 billion allocation on international content, a first for the streaming giant. This allocation includes Netflix’s locally focused original content for its international markets or the licensing of titles produced outside the United States.

Studios and Streamers Look Overseas for Subscribers and International Hits

Spending in North America by television producers is expected to drop over 25% over the next few years from its all-time highs in 2022.

The costs to produce films and shows have exploded over the last few years in the United States for many reasons, verboten to mention. This new focus on international content aims to substantially drive down content creation costs while appealing to foreign markets far less saturated than English-speaking and European countries.

Streamers are also gambling that it can manufacture a multitude of international hits, like “Squid Game,” despite all evidence to the contrary. Purportedly, Netflix only spent $21 million to produce the series, which is nearly the cost of one episode for a third or fourth season of a stateside hit show.

Furthermore, Netflix and Amazon are now looking overseas as the U.S. market nears subscriber saturation and is likely heading towards contraction in the coming year. However, these supposed areas of massive growth, such as India and Africa, are fool’s gold for streaming executives and their already disappointed investors.

For instance, the monthly average revenue per user (ARPU) for Warner Bros’ Max streaming service in the last quarter of 2023 was $10.66 for domestic subscribers and only $3.37 internationally. Such a wide margin highlights the importance of retaining valuable domestic subscribers as the company tries to expand its streaming service globally, which is highly cost-intensive, as Netflix has learned.

Uncover What Streamers Like Netflix Pay to License Third-Party Films and Shows Worldwide with Distribution Intelligence from FilmTake.

Endless Content Spending Growth Faces Economic Realities

Global content spending is expected to grow to nearly $250 billion in 2024, up a modest 2% from last year. Last year was way worse than expected for content spending due to multiple strikes, an investor revolt, and audiences rejecting lazy sequels, spinoffs, and reimaginings of films and shows that lacked even a modicum of imagination or self-reflection.

Last year saw a significant decline in U.S. scripted releases, dropping by 24% to 481, down from 633 in 2021 and 2022. The decrease in scripted shows released in 2023 was unsurprisingly influenced by Hollywood’s concurrent writers’ and actors’ strikes, which halted most productions from May until November.

Netflix Reembraces Licensing Films and Shows After Originals Slump

Netflix’s recent refocus on third-party licensing, exemplified by the resurgence of middle-of-the-road shows like “Suits” and “Lucifer,” highlights a strategic pivot towards utilizing third-party content to bolster its catalog and retain subscribers.

Netflix’s reversal revitalizes forgotten gems and offers a lifeline to underperforming shows that went unnoticed on crowded networks. By turning these overlooked titles into streaming sensations, Netflix reinforces its position as a dominant player in the streaming landscape. This approach also addresses a critical aspect of content diversity, ensuring a wide range of storytelling that appeals to its global audience.

Despite the increased focus on licensing, Netflix will continue investing in original programming, but far less than in years past. For instance, in 2019, Netflix spent $15 billion on content, with 85% of new spending earmarked for originals, which was a high watermark. However, during this period, series content from three of the largest providers comprised nearly 60% of Netflix’s programming in terms of minutes viewed (Disney 19%, NBCUniversal 19%, and WarnerMedia 17%). Furthermore, in the US, only seven of the top 100 most in-demand shows of 2022 were Netflix originals.

According to Nielsen’s research in 2019, eight of the top most viewed shows on Netflix were reruns of studio content that were soon after removed from the streamer to bolster the studio’s emerging direct-to-consumer platforms, including “The Office” and “Friends.”

Given Netflix’s insurmountable global subscriber base, competing content distributors are again lining up to license their shows and films to Netflix, where even moderately successful viewership numbers will surpass those of most rival streaming platforms.

With the most significant content distributors reversing their plans to make content exclusive on their in-house platforms and Netflix originals falling flat, Netflix will lead the way in third-party licensing and once again resume its role as Hollywood’s aggregator.

FilmTake Away: Studios Search for a Magic Bullet to Fix Systemic Problems

Driven by a sustained emphasis on international productions, alongside the postponed debut of U.S. original titles and a heightened demand for sports rights, streaming services are poised to increase their total content expenditure in 2024, reaching $46 billion.

Nevertheless, the landscape isn’t entirely optimistic, with several studios scaling back on theatrical releases and broadcasters reducing expenditure due to sustained declines in television advertising revenue.

Studios seem incapable of captivating audiences that once brought diverse audiences to theaters after historic breaches of the social contract. It’s becoming increasingly evident that new strategies and management are imperative as Hollywood tries to orchestrate a creative reset.