Netflix has now become the biggest and most popular OTT video streaming service in the world, with over 220 million users worldwide in 2022. In fact, it literally created TV and video streaming in the form we know it. Part of its enduring appeal is its ability to create original content at lightning speed. Better Call Saul, The Sandman, Orange is the New Black, Lock and Key, Stranger Things, and House of Cards are just some of the really big shows to have come to us via this service. But how and why does Netflix make content so quickly?
A brief history of Netflix.
Netflix began life in 1997 as an at-home DVD rental programme. However, it decided to change direction in the early 2000s, deciding to become an Over-the-Top (OTT) entertainment platform and swapping to a subscription-based model. In the past decade, it has accelerated this change, winding down the majority of its DVD rental programme.
In 2013, Netflix decided to start producing and showing its own content. Nowadays, it offers both original and licensed content on the platform, substantially increasing its popularity and the number of subscriptions it has gained.
Netflix was one of the first subscription-based TV streaming services to exist. Today, this kind of service is better known as Subscription Video on Demand (SVOD) and it is a business model used by numerous other companies such as Disney+, YouTube TV, and Amazon Prime Video. However, at the beginning of the Netflix story, Netflix stood almost alone in providing this kind of service.
How Netflix makes its original content.
Nowadays, Netflix generates the majority of its revenue from its huge number of subscribers, who pay between £10.99 and £15.99 per month. According to Statista, the company’s annual revenue for 2021 was $30 billion, and a large majority of this came from subscription fees. Due to its popularity worldwide, this looks set to grow further in the coming years.
A lot of the profit generated by subscription fees is used to create new and exciting content. Some of this content can be expensive and securing well-known actors and directors can also come at a high cost. As such, despite the service’s popularity, it is now considering other options to make money. One of these is a cheaper or free subscription service that will include adverts and use advanced TV targeting. This, it hopes, will open up a new revenue channel and encourage more people to subscribe at the same time.
Why original content is so important to Netflix.
Netflix may well be the world’s most famous and popular OTT entertainment platform, but this doesn’t mean it can afford to be complacent. To remain in front of its closest competitors, which are forever trying to overtake the brand, it has become essential for Netflix to produce original movies, TV shows and documentaries on a regular basis. If it ceased to do this and only showed licensed programmes, it would lose its competitive edge.