The streaming industry is undergoing a significant transformation as major players like Netflix, Amazon, and Apple are reducing their content libraries. This shift is driven by the need for profitability and differentiation in an increasingly competitive market.
One of the primary reasons behind the reduction of content libraries is the desire to pay smaller licensing fees. Streaming services are required to pay licensing fees even for their own film and TV shows, which can be incredibly costly. For example, NBC paid $500 million to buy back the rights to “The Office” in 2019. By shrinking their libraries, streamers can avoid these expenses and increase their profitability.
This trend has divided the major streaming companies into two camps: buyers and sellers. Netflix, Amazon, and Apple fall into the buyer category as they license content from other studios to enhance their offerings. On the other hand, Disney, Universal, Warner Bros. Discovery, and Paramount rely on their extensive legacy content to build their own services and generate revenue by selling it to the highest bidder.
The buyers benefit from acquiring content with a proven track record of consumer value, especially for newer entrants like Netflix. They can attract subscribers by adding popular shows like NBC’s “Suits” to their libraries. In contrast, sellers can monetize their existing content by auctioning it off, providing a source of capital.
Narrowing content libraries also leads to the need for differentiation in the streaming market. Many platforms initially aimed to offer everything to everyone, resulting in a lack of distinction between services. To combat this, streamers should focus on understanding the preferences of their subscribers and acquiring complementary shows and films that have not yet been licensed.
Smaller streaming services like BritBox and Shudder have successfully implemented this strategy. BritBox offers a wide range of British dramas, mysteries, and period pieces, while Shudder specializes in horror content. By identifying niche genres or themes that resonate with their target audience, streamers can set themselves apart and attract loyal viewers.
Data from Fandom, the world’s largest platform for entertainment fans, can provide valuable insights into consumer preferences and overlaps between different streaming services. For example, Netflix could consider adding shows like Nickelodeon and Paramount’s “Fairly Odd Parents” and “Hey Arnold,” Disney’s “Boy Meets World” and “American Dad,” and NBC’s “Saved by the Bell” to appeal to nostalgic sitcom lovers.
Each streaming platform has its own unique audience and content focus. Apple TV+ has gained popularity with dark investigative thrillers like “Severance” and “Defending Jacob,” which could pair well with Warner Bros. Discovery’s “The Leftovers” and Netflix’s “Haunting of Hill House.” Amazon Prime Video attracts viewers with action-packed shows like “The Boys” and “Jack Ryan,” suggesting that shows like Netflix’s “Jupiter’s Legacy” and Warner Bros. Discovery’s “My Adventures with Superman” would resonate with their audience.
Differentiating in the market is crucial for success, as it allows streamers to keep their viewers engaged and prevent them from canceling their subscriptions. By offering a unique lineup of shows in specific genres or targeting specific demographics, streamers can become indispensable to their subscribers.
Overall, the decision to reduce content libraries in the streaming industry is driven by the need for profitability and differentiation. Streamers are looking for ways to cut costs by avoiding licensing fees, while also attracting and retaining subscribers through unique and tailored content offerings. As the streaming landscape becomes increasingly crowded, this strategy will be essential for long-term success.
