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Striking the Perfect Chord: Balancing Originals and Licensed Content

In the dynamic and fiercely competitive world of digital entertainment, where streaming platforms reign supreme, the strategic deployment of content licensing and original productions emerges as a cornerstone for success. Understanding the intricate dance between these two approaches is essential for carving out a competitive edge in the evolving world of SVOD, AVOD, FAST, and traditional cable platforms.



Streaming Economics: Licensing Content vs. Original Production


One of the primary advantages of content licensing is the predictability of costs. Content buyers negotiate licensing fees with rights holders, often based on title characteristics such as popularity, ratings, cast, and release date, along with licensing terms like exclusivity, territories, monetization methods, and licensing time period. While licensing fees can vary widely depending on these factors, content buyers can budget accordingly, knowing the costs upfront. However, a potential disadvantage of content licensing is the risk that the acquired content may not resonate with the audience. To mitigate this risk, innovative content licensing models like Content as a Service (CaaS) have been designed to allow flexibility, enabling providers to change and adapt already acquired content based on audience preferences.


On the other hand, producing original content offers entertainment services unparalleled creative control, brand differentiation, and potential revenues from licensing this content to other services later on. Originals allow platforms to tailor content to their target audience's preferences, fostering brand loyalty and subscriber growth. However, producing originals entails variable costs that can fluctuate significantly depending on various factors. Unlike licensing, where costs are somewhat predetermined, the cost of producing originals can vary based on factors such as script development, casting, production scale, post-production expenses, and many other internal and external factors. The cost of production of original content can soar as high as 58 million dollars per episode, as evidenced by Amazon Prime’s "The Lord of the Rings: The Rings of Power"



Originals: A Magnet for Subscriber Growth, a Challenge for Retention


Original productions serve as powerful magnets for attracting new subscribers—an indispensable metric coveted by all digital entertainers. Parrot Analytics once proved that subscriber growth positively correlates with the number of original titles a particular service provides. Moreover, 32% of respondents in another study said they are ready to subscribe to a streaming platform for new originals that platform releases.


Tubi’s Streaming Research 2024 mentions a term called FOMOOTLT (Fear Of Missing Out On The Latest Tea) that is popular among Gen Z and Millennials. Almost 50% of respondents feel the pressure to keep up with the latest trends in streaming content, even if some of the shows or films are not something they would prefer to watch. Many of these individuals will subscribe to a particular streaming service solely to watch a specific trending title.


However, beneath this surface subscriber success lies a nuanced challenge: the phenomenon of "serial churners." These viewers, exemplified by the binge-and-bail behavior witnessed with hits like "Strander Things" on Netflix, consume a show and then swiftly depart the platform, presenting a unique hurdle for platforms banking on original content to drive growth.



The Library Legacy: The Significance of Content Depth


In navigating this ever-evolving digital entertainment landscape, striking the right balance is key. While original productions serve as the lighthouse, guiding new subscribers to shore, platforms must also master the art of retention amidst turbulent seas of churn. This involves, among other strategies, fostering lasting connections beyond individual shows and curating an expansive, diverse content library that keeps viewers anchored to the platform.


Deloitte's research sheds light on a fascinating trend: a staggering 50% of subscribers are drawn to a service primarily due to the sheer breadth of content choices available. To paint a vivid picture, consider the streaming giant Netflix: in 2023 alone, licensed content commanded a significant 45% of total streaming time. Moreover, industry-wide data reveals that a remarkable 75% of viewership across major platforms is devoted to licensed content.


Licensed content doesn't always need to be fresh. In fact, there's a rising trend towards TV content that's more than 10 years old. According to Tubi’s Streaming Research 2024, a whopping 98% of respondents expressed a fondness for diving into the nostalgia of their childhood and youth-day shows and films.


In this digital age, the keyword is adaptation. Streaming platforms must not only harness the allure of originals but also embrace the enduring appeal of licensed content to captivate audiences and navigate the turbulent waters of subscriber retention.



Adapting to Industry Disruptions: Leveraging Content Strategies Amidst Crisis


The media and entertainment industry is no stranger to upheavals, with recent events such as the COVID-19 pandemic and the 2023 Writers & Actors strike triggering shifts in content strategies. The strikes of 2023 sent shockwaves through the industry, resulting in the postponement of numerous premieres by at least a year, leaving 72% of American respondents frustrated with the uncertainty surrounding release dates of their long-waited TV series and films.


Entertainment providers heavily reliant on original productions find themselves particularly vulnerable during these unpredictable crises, forced to navigate uncharted waters with agility and innovation. In the wake of disruptions caused by COVID-19 and the SAG-AFTRA strikes, industry leaders are turning to a tried-and-tested solution: content licensing. With productions on indefinite hold, savvy providers are leveraging content licensing agreements to fill programming gaps, ensuring a steady stream of content to keep audiences engaged and satisfied.



Crafting a Content Strategy: Niche Appeal vs. Mainstream Appeal


With all the costs involved, whether we are talking about original or licensed content, it is important to understand your content strategy – niche or mainstream. In our recent NATPE wrap-up article, we touched on niche content as a powerful strategy for services to build a loyal subscriber base or a “fan base”, especially is we are talking about AVOD & FAST Channels who can attract niche viewers for free and then convert them into paying customers. However, mainstream content has its perks too, undoubtedly. According to findings, mainstream genres like Comedy and Family & Kids Entertainment are among the most popular, most engaging, and churn-reducing genres even if we talk about not-so-freshly-produced licensed content.


The conclusion is crystal clear: magic happens when we blend the artistry of original creations with the reliability of licensed content. Think of it as a dynamic duet, where each partner brings something special to the stage.


Original productions steal the spotlight, drawing in fresh faces and building fanbases. They are the trendsetters, the groundbreakers, and the pulse of streaming platforms. But let's not forget about the unsung hero: licensed content. It's the backbone, offering a steady rhythm of viewer engagement and a diverse buffet of entertainment choices.


We, at allrites, offer you risk-free film and TV content licensing with our unique CaaS model and hours of diverse content to choose from.

 

 

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