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Video Briefing: Netflix doesn’t make all of its own ‘Originals’ — and that’s OK

Netflix did not invent the concept of the capital-O “Original,” but it has been the most aggressive company in terms of using the label to brand and market its exclusive programming — even if it didn’t commission or produce the show on its own. What that has created is an ecosystem where the definition of an “Original” is different based on the company and/or geographic market in question. It’s also an ecosystem that’s very advantageous to Netflix.

The key hits:

  • More people think of “You,” a drama series on Netflix, was made by Netflix; the show was originally made for Lifetime.
  • Netflix’s promotional and distribution power has made “You” more popular than it ever was on Lifetime.
  • This points to how Netflix takes an elastic approach to how it defines an “Original,” which can include both shows developed and owned by Netflix, and licensed programming that Netflix only has partial exclusivity to.
  • It’s marketing, but still very advantageous to Netflix: The company is focused on getting hundreds of millions of subscribers across the globe, which means it needs to be everything for everyone. By liberally applying the “Netflix Original” label, it’s training users to think of Netflix as all of TV, not just a single network.
  • Plus, with more than 700 “original” projects premiering every year, Netflix does not need as high of a batting average as networks that deliver less than a dozen original projects per year.

What’s an “Original” these days, anyway?

In its most recent earnings report, Netflix boasted that roughly 40 million “member households” will watch its drama series “You” over the first four weeks of the show’s availability on the platform. (Note: Netflix defined viewership here as member accounts that watched at least 70 percent of one episode of “You,” which has a 10-episode first season.) But while “You” is labeled a “Netflix Original,” the show did not originate on Netflix. Lifetime aired the first season of the hour-long drama. With low ratings — the show averaged roughly 650,000 viewers per episode, according to The New York Times — Lifetime canceled the series, which was later picked up by Netflix for a second season.

“You” is the type of linear TV-to-Netflix success story that seems to be commonplace by now. And there’s no denying the promotional and distribution power of Netflix, which has close to 140 million subscribers across the globe that it can easily market to without needing to spend a dime. “You” became popular because it was on Netflix, billed as a Netflix original.

But it also shows up Netflix’s liberal and elastic use of the term “Original,” and how it helps Netflix grow and protect its brand and business.

Most TV networks and digital video programmers typically define an “original series” as a project that it has some type of creative influence over. Either the show was fully developed and produced internally or it was acquired through a partnership with a studio or a producer.

Netflix doesn’t follow those rules. Former Amazon and Otter Media executive Matthew Ball has a terrific breakdown of the different types of “Netflix Originals” — and how many of them are not actually developed by Netflix. Yes, the list includes those types of shows, but it also includes shows created by external producers or studios but fully acquired (at a premium) by Netflix (“The Crown”); shows that Netflix has some type of co-production and co-licensing deal for (“Black Mirror,” which airs on Channel 4 in the U.K.); and shows that were developed and produced by other studios/networks but for which Netflix has carved out exclusive distribution rights in certain territories (“Star Trek: Discovery,” which is produced and distributed by CBS in the U.S.).

As Ball explains, where HBO, Amazon and others typically only label shows that they produce in-house have some creative control over as original series, Netflix frequently slaps that label on anything that it has some form of exclusive distribution rights to. It does not matter to Netflix if “Better Call Saul” was produced by Sony Pictures Television and airs on AMC in the U.S.; it’s still a “Netflix Original” in the U.K. and other markets.

Those models are not new. Most people in the entertainment industry have accepted by now that “Originals” don’t always mean a show developed and funded exclusively by the network or platform it airs on. So why does it matter? To some extent, it’s just semantics. But it’s also good marketing, and key for Netflix’s growth strategy of having different types of content, suitable for everyone.

It’s “The Crown,” but it’s also “Queer Eye.” It’s not just one network, it’s all of TV. That’s important when your ambitions are hundreds of millions of global subscribers. Who cares if that show isn’t fully owned by Netflix? Subscribers don’t.

This can be tough for some networks — both from a linear and a direct-to-consumer perspective — when trying to compete with Netflix. A network that is only doing six to 12 “true” original series in a given year needs to have a better batting average than a company that last year said it will launch 700 original projects in 2018. And with the data Netflix has on its subscribers, it can do a pretty great job of serving the type of shows — whether it’s Emmy-quality dramas or breezy reality TV fare — that its users want. (This gets even more interesting when a network/company such as HBO or Disney has a certain brand to maintain.)

Netflix has an advantage because of its unprecedented volume, which is fueled by unprecedented spending. And as we’ve seen, this has reshaped TV. There is a reason WarnerMedia is now talking about increasing HBO’s budget, while also using it as an umbrella brand to offer a broader array of movies and TV shows from the WarnerMedia portfolio.

It will be interesting to see if things change as Netflix moves more production in-house. That typically means more spending upfront, but it also protects Netflix against the very real possibility that some of its most popular licensed titles will leave the service soon. That said, Netflix isn’t going to be easing up on the “Originals” branding anytime soon. Definitions be damned.

Confessional

“For better or worse, the YouTuber — the individual creator — ends up being the Pied Piper of the industry. If you watch them, you see the future path for publishers. They got hit by YouTube before anyone was talking about publishers and platforms. And then in the past two years, you saw them really dive into Patreon. They realized that there are people out there who want them to be successful, and are willing to support it through subscriptions and merch and donations.” — Digital entertainment executive

Numbers don’t lie
568,000: New subscribers to ESPN+ last weekend in the lead-up to the network’s first UFC event for ESPN+. (525,000 subscribers signed up on Saturday alone, the company said.)

38,445: Number of pages in Facebook’s video monetization program as of Jan. 14.

13: Number of Oscar nominations for Netflix.

What we’ve covered
Connected TV ad buying is becoming more TV-like:

  • Advertisers have begun to count co-viewing as part of CTV campaigns.
  • Issues still remain, including an inability to independently verify first-party data from platforms such as Hulu and Roku.

Read more about the future of connected TV advertising here.

Advertisers want better brand-safety tools for Facebook video ads:

  • Facebook is developing an API that will allow third-party vendors to monitor content across Facebook’s audience network for brand safety.
  • Level of advertiser interest in Facebook in-stream video ads is still low.

Read more about Facebook video advertising here.

What we’re reading
Netflix close to joining the MPAA: Fresh off 13 Oscar nominations, Netflix might soon join the film industry’s top lobbying group.

Pluto TV sells to Viacom for $340 million: This is a great exit for Pluto TV, which has 12 million monthly active users and offers a linear feed of channels from programmers such as Tastemade, Cheddar and NBC News (as well as those owned and operated by Pluto TV itself). As I mentioned in last week’s Video Briefing, I can understand Viacom’s thinking here as the subscription streaming landscape gets increasingly crowded; but long term, this still feels like Amazon’s (and Roku’s) market to lose. (Also, this piece has Pluto TV’s run rate at $200 million, but it sells for $340 million? At the very least, it’s a reminder that run rate can be a misleading stat.)

Disney changes up finances as part of its re-org: Disney has moved the accounting for some of its businesses, including its investments in Vice and Hulu, to its Direct to Consumer and International unit. This is the group that oversees Disney+ and works with ESPN on ESPN+, as well as other minor DTC businesses. Based on the new structure, annual revenues for the unit (ending in September) would have been $3.4 billion.

MasterCard is cracking down on free trials: MasterCard is instituting a new rule where subscription services will need to ask users permission to charge them for a subscription once the free-trial period has ended. “Merchants will be required to send the cardholder — either by email or text — the transaction amount, payment date, merchant name along with explicit instructions on how to cancel a trial,” the company said.

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