The growth in consumer demand for streaming video content has resulted in blockbuster—and eyebrow-raising—deals. Last April, Netflix allegedly paid US$450 million for the rights to two sequels to the 2019 murder thriller Knives Out.1 Universal Pictures and NBCUniversal's new streaming service, Peacock, have agreed to pay more than $400 million for the worldwide rights to a new series based on the 50-year-old blockbuster The Exorcist.2 ViacomCBS, on the other hand, has been busy selling US$3 billion in stock to fund content for its Paramount+ streaming service—including a whopping $900 million for six additional seasons and 14 films of South Park.3,4 Megadeals like these have become normal salvos in the battle for streaming consumers in a sector that is expected to spend $230 billion on content globally by 2022.5 Some will hit the mark, while others will not. That has always been the reality of the entertainment and media industries. However, this tried-and-true portfolio approach will not guarantee success—or even survival—as the streaming wars continue through 2022 and beyond. To be sure, global expenditure on streaming services continues to rise, but competition is increasing as new providers emerge. Streaming boom
With rights holders withdrawing their material from streaming platforms in droves and offering it on their own, the rules of content ROI have shifted substantially.
The days of firms relying on a steady stream of money during theatrical 'windows' box office, DVD, premium and basic cable, broadcast syndication are numbered. So are the lucrative licensing agreements that permitted underperforming pictures to be bundled alongside blockbusters. In this new environment, every content asset is important. A single flaw can result in a widespread exodus of subscribers. That's why we developed a three-pronged content valuation formula to assist achieve real and long-term ROI. The formula is straightforward, with three variables: demand, expansion, and exclusivity. Demand To correctly value any third-party TV show or movie, one must first understand demand. That is no simple undertaking in the age of streaming. Most platforms do not share precise viewership data with the public. However, some independent data and analytics organizations, like as Parrot Analytics, have developed their own demand measurements based on piracy and social media buzz, which can be useful as a starting point. The following stage is to combine both predicted and actual revenue-based measures (such as ticket sales and total views) with social-impact indicators (such as social media impressions) and quality metrics (such as awards or Rotten Tomatoes scores).
This will let you develop your own demand metric for current and future content.
Content that can be expanded into sequels, spin-offs, and television series is generally more valuable than 'one-and-done' shows and films. Titanic was a historic box office success, grossing $2.2 billion worldwide, yet the film does not lend itself well to expansion due to the finality of the ending.6 In contrast, Harry Potter is a fertile field for expansion, with its eight films grossing $7.7 billion at the global box office.7 However, thanks to toys, video games, Halloween costumes, and theme parks, the property is worth more than $25 billion, indicating a vibrant and engaged fan base that is always eager for more content.8 Now, consider growth in a streaming setting. The Mandalorian is part of the expansion strategy for possibly the most successful content franchise of all time, Star Wars. According to market intelligence service Antenna, 29% of Disney+ users who signed up during the launch of The Mandalorian's second season had previously subscribed to Disney+. To be more specific, theseNetflix recently created an online shop for branded products, such as Stranger Things hoodies, to supplement its two primary revenue streams—streaming and DVD rentals. On the other hand, in emerging regions where Netflix is still striving to get members, the demand and exclusivity aspects become more important. customers were reuniting to see a single episode that promised more to come. Exclusivity
Exclusivity is critical in helping corporations attract clients to their streaming platforms.
Think back to January 2021, when the beloved nine-season, 201-episode NBC sitcom The Office was transferred from Netflix to Peacock. Fans of the show's stars helped NBCUniversal's streaming platform generate more paid sign-ups around The Office's premiere than during the service's nationwide launch or any other new programming event, including Premier League soccer.9 Meanwhile, Disney+ provides a comparable value proposition to Marvel's superhero content, which was moved from Netflix after Disney+'s launch in late 2019. Since then, Disney's Marvel content has been a major driver of client acquisition. Playing to type. Netflix, the streaming king, is in a league of its own. According to the company's fourth-quarter financial report for 2021, there are 222 million paying members.10 Compare that to Amazon Prime Video's 175 million, Disney+'s over 120 million, and Peacock's about 54 million.11 How the Reigning King Should Apply the Formula: As Netflix enters its second decade of streaming, the equation changes depending on the geographical market. In crowded markets such as North America, where Netflix currently has over 75 million customers, expansion is the most critical variable: Netflix must identify new growth prospects beyond monthly subscriptions.12 For every content investment, Netflix must ask itself: Can this piece of content be enlarged to realize its full value? Can it increase average revenue per user (ARPU) through other revenue streams like retail and new experiences?
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