Original Shows – A New Battlefield For Tech Companies

After iPhone X launched, Apple caught attentions again by its giant deal with Mr. Spielberg’s Amblin Television and Universal Television, a unit of Comcast Corp.’s NBCUniversal, to make new episodes of “Amazing Stories,” a science fiction and horror anthology series that ran on NBC in the 1980s.

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The budget for “Amazing Stories” will be significantly more than $5 million an episode, higher than most broadcast shows but on par with budgets of high-end shows on Netflix, HBO and some cable networks, according to an executive involved in the project.

In the recent years, a tendency shows that more and more giant tech companies are moving their steps into Hollywood. Like Apple did, Facebook is signaling that’s ready to spend a bundle on original TV-style content — upwards of a billion bucks in the next year, according to an anonymously sourced report in the Wall Street Journal. Netflix owned by Amazon, has inspired Original Shows development among video stream platforms in 2013 by its successful show – House of Cards. Young video service provider Hulu.com has made its great show – The Handmaid’s Tale which just won 5 prizes from the 69th Emmy Award.

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It is very obvious that all these tech companies want to make their networks much tighter. The business cycle is turning around from the start again: the platform seems to become not enough for maintaining users. Instead, the content will finally be the key to win the users back.

The benefits of investing TV shows are quite apparent:

1. Enlarge the ecosystem of the platform

Apple’s efforts on their ecosystem can be seen from the age of iPod. iTunes is like a prototype to enlarge the ecosystem from Apple. The users can download music, listen to the radio and podcast on their iPods. To some extent, iTunes has provided the users more access to contents. Later, products like Apple Music and Apple TV, are trying to enlarge the ecosystem to music lovers and movie lovers. Therefore, original TV shows are valuable in the ecosystem for attracting more users and keep the current ones, especially for Apple TV.

I assume the same strategies behind Amazon and Netflix. Currently, Netflix and Amazon memberships are separate. However, Amazon has been putting its foot into enlarging their ecosystem that they have developed Amazon Prime Video and released Fire TV to compete with Apple. One day if Netflix and Amazon share one membership, the network effects are pretty strong and solid.

Netflix-vs-Amazon-Prime-vs-Hulu

2. Strengthen the network effects

The good example here is the legendary case of HBO creating Games of Thrones. Although HBO was not in a digital business before, it has succeeded to create new networks among HBO audience. The success of Games of Thrones has leaded HBO to move the core business to video stream instead of cable. Despite having millions of fewer subscribers, HBO’s operating income for 2013 was $1.8 billion, compared to $228 million for the year at Netflix. The video stream model, together with the show, has brought HBO huge amount of younger customers and made its networks of the audience more loyal by combining the platform of cable and online.

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3. Content is future

As I claimed before, content again becomes the key to attract and maintain the users cause it is harder to imitate. Platform building costs time but it lacks protection from the idea stealing. On the contrary, TV shows have copyrights and relevant legal terms to guarantee its uniqueness. Imitation game is not strange in the digital world: Messaging Apps, E-Commerce, Video Stream model… etc. Nonetheless, TV shows have a chance to stand out for it is more close to art.

To sum up,  Silicon Valley’s battle in TV shows just started. As an audience, I believe the winner actually will be the public for the battle is going to bring us more great shows!

Statistics of Original Shows in 2016:

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Sources:

https://www.wsj.com/articles/apple-signs-content-deal-with-steven-spielberg-1507656455

http://variety.com/2017/digital/news/facebook-1-billion-spending-video-original-programming-1202551659/

https://www.wsj.com/articles/hbo-to-launch-standalone-streaming-service-1413385733

http://www.businessinsider.com/netflix-original-shows-vs-amazon-hulu-in-2016-chart-2017-1

11 comments

  1. sherricheng5 · ·

    Really cool post! I think you brought up many great points. I think that the future definitely rests in content, and it will be interesting to see what the big tech companies will do to differentiate themselves from one another. I wonder what implications this will have on traditional cable/TV companies. As more people start to watch content on their smartphones and mobile devices, less will watch content on television. I think that any company that wants to succeed in the future should shift their attention on how to make their content the most easily accessible to the viewers.

  2. mgiovanniello · ·

    These are all great points. I’ve always been a bit puzzled as to why all these tech companies are racing each other to invest in original content — this article definitely clears up my confusion. This also goes back to one of our first classes, where @geraldckane argued that content is what keeps people coming back to Facebook (and social in general) and is the driving force of user engagement. I don’t think Amazon and Netflix would necessarily work well as a merger — the competition between them now is fierce, and the end-result, like you mentioned, benefits us consumers greatly. Great post!

  3. mattwardbc · ·

    I think you hit the nail on the head with this post. As a consumer of digital streaming services, I am very excited to see big tech companies pour money into tv streaming and digital content as we as consumers are the ultimate winners. Great content is the key to each platform because I just found myself interested in purchasing Hulu just to be able to watch the acclaimed show, The Handmaid’s Tale.

  4. Very interesting post. So far, the most successful original content launched by these giant tech companies have been TV series like Game of Thrones, Stranger Things, and The Handmaid’s Tale. However, I don’t think it will be long until they become a serious contender in films shown in the theaters. As you mentioned, Apple and FB are already investing billions, and Netflix recently announced that they plan to release 80 original movies in 2018. As ex-majority owners of film studio PIXAR (before they sold it off to Disney), Apple surely knows how lucrative this space is, and it wouldn’t be surprising to see them expand their network there again.

  5. kaitlinardiff · ·

    Great post! We’ve definitely seen the popularity of movie theaters decline in our lifetime, and I think most of it is attributed to fact that we now have a plethora of options of things to watch on these viewing platforms, so why leave the house when we can binge-watch episodes from the comfort of our laptop? It’ll definitely be interesting to see how VR changes the landscape in the coming years as our experience of watching shows may be significantly altered if now we can enter the shows like a 4-D film, etc.

  6. Nice strategic analysis of why companies are investing in content. If only they would also invest in reliable news sources, but I guess Bezos did that, at least.

  7. Great post! I definitely agree with @mgiovanniello that I don’t think a merger will occur between Amazon and Netflix (especially when they are both going so strong solo). I agree it would be super convenient to have both linked through the same membership though! I really liked your last point, because one thing that has “annoyed” me (though I am still waiting for a call from Silicon Valley asking my opinion) is the seeming “jumping on the bandwagon” that so many tech companies do. It has appeared to me, as an outsider, that one company finds a new channel to successfully reach customers, and then suddenly a ton of other companies jump on the bandwagon and follow suit. The lack of originality can be frustrating. But I think you are right: 1. it is a good way to create non-copyable material, which is incredibly difficult in this digital world 2. we do all win as consumers, as we are getting better and better content delivered to us as the competition heats up between companies. Great post really made me think!

  8. juliabrodigan · ·

    Great Post! Original content on these platforms are extremely popular. The content that these platforms are releasing are excellent quality and good stories. A lot of them are on the same level as shows on cable. A lot of people don’t have TVs anymore, thus they rely on these platforms to watch TV and movies. Personally, I have watched a lot of the original content these platforms have released. One of my favorites is House of Cards. I think that this will continue to grow in popularity and quantity.

  9. Nice post Ivette, I love all streaming and content opportunities. I am quite a TV series enthusiast and probably saw all 2016 list. It amazes me what companies are doing and how much they are investing in original content. Now even Apple and Facebook. I agree with you the content is the future. Not for any reason Netflix investment of $6 Bn in 2018 is paying dividends. Now they just announced an increase from $10 to $11 per month and the stock jumped. THAT is pricing power!
    I loved your comparison of Net income between Netflix and HBO, but again, Netflix is investing $6 in content while HBO only around $2. Who has the edge in the near future?

  10. sejackson33 · ·

    This is a very interesting post! We’ve talked before in this class how Apple is really struggling to offer content that lures customers away from the bigger players in online streaming like Netflix and Amazon. It will be interesting to see how successful initiatives like Amazing Stories will be in this endeavor. I agree with above comments that I think Amazon and Netflix are big enough competitors that they will not merge onto the same platform.

  11. ericiangesuale · ·

    Great post! Seeing Facebook Watch in its attempt to compete with the other streaming services is a point of particular interest to me. Considering most of the time I am on Facebook I am watching videos, this is a sensible area for them to invest in. I am really excited to see how these giants compete because it will only benefit us- the viewers! I think Netflix and Amazon have a big leg up but it will be interesting to see how Apple’s power with creators helps them here.

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