21/09/2016 - TOBY HOLLERAN
Netflix could hit 50% original content within five years

Netflix is ultimately aiming for a 50:50 split between original and licensed content, according to its chief finance officer, who claimed that the streaming subscription service is between a third and halfway to meeting that goal already.

There are some different interpretations of this split:

1. Content spend.

2. Volume of newly acquired content.

3. Total volume of content in the Netflix catalogue.

In regards to the first and second points, this could be true. However, in terms of total volume, Netflix USA was less than ten per cent of the way there at the end of Q2 2016. Ampere estimates that originals constituted 4.6% of its title count and 4.2% of its available content hours. Nonetheless, this proportion was significantly greater than Amazon Prime Instant Video USA, whose originals represented just 0.4% of its catalogue at the same point in time.

Were Netflix to be aiming for equal volume of unique titles of original and acquired content, one way to achieve this goal would be to continue honing its catalogue, which decreased in number of unique titles in the USA at a rate of around 20% year-on-year from Q2 2015. It also more than doubled the number of original shows in the same period. Were Netflix to continue shrinking its catalogue at this rate, it would be down to around 2,250 distinct titles within the next five years; about a quarter of its current catalogue size. This would require roughly 1,125 originals for a 50% split; almost four times more than its selection at the end of Q2 2016.

But Netflix is adding new original series at an accelerating rate. Netflix finished 2015 with approximately 700 hours of original content and has pledged 600 additional hours in 2016. If Netflix continues to add original content at this rate, and continues to trim its catalogue, we estimate that it would reach its 50% originals target (measured by content duration) by mid 2021.

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