I couldn’t let this tidbit of news about Netflix-Amazon spending on original content to slide through without adding some perspective. The sheer enormity of their spending plans reinforces how much catching up Hollywood must do to keep pace with the big digital-media players.
As this Business Insider piece notes, JP Morgan analysts project that Amazon will spend $4.5 billion this year on original and licensed content as it expands into new international markets and ramps up its competition with Netflix and other online-media providers for audience attention and dollars.
That’s a considerable jump from an estimated $1 billion the company said it spent last year for offerings that included a range of award-winning episodic shows and films such as “Man in the High Castle” and “Transparent.”
Netflix, which last year spent $5 billion on original content such as “House of Cards” and “Orange is the New Black,” is planning to surpass even Amazon’s hefty plans. It has said in quarterly earnings statements that it expects to spend up to $6 billion, as it continues to create content not just for its home U.S. market but foreign-language fare to reach more of its 192-country service area.
As big as those numbers are, it’s important to give them some perspective. In 2016, according to the MPAA, the domestic gross box office for films released in the United States and Canada combined for a little less than $11.4 billion, a record year for the industry.
The record year was boosted by ever-increasing average ticket prices and a slight rebound in actual tickets sold. Some 734 films grossed an average of about $15.5 million each to generate that total, according to the MPAA.
And yes, I know that domestic box office these days is typically about a quarter of the film business, and that doesn’t begin to address the huge television industry in all its multiplying permutations that pays most of Hollywood’s bills these days.
But both Amazon and Netflix are creating content almost exclusively for the new delivery models, while the older Hollywood incumbents still must serve slowly eroding theatrical and linear broadcast and pay-TV platforms.
Many billions of dollars in value still sit on those older business models. But if Hollywood wants to position itself for the new platforms, it needs to remember who its real competition is.