|Image courtesy of Dan-Dare.org|
For years, Netflix has dominated the online digital media streaming sector. For only $7.99 per month, you can access thousands of television shows and movies through the internet. Over the past couple of years, Netflix has seen a new competitor emerge in Amazon Prime, which also provides digital media streaming of televisions shows and movies. Because these two web services are subscription based, they must maintain extensive and desirable libraries of television/film content that will continually pique viewer interest to keep subscribers loyal. In order to provide streaming services, Netflix and Amazon must acquire the rights to each television show and movie.
More and more, subscription services like Netflix and Amazon Prime are becoming viewed as competitors to traditional media companies, primarily the studios that are leasing their content to them. This leads to reluctance among traditional media companies to sell their content, or at the very least, reluctance to lease the content at a reasonable price. At the same time, television/film studios do enjoy the extra income and exposure from these large media distribution companies. But the added exposure has not meant that media companies are not trying to squeeze every dollar out of the streaming services that they can. Netflix recently ended their contract with Viacom over pricing disputes. Although Viacom represents a large pool of television and film media, Netflix did not feel Viacom’s content was worth the asking price. Weeks later, Viacom and Amazon reached a deal to allow for streaming of Viacom content through Amazon Prime, at a much lower asking price than Netflix.
As a way to boost subscriptions, and to break away from relying on television and movie studios for their content, Netflix and Amazon have begun producing their own original content. Netflix was the first to try this by releasing its own series “House of Cards,” an adaptation of a BBC miniseries of the same name. All 13 episodes, each an hour long and commercial free, of season one were released simultaneously on February 1, 2013. The release of “House of Cards” in an exclusively digital manner represented a major milestone in television series distribution, and it’s a method that is expected to continue. Netflix followed this up with a new season of Arrested Development, a cult classic that originally aired on the Fox network ten years ago.
Amazon’s approach to showcasing original content is a touch different. In late May, Amazon announced that it will be pursuing the release of five original television series. Interestingly, Amazon engaged its customers by using their feedback to choose these five television series from a pool of 14 potential series. By giving their customers what they want, Amazon hopes to maintain and bring in a strong client base.
Netflix has made the most recent power move by signing an exclusive deal with DreamWorks Studios for the rights to DreamWorks content, as well the plan to develop shows based off of some of DreamWorks’ films. This is Netflix’s largest content agreement to date, and once again solidifies the company’s effort to become less reliant on television networks for content.
How exactly does this correlate to sourcing? Though the industry may be different, the procurement skills and strategies remain the same. Competition among your supply base can sometimes have a direct impact on your access to certain products and services. Also, Netflix and Amazon both made original content decisions only after careful market analysis, but did this analysis in different ways. Netflix purchased the rights for Arrested Development based on its history of having a dedicated audience. Amazon directly polled its expected users for their input. Finally, Netflix’s securing of exclusive DreamWorks content is a page straight out of the modern supplier management handbook: by curating strong and effective working relationships with core suppliers, a company can secure exclusive rights to limited resources.