Why Netflix’s goal of 50% original content may be bad news for your binge watching

By Mike Murphy

Binge-watching your favorite show might become a bit more difficult in the coming years, as Netflix Inc. moves toward its goal of creating half of the content the streaming service offers.
Netflix Chief Financial Officer David Wells announced the 50% goal Tuesday at Goldman Sachs’ Communacopia conference.

“We’ve been on a multiyear transition and evolution toward more of our own content,” Wells said, and “it will take us a couple more years” to reach that target. “We’re a third to halfway to where we want to be. … We’ve got a ways to go.”

This year, Netflix NFLX, +0.66%   said it will produce 31 series, with 600 hours of original programming — up from 450 in 2015 — and it will spend about $6 billion on original content in 2017. It has also started producing movies, such as Adam Sandler’s “The Do-Over” earlier this year and 2015’s “Beasts of No Nation.”

Producing that much of its own content could be good for Netflix’s bottom line, eventually. Though likely resulting in higher — though one-time — costs for the near term to actually create the shows, the move could save significant money down the road, as Netflix will be able to get out of the licensing deals it currently must pay for outside programming. 

With more streaming services vying for the same content, the cost of licensing deals is soaring. In July, Netflix reached a five-year deal to stream shows from The CW Network eight days after they air, which could end up costing as much as $1 billion, according to a report by Variety.

“You have supply and demand settling out,” Wells said Tuesday. “We would love to provide as many of those stories as possible to the consumer.”

But while Netflix subscribers may be getting more original shows like “Stranger Things” and “Narcos,” they may be seeing significantly fewer second-run shows like “The West Wing” and “Sons of Anarchy.” Netflix has already started winnowing outside content from its lineup. A report earlier this year by AllFlicks found that Netflix’s catalog of movies and TV shows has dropped by 31% over the past two and a half years, slashing more than 2,500 titles.

Many more titles are likely to drop off Netflix in the next few years as licensing deals expire. That means it’ll only get harder to catch up on movies and network TV shows. While streaming rivals such as Amazon.com AMZN, +1.58%   and Hulu will likely pick up rights to some of the content Netflix drops, they too will likely shift their focus toward more cost-effective original content in the future. And that could be bad news for fans of non-blockbuster movies and older TV shows who likely will be left with fewer — if any — streaming options.

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