The ‘Netflix Original’ and what it means for the production of European television content

Introduction

Since the mid-2010s, media use has been gradually shifting from linear to linear-delayed or subscription-based viewing (Doyle, 2016; Lotz, 2018). The advent of over-the-top (OTT) players has particularly been said to fundamentally disrupt the production, distribution and consumption of audiovisual content (Burgess and Green, 2018). So far, Netflix has been leading the digital revolution in the audiovisual market (Steemers, 2015).

OTT platforms offer easy-to-use, attractive services, as well as binge-watching titles based on personalised user preferences (Johnson, 2017). They directly compete with subscription models of legacy players, such as telecom and cable distributors, as well as broadcasters, partly through rights acquisition, partly through producing original content. Due to advantages of scale, they can invest heavily in original content, which improves both the quality of the content itself, as well as its distribution, all putting pressure on the investment of broadcasters, traditionally the main financiers of audiovisual content in Europe. Broadcasters face increasing competition for content acquisitions of foreign films, documentary and television drama, and are losing out on interesting deals altogether. At the same time, broadcasters are confronted with increasing cutbacks and decreasing ad revenues due to delayed viewing and competition for ad spending on global platforms such as Facebook and Google (Schneeberger, 2018).

Especially for scripted television (hereafter: TV fiction), new platforms bring new prospects, as investment expands the distribution capacity and overall production scale, which increases content exposure and thus potential revenues. On the other hand, Netflix’s presence on the European market has increased fragmentation of financing, has redefined the territorial pre-sale model, has shifted the release window model and has contested the exclusivity of content for broadcasters (Doyle, 2016). On top of that, TV fiction is difficult to sustain in terms of financing. This is especially true for small television markets (Puppis, 2009), which, in fact, most European television markets are. These are characterised by a lack of market capacity, limited audiences, small budgets, and difficulties in pooling resources and exporting domestic productions. As a result, there is increased pressure on the creation of domestic content, which in turn reduces export capacity (Picard, 2011; Vogel, 2014). Due to the complex nature of the fragmented and diverse European audiovisual market, it can be asserted that these structural and contextual factors have an impact on the investment strategies of OTT services in different countries.

It was reported that Netflix spent $1 billion on European originals in 2018 (Garrahan, 2018). In 2020, Netflix allocated the same sum for investment in the British market alone (Sweney, 2020), as well as almost doubled its French language originals (Statt, 2020) and significantly increased its investment in Germany, Italy, and Spain. However, little is known about Netflix’s investment strategies, partly because they develop at a rapid pace, and partly because Netflix does not disclose financial data. The questions this study therefore addresses are: (i) What are Netflix’s investment strategies in the different European markets; (ii) to what extent does it invest in European original content; and (iii) to what extent do these investments contribute to the sustainability of European television markets? Based on a study of the volume and strategies of Netflix original investment in Europe, the analysis also aims to establish the degree to which Netflix is reconfirming existing patterns in European audiovisual production, such as the discrepancies between large and small television markets.

As in-depth budgetary data is not available for scholarly research, the study is conducted by analysing the volume of European productions, the collaborations Netflix is forging, particularly for co-producing/co-financing and the predominant genres of Netflix Originals. The analysis was conducted on productions labelled as ‘Netflix Originals’ – which we will define below – and was limited to scripted series produced between 2012, when the platform started investing in the European market, and May 2020.

The next two sections of the article discuss the fragmentation of the European market and how this might have shaped Netflix’s existing strategies. This is followed by the methodological considerations of the study. The final sections of the article present the four types of Netflix investment identified and the analysis based on the findings of the quantitative mapping. The discussion will reflect on the potential effects of Netflix investment on the sustainability of scripted series in Europe.

Financing television content in a fragmented European market

The European audiovisual market consists of a majority of various small markets and a limited number of large markets (Puppis, 2009), however none large enough to compete with notable non-European markets such as China and the United States. European television production is mostly limited within the borders of European Union member states, with the exception of cross-country collaborations in the form of co-productions or co-financing (in which a distributor finances part of the production) deals, and the income from exports to other member states which mostly flows back into domestic audiovisual productions. Various authors (for example, Hjort and Petrie, 2007; Lowe and Nissen, 2011; Puppis, 2009; Wauters and Raats, 2018) have described the characteristics of these European markets, highlighting, among others the vulnerability of national broadcasters and producers, as foreign media companies, satellite, and cable networks threaten national sovereignty. Additionally, the shortage of capital and media professionals and the small audiences, which limit return-on-investment in advertisement and sales, result in small production budgets. The latter also hampers export potential due to fierce competition with international big budget productions. Furthermore, cultural and linguistic diversity can be regarded as a barrier to the intra-European distribution of television content (Lee, 2008: 119; Raats et al., 2018a).

For most European countries, public service broadcasters were the only producers of television content up until the 1980s (Raats et al., 2018b). As satellite and cable technically allowed more players in the market, the 1990s saw the introduction of private broadcasters, subscription-based pay-TV channels and the development of an independent production industry. Private broadcasters have been active in producing more expensive yet popular types of programming such as TV fiction, yet, in many member states public broadcasters are still the main drivers behind the production and distribution of TV fiction (McElroy et al., 2018; Raats et al., 2018b). To date, domestic programming remains highly popular in smaller markets, yet broadcasters still acquire more foreign programming as it is cheaper to buy and often made with significantly higher budgets (Econopolis, 2017; Lowe and Nissen, 2011: 58). However, the acquisition of foreign series usually means purchasing U.S. productions, regardless of the significant volumes produced by European markets (Talavera, 2017). Pay-TV services also invest in content in small markets, but less so, given the limited footprint (Wauters and Raats, 2018). To partly remedy the structural constraints of small markets, research has pointed to the importance of co-production and co-financing deals, as shown in the success of the Nordic production model (see Hammett-Jamart et al., 2018; Raats and Jensen, 2020).

The advent of new players has clearly impacted the traditional financing of TV fiction in Europe. Broadcasters seemingly engage more in co-productions to increase scale and retain exploitation rights and possibilities to recoup investment or are exploring large-scale SVOD collaborations such as Britbox in the United Kingdom and Salto in France. OTT players are increasingly exploring domestic European productions directly or through co-financing and co-production (for example HBO, Netflix), while cable and telecommunications distributors, trying to compete with online streaming platforms, are increasingly taking part in co-productions as a means to increase or maintain their subscriber base. For example, Videoland in the Netherlands co-produces with RTL, while Belgian Telenet and Proximus co-produce with broadcasters and ViaPlay invests significantly in the Nordic countries.

Looking into the budgetary composition of TV fiction production in smaller European markets, broadcasting investment usually takes up the highest percentage, often supplemented by national support schemes (Raats et al., 2016). Different forms of policy support have been established, most of them aimed at boosting the domestic volume of TV fiction or attracting foreign spending in domestic markets. There are exceptions, as highlighted by, among others, Jensen et al. (2016), who describe a financial model based on partnerships with co-investors and co-producing partners (who get distribution rights for their contributions) as one of the main explanatory factors for sustaining high-quality and high-budget TV drama in Denmark. In larger markets, independent producers themselves usually invest more, as financial recovery is more likely and risks are notably smaller, due to the home-market effect (Dupagne and Waterman, 1998). Equally, distributors invest more in these markets, usually in the form of pre-sale deals, where a minimum guarantee is given in return for rights exploitation in a specific territory, as bigger sales revenues are more likely. However, over the past decades, both smaller and larger markets have added support systems for boosting television production, mostly in the forms of direct subsidies and tax incentives (European Audiovisual Observatory, 2019).

The high diversity and fragmentation at the core of the European audiovisual market have generated a series of collaboration practices and financial mechanisms meant to manage risk and increase sustainability. The growing involvement of new players, such as streaming platforms, in content production has the potential to disrupt existing practices, with both cultural and economic ramifications.

Netflix investment in the European market

In 2012, Netflix expanded into Europe as a streaming platform, reaching almost 40 million subscribers in the first 6 years, which is estimated to increase by another 15–20 million by 2024 (Statista, 2018a, 2018b). Although some markets were quick successes, others proved to be more challenging, due to consumer behaviour, structural barriers such as low internet speed or penetration, as well as the competitive market landscape and stricter media regulation (Dixon, 2016; McDonald, 2018). Netflix’s success outside its home market relies on the different tastes, preferences and expectations of global markets, which are the core of its global expansion. Therefore, Netflix should not be looked at as a standardised global service but as ‘a collection of national services tied together in one platform’ (Lobato, 2019: 184).

Netflix’s investment model is based on three strategic pillars: scale, volume, and algorithm-based production. To scale up, Netflix is in constant need of new content, which is why it bulks up volume at such a fast pace. Originally, Netflix acquired and distributed ready-made content in order to feed its algorithm and test subscribers’ preferences in each market (Sadeh, 2019). Based on big data, Netflix makes strategic investment decisions guided by data analytics and algorithms, given the specificities of each market and customers’ preferences (Shattuc, 2020). Today, the challenge for Netflix is keeping its existing subscribers contented while also expanding its customer base (see also Evens and Donders, 2018; Lobato, 2019).

Netflix is both a content producer and a distributor as it purchases licences of ready-made content for set periods of time and territories. Buying rights to distribute non-exclusive content is easier and cheaper and often takes the form of bulk deals with broadcasters or producers for back-catalogue titles and older content. Since 2016, Netflix has also been signing deals with pay-TV providers for more exposure to customers, for example by partnering up with operators for set-top box integration, but also due to the simplicity of the sign-up and payment process (Netflix, 2018). In Europe, deals were made with giants such as Comcast, Liberty Global, Proximus, SFR Altrice and Sky, among others. In that regard, there have been concerns that cable-TV and studios will become ‘too dependent on such licensing deals and that Netflix finally will enjoy a near-monopoly position in entertainment’ (Cabrera Blázquez et al., 2016: 14). If Netflix wants to purchase first-window rights and exclusivity in specific territories, they are expected to put a lot more money on the negotiating table. However, as numbers of on-demand services have increased, licencing has become more expensive. Fewer titles are made available to licence for Netflix, as media giants such as Amazon Prime Video, Disney+, or HBO Max are pulling their content from various VOD catalogues to aggregate it on their own platforms (Ene, 2020; Schneeberger, 2019).

In a highly competitive landscape, content differentiation is what sets services apart, and this is where the increasing investment in exclusive, high-budget Netflix Originals comes into play. At the end of 2018, Netflix released more original productions than acquired content on its platform (Hayes, 2019) and spent 85% of its yearly acquisition budget on original content (Schomer, 2018). At the end of 2019, Netflix debuted a record 802 hours of original programming, up 3% year-on-year (Spangler, 2020). But although its investment strategy does bring more subscribers to the service, while making it more sustainable and autonomous from other content producers, the heavy spending is still to be recuperated, as Netflix continues to register a negative cash flow and accumulate debt (Spangler, 2019, 2020). Nevertheless, the recent global lockdown has brought in a rise in subscribers double than expected, which, although likely to decrease in time, has secured Netflix a significant quarterly revenue (Netflix, 2020).

The recent global growth has also influenced Netflix’s international investment strategy (Alexander, 2020). As the development of television previously showed, it was localised content that took into consideration the local culture and market conditions that proved to be the key to success in international markets (Chalaby, 2006). One essential way for Netflix to localise content is the investments it makes in original programming, tailored to different markets, which have influenced their European expansion strategy (Lobato, 2019).

In the context of Netflix’s investment in original content, its strategy and potential effects for European markets become especially relevant. Hence, an essential step is to also define the ‘Netflix Original’, which proves to be a challenging term to analyse.

Methodology

To analyse the different strategies of Netflix original investment in Europe, our study focuses on: (i) the total volume of European productions, (ii) the countries Netflix is co-producing/co-investing with, and (iii) the genres it is investing in. The research sets out from a quantitative mapping of Netflix investments in European scripted series (that is, episodic fiction of a minimum of 20 minutes per episode, including sitcoms and mini-series) since the platform’s entrance on the European market in 2012 and 15 May 2020, consisting of 202 titles, which amounted to a total of 1,920 hours of content. For the year 2020 we have also included series scheduled for release and 36 series currently in development, officially announced before 15 May, but potentially postponed due to the COVID-19 lockdown.

The database of all productions labelled as Netflix Originals aggregates data from a variety of sources. Firstly, the Netflix Media Centre was consulted for direct communication from Netflix on new releases. Additional information on each production was collected from the International Movie Database (IMDb) and whats-on-netflix.com. The data was cross-checked with and complemented by information from various media sources that made reference to (upcoming) European productions for which Netflix was labelled a (co-)producer. Established trade journals and magazines were consulted on the basis of title-searches (Hollywood Reporter, The Verge, Wired, Deadline, Variety, TechRadar, Digiday, Vulture). IMDb Pro and trade journals were also consulted for additional information on budgets, co-investing and co-producing partners. Two databases were developed: one that contained a listing of new titles per production year, used to monitor the number of new titles released each year, and another which mapped the seasons Netflix released each year, used to monitor patterns in actual investments. In both databases, we listed production year, number of seasons to date (we did not include upcoming series that were already announced in the trade press), episode length, total number of episodes, the listed production companies involved and broadcasters, pay-TV operators or distributors that also contributed to the production in the form of presales.

The analysis focuses on Netflix Originals defined as European by the provisions of the Audiovisual Media Services Directive (AVMSD) and the Council of Europe (European Audiovisual Observatory, 2020). Based on this, we considered countries part of the continent, not just the EU, thus also including productions from the United Kingdom, Russia, Norway and Iceland. When discussing policy matters such as the AVMSD, it is worth mentioning that the focus is pre-2021, when the United Kingdom was still part of the Union.

Netflix’s personalised recommendations and interface are both heavily reliant on genre (Jenner, 2018), or, more specifically, on ‘micro-genres’, based on complex textual analysis (Madrigal, 2014). Nevertheless, for the purpose of this study and given the variety in genre labels in scholarly work (Creeber, 2015), a categorisation of six ‘established’ genres was created in the database: crime, historical drama, comedy, family, science fiction/fantasy/horror and thriller. Series that could not be labelled as one of the aforementioned were labelled as drama, which encompasses various subgenres such as ‘courtroom drama’ or ‘hospital drama’. Although many of the series are marked by genre hybridity, we specifically assigned each production manually to one category. This categorisation is also meant to reflect the underlying investment in each type of production, especially when the financial information was not available. Thus, when considering the volume of minutes produced, a series in the ‘family’ category is expected to cost less, while the same volume of a ‘historical drama’ will likely benefit from more substantial investment than most other general ‘drama’ productions.

A number of considerations were made when collecting and reporting the findings. Most importantly, as Netflix does not communicate data on its productions, financial data was primarily extracted from a combination of secondary sources. Although not peer-reviewed, trade publications offer access to valuable up-to-date market data and analysis (Wimmer and Dominick, 2011) and information from top industry executives (Lotz, 2009).

Based on the database of Netflix Originals, the next section identifies and discusses four types of investment strategies. The analytical framework consists of several parameters. The first one focuses on the chronological evolution of Netflix investments in Europe, based on the number of titles labelled as originals. The second factor consists of the total volume based on minutes produced. The third one focuses on country diversity, with an eye on the differences between investments in small and large media markets. The fourth factor deals with genre and aims to identify potential patterns of investment based on the country targeted or the popularity of a certain genre.

What is a Netflix Original?

As previous analyses have shown (Petruska and Woods, 2019), the ‘original’ label is no longer representative of creative involvement, nor of the traditional link between production and national specificity. Instead, it reflects Netflix’s commercial marketing interests, subsuming acquisitions to the platform’s international brand and robbing them of their sociocultural context in the process (Petruska and Woods, 2019: 72). This article delves deeper into these strategies and, based on the listings of production companies, release dates, and production partners, has identified four types of Netflix Originals, according to the types of investment made.

The first type are the licensed originals. These are series for which Netflix has purchased distribution rights, usually from broadcasters, after they had been completed, without having contributed financially to the production’s budget. Interestingly, some of these series are only marketed as originals in the territories negotiated, but not in the country of origin, where the broadcaster/production company keeps distribution rights. Examples here include Rebellion (2016–2019), Happy Valley (2014–present), Tabula Rasa (2017–present) and Ad Vitam (2018–present).

The second type of Netflix Originals are the continuation deals, where we have identified two different strategies. A first strategy consists of Netflix acquiring a licence deal, either for worldwide rights or for specific territories, and adding to the production budget, after a first season of a production was released, as was the case with The A List (2018–present) or Lovesick (2014–present). In a second, more common, strategy, Netflix takes over the production entirely, either by outbidding the initial producers after the success of the first season(s) as was the case with Black Mirror (2011–present) or by picking up a cancelled series as it did with Money Heist (2017–present) (Casaus, 2020; Plunkett, 2016).

In a third type of investment strategy, Netflix gets involved by either co-producing or co-financing content. We chose to discuss these together as the distinction is sometimes vague because data on budgets, rights, revenues, and editorial control over the production are all needed in order to determine the exact typology. In the case of a co-production, ownership rights are split between the producers allowing for more creative leeway (Bondebjerg et al., 2017) and sharing of revenues. This type of collaboration may prove difficult to manage, as was the case of Lilyhammer (2011–2014), where budgetary and creative differences between Netflix and NRK led to the series’ cancellation. In the co-financing deal, Netflix usually contributes financially in the initial stages of a production, solely in return for worldwide distribution rights. This type of investment may also prove controversial as broadcasters, who are the main investors in the productions, tend to be overshadowed by Netflix claiming first-window global distribution rights and official recognition for shows where it remains the minority producing partner (White, 2018), as was the case with The End of the F***ing World (2017–2019).

The fourth type is the full Netflix Original, where Netflix commissions local independent production companies to create content exclusively for Netflix. The production companies retain no rights over the content, which ensures Netflix has worldwide exclusive rights and controls how, when and where the series are released. While in most cases Netflix works with local independent production companies, it has also recently established its own production hubs in Spain and the United Kingdom (Netflix Media Center, 2018; Wiseman, 2019). Initially most of these productions were flagship big budget originals, such as the historical drama The Crown (2016–present), where Netflix invested €115 million for two seasons of ten episodes each (Seale, 2019), German science fiction/horror/fantasy series Dark (2017–present) which cost €5–7 million for one eight-episode season (Bonnie, 2019), French drama Marseille (2016–present) which was estimated at €7–9 million for one eight-episode season (Roxborough, 2016) or Cable Girls (2017–2020) which was said to have had the highest budget allocated to a domestic Spanish production at the time of release (Newbould, 2017). However, more recently the slate of full Netflix Originals has expanded to a variety of content, including smaller budget productions.

Volume of Netflix Originals

We have analysed the total volume of Netflix Originals based on three different parameters: number of new titles released; number of all titles, new and recurring titles (where we also count new seasons as they get released each year); and volume of minutes per series, as episode lengths and numbers differ per season/series.

When analysing the number of new titles, we notice a significant overall increase and diversification of investment strategies (see Figure 1). 2016 is marked by a total number of 23 originals, whereas 2020 is already seeing this almost triple to 68 in the first part of the year. Netflix’s first investment in the European market is marked by a co-production/co-financing deal in 2012 with Norwegian broadcaster NRK (Lilyhammer), followed by a series of continuation deals starting in 2015, which peaked in 2016 (for example Money Heist, Black Mirror, The Last Kingdom). This strategy is not out of the ordinary, as Netflix seized the opportunity to develop a slate of big budget productions with a proven track record.

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Figure 1.

Number of new titles released each year as Netflix Originals, per type of investment.

2016 marks the year when full European Netflix Originals came to life (The Crown and Marseille), and since then, the volume of full originals has consistently increased. At the time of writing, our data shows that there are currently 85 full originals, either already streaming or scheduled to stream in 2020, or currently in development (36 titles). Slightly more than one third of the full Netflix Originals currently have one season and are pending renewal. The uptake in full Netflix Originals is spectacular, considering that since 2018, when seven full originals were released, their number has increased approximately eightfold to 52 in 2020. This may also explain the significant decrease in co-production/co-financing originals for that same period.

In Europe, Netflix has acquired licences for 61 ready-made titles since 2013, adding up to a third of our dataset. 2018 marked the year with the highest number of licensed originals, but since then their numbers have been dropping. This may be due to high competition for licensed deals, their growing costs or broadcasters deciding to retain exclusive rights for their productions, also due to setting up their own OTT platforms (Beers, 2020; Nordvision, 2018). However, the data for 2020 is subject to change and may add up higher numbers as licensed deals can take place on shorter notice and are often not announced in advance.

More than a quarter of our dataset is represented by co-production/co-financing deals. These started in 2016, peaked in 2018 and then saw a significant decrease, potentially explained by the same reasons discussed above: the preference for full originals, due to ownership of exclusive rights which is particularly important for attracting new subscribers.

Continuation deals are the least numerous in our dataset, with only 12 titles. Data shows Netflix decides to invest approximately 2 years after a production proves to be successful. For Netflix, these series have been important for quickly developing a slate of European ‘brand-building’ productions while managing the associated risks, especially since the majority are daring concepts or more niche genres, such as dystopian science fiction, horror, or comedy-fantasy. Trade journal data also indicates that, after Netflix takes over a production, in most cases it allocates more episodes and increases the production budget. Black Mirror’s (2011–present) huge success on Channel 4 prompted Netflix to outbid the broadcaster (Plunkett, 2016) with an offer of two six-episode seasons, instead of the initial one season of three episodes.

To get a better insight into the actual Netflix investments, we need to take into account not only new titles, but also the total volume of seasons that Netflix invested in (see Figure 2). In this part of our analysis, we removed productions where Netflix purchased a licence but did not actually contribute to the financing, hence excluding the ‘licensed originals’ category. We also excluded seasons of continuation deals prior to Netflix involvement, counting only the seasons where Netflix contributed to the budget.

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Figure 2.

Total volume of minutes per year per type of investment, based on the number of seasons Netflix invested in.

The total volume of minutes provides the most accurate image of total European Netflix investments. In 2016 and 2017 the difference in volume of minutes between the types of investments is insignificant. However, considerable discrepancies start in 2018, as co-production/co-financing originals receive double the investment in volume of minutes compared to full originals and continuation deals. In 2019, the situation changes, as the investment in full originals overtakes the co-production/co-financing originals in terms of volume of minutes, whereas continuation originals see a slight increase. As at the time of writing the available information on new and recurring titles to be released in 2020 was incomplete, we did not include the year in the analysis (see Figure 2 and Figure 3). Nevertheless, we can predict a rise in volume for full originals, as at the time of writing they were already making up 79% of the total number of new and recurring titles, with only 12% co-production/co-financing originals, and 9% continuation originals.

This shows that Netflix made use of licensed and continuation deals to enter European markets with local premium offerings that limited investment and risk, but gradually shifted its focus to more costly full Netflix Originals. The platform’s strategies reconfirm its prioritisation of exclusive rights, as well as its aim to establish itself as a strong producer of European content.

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Figure 3.

Investment trend of Netflix Originals based on total volume of minutes per year, in percentages of total volume of minutes produced.

Country, language and genre diversity

Our findings confirm the general trends in film and television production in Europe and the same discrepancies between small and large markets. Due to the high fragmentation in the European market, Netflix has differentiated its investment strategies. Our data shows that the largest investment, 77% of total number of new titles, was made in Europe’s ‘Big Five’ markets (see Figure 4). The clear preference for British content, dominating the landscape with 30% of titles, followed by other large markets, reaffirms the consolidation of existing power imbalances in the European market. These are also markets that already produce and successfully export significant volumes of fiction.

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Figure 4.

Country diversity for new titles based on number of new titles and percentages of minutes.

In terms of languages, the top three markets are among the top five most widely spoken languages globally, alongside Chinese and Hindi, thus facilitating international circulation. However, over the years, Netflix has clearly diversified its choice of investment countries, also expanding to smaller European media markets, on top of the Nordic countries. To a lesser extent, Netflix investment can also be found in Austria, Belgium, Ireland, and the Netherlands. The trend seems to be following a series of geo-cultural markets (Straubhaar, 2007). But generally, Netflix seems to favour countries which have, in recent years, released significant volumes of television fiction and consequently secured stronger overseas sales. Another factor may be linked to Netflix’s market share and growth potential in different markets. The European Audiovisual Observatory (2018) reported that Netflix and Amazon Prime dominated the European SVOD market, with leading market shares in France, the United Kingdom, Germany and Spain, corresponding to the top four countries that have received the most investment in original content.

Eastern and Central European investments are much lower. One of the explanations could also be the strong position of HBO Europe in this region, known for co-producing and commissioning domestic fiction (see Hansen et al., 2020). However, the recent investments in Poland and Russia prove that Netflix is already expanding into new markets (Dziadul, 2019; Thomson, 2020).

It is also worth noticing that, although the United Kingdom has almost double the number of titles when compared to Spain, the volume in minutes is rather similar. This is due to the fact that Spanish content is mostly long-form (see Smith, 2017). Thus, while 1-hour long episodes are found in 46% of Spanish Netflix Originals and 32% of the British originals, episodes of 30 minutes or under are only found in 11% of the Spanish originals but in 36% of the British series. Naturally, shorter episodes can be cheaper to produce, thus allowing investment in more new titles.

When looking at the types of investment, full originals are preferred in the big markets. A potential explanation is that Netflix abandons co-production/co-financing deals in order to go for full originals in large markets where it has already secured a significant user base and production alliances. Notable investment in these markets also poses fewer risks as most of the content comes from large language markets, thus being likely to be picked up by bigger audiences globally.

In smaller markets, licensed deals as well as co-production/co-financing are more common, perhaps until Netflix establishes itself in the market. Looking at its trajectory in Belgium, Netflix first acquired licence deals for Tabula Rasa (2017–present) and Hotel Beau Séjour (2016–present), both presented as originals internationally. It subsequently engaged in its first co-financing/co-production deal for Undercover (2019–present), and only afterwards in 2020 invested in full Netflix Originals (for example Into the Night). The co-production/co-financing deals are highly relevant for bigger markets, which traditionally include significant proportions of foreign investment in production budgets (Steemers, 2016). Our data shows that these types of deals often take place with the same partners (for example BBC and Channel 4 in the United Kingdom, RAI in Italy, NRK in Norway, Antena 3 and TV3 in Spain), which in 80% of the cases are public broadcasters.

With regard to genre, our dataset shows relative diversity across all four investment types. At first glance, there is a clear preference for European crime, drama, and comedy series (Figure 5).

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Figure 5.

Distribution of Netflix investments per genre.

Investment in drama series is higher, particularly for full originals, represented by one third of the titles. Full originals also have the highest number of science fiction/horror/fantasy series. Crime series seem to be preferred for licensed originals, but also for co-production/co-financing deals. In the case of continuation deals, most of the titles Netflix decided to tap into were big local successes which dealt with daring concepts such as dystopian science fiction, horror and fantasy series Black Mirror, The Ministry of Time and the thriller Money Heist, or cult hits with a niche but engaged audience such as the historical drama The Last Kingdom.

Netflix appears to have tailored its strategies to different European markets based on potential return-on-investment. This calculation points to a complex formula based on a variety of factors, including the size of the market in terms of subscriber base, the strength of its media industry, potential for export and transnational appeal, collaborations with local partners, and the type of investment made.

Conclusions

This article presents the result of a large-scale study mapping Netflix’s investment strategies in different European markets. One of the first findings of our study was a confirmation of the increasing diversity in Netflix investment, both in terms of practice and volume of European content.

In terms of investment strategies, the data clearly shows a shift from licensed content to full Netflix Originals. Not only is Netflix interested in securing global distribution rights for its content, but it increasingly defines itself through it, which is why it is gravitating towards exclusive titles, aimed at attracting new subscribers. Netflix also takes advantage of available opportunities for tax credits or subsidies in certain European markets. Moreover, by being the sole investor and by controlling the distribution chain, Netflix does not need to worry about distribution rights, pre-sales and release windows. This type of investment is expected to significantly increase, not only because Netflix wants full ownership over the content, but also because licensed content and co-productions are becoming much less attractive. This is partly because licensed content is more difficult to get a hold of, given that giants such as Disney and Comcast cut ties with Netflix in order to feed their own streaming platforms, and broadcasters are following suit. Moreover, licensed content comes with an expiry date, which can lead to expensive bidding wars for renewal, or limited market exposure in the case of some co-productions, where distribution rights must be shared.

With licensed originals, Netflix manages to keep the volume of original series quite high in their catalogues, as these series are marketed on the Netflix interface in the same way as their full productions – marked by the ‘N’ logo on the presentation poster – no matter the extent of the financial investment. Netflix also makes use of licensed originals to manage risk for more daring concepts by purchasing them only after they have proven successful, as was the case with Black Mirror and Money Heist. However, this type of cost-effective bulk deal with broadcasters and/or producers and the purchase of older back-catalogue content are not enough for Netflix to recuperate its investment and bring new subscribers and thus become much less attractive for the platform. Furthermore, European broadcasters are trying to retain rights over their content as much as possible, in order to display it on their catch-up services for longer, rather than selling it to streaming services for a second window (Dams, 2018).

Although general observations see broadcasters increasingly involving Netflix in their own productions (Nordvision, 2018; Saigol, 2019), Netflix seems less interested in co-production/co-financing deals, as these have decreased significantly in the past years. When they are present, Netflix investments seem to aim for a clear market and target productions with an international appeal.

Contrary to expectations, Netflix investments were not restricted by genre. Bondebjerg (2016) has previously shown that historical drama and crime travel best due to their narrative structure, use of stereotypes and other recognisable features. Although these genres were well-represented in our dataset, the investment in European comedy was rather surprising, due to the popular belief that comedy is a culturally specific genre, which does not appeal to foreign audiences (Raats et al., 2018a). It is worth mentioning, however, that the comedy series in the dataset were primarily hybrid genres, such as comedy-drama or comedy-romance.

The limited editorial involvement of Netflix in many of its original productions is a rather new practice for a producer (Petruska and Woods, 2019), as is its algorithm-based strategy, both for commissioning new titles and series renewals. Netflix also goes against traditional practices when re-structuring its series by number of episodes, as it seems to move away from broadcasting conventions of 10 to 13 episodes to seasons of 6 to 8 episodes. Licensed content that comes in longer seasons is divided by Netflix into more seasons, as are longer films which are often broken into two- to three-part instalments.

Regarding the article’s third research question, Netflix investment also seems to reinforce existing power imbalances in Europe as differences between small and large media markets are intensified. For larger markets, Netflix has become an important collaborator. However, not only larger markets such as the United Kingdom, Spain, France, Germany and Italy have seen Netflix investment. Denmark, Sweden, Belgium and others have also been recognised, leading to an increasing number of co-financing, licensed and full Netflix original deals. However, for a lot of other European countries showing less production capacity, less investment from broadcasters, or no proven track record on the international market, production sustainability is becoming difficult. While licensed and co-financing deals provide much-needed revenue for small markets, the presence of such a strong foreign player on the market may prove to be more of a foe than a friend.

Interestingly, investment in pan-European productions, in which Netflix would commission a production based on collaborations between different European markets, is rare to non-existent. This is contrary to the strategy followed by European broadcasters and pay-TV channels who collaborate in order to build scale (see collaborations between Rai-HBO, Sky-Canal+, Viaplay and Nordic channels etc.). On the other hand, what is reinforcing an existing trend is that 80% of all co-production/co-financing deals in our dataset are partnerships with public broadcasters who have a strong reputation as investors in local content. As we have highlighted, information on Netflix investment, viewer ratings and collaborations is famously difficult to come by, which is where the study’s limitations lie. Nevertheless, financial reports, trade magazines and data from other secondary sources have proven to be valuable sources in piecing together the puzzle of Netflix investment strategies.

A focus on the EU markets in the dataset confirms that most of the investments made precede the ‘Netflix tax’ and 30% European works quota put forward by the revised AVMSD (see Iordache et al., forthcoming). This may indeed prove that these investments represent a market-based strategy, rather than a consequence of Netflix having to invest, which confirms the importance of connecting to new audiences through offerings of local content.

The shift towards full Netflix Originals and the platform’s increasing ‘physical’ presence in Europe, through offices and production houses, signal its commitment to establish itself as a key producer of European content. Future research into the ramifications of each type of investment strategy would not only deepen our understanding of Netflix’s model, but it would also prepare European markets for the soaring battle for exclusive rights, in the context of the imminent ‘Streaming Wars’.