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Feb 2012

Maybe Walmart should produce original programming as well
Sushil Content Distribution No Comments on Maybe Walmart should produce original programming as well

News today that Amazon is looking to enter the original programming (OP) game. I get why Netflix and Hulu (and YouTube and Yahoo and AOL, know of any more?) are taking these steps–because the established content producers are not making their content available for streaming (see here, here and here)–but I’m not at all convince that they can make it work. Producing compelling content is difficult and an iterative or shotgun approach. Keep publishing dozens of book or making many movies and some will be great, others will be forgettable. Broadcast networks launch dozens of new shows every season, only to see many of them fail and just a handful continue on. Even HBO has had mixed success at launching new shows or keeping them going. A few years ago the network cancelled 12 Miles of Bad Road after spending $25 million developing but not airing it, and cancelled Lucky Louie, John From Cincinnati and Tell Me You Love Me after just one season each. The past year they cancelled Bored to Death, How to Make it in America and Hung after just two or three seasons.

Netflix and Amazon should stick to doing what has made them so successful and what they do best, which is getting content and goods to consumers in the most efficient way possible, and optimizing their sites so that consumers can find what they want easily and quickly. Yes, content is hard to come by now, but that is bound to change as streaming becomes a more robust business compared to cable/telco/satellite (C/T/S).

Besides the risk of producing flops, I can think of two other problems with creating their own content. First, I cannot conceive that Netflix will maker its OP available on Amazon, or vice versa, let alone on C/T/S, as the whole point is to attract subscribers exclusively to their own platform. Therefore, their content will not reach as many viewers as some other producer’s that has content on all the services. So both Amazon and Netflix will be at a continual cost disadvantage compared to the traditional content producers. This makes betting on any show even more risky for these online players. Second, exclusive OP would likely drive up subscriber churn. Say both Netflix and Amazon create fantastic, must-watch shows. I may subscribe to Netflix until I finish watching their new OP, then switch to Amazon, then switch back. Since it is likely that they will both offer the same library of other-party content like movies and How I Met Your Mother, I wouldn’t be missing out on the other stuff while I jump back-and-forth. But each service is getting only half my money (or whatever, depending on the pricing scheme).

So I hope that these OP ventures are just feints on the part of Netflix and Amazon, that they  are throwing a few sops to investors and media journalists to keep themselves in the news, keep themselves in the game until the bigger media companies come around. If they ever start throwing serious money at making their own content, then I think they will start to lose focus and endanger their core business.

An additional word about Amazon–it has already entered the content business in books with the Amazon imprint, so its move into video production follows in that logic. But the boycott reaction by other booksellers reveals that Amazon may have to rely on its own distribution to sell the titles. That may not matter in books as it crushes competition, but it may when it comes to online video where there are many viable players. Plus I wonder how long it can sustain the $79/year all-you-can-eat model for both video content and two-day free shipping. That has to be a loss leader sooner or later.

So, no, Walmart should not produce original programming any more than supermarkets should grow their own produce.

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