M+E Connections
Analyst: Contrast in SVOD Original Movie Ratings
Story Highlights
When Netflix released its first exclusive feature film, “Beasts of No Nation,” in October 2015, it received solid reviews. But since then, Netflix’s original movies have had a rough time with reviewers, with “The Ridiculous Six,” “Crouching Tiger, Hidden Dragon II,” “Special Correspondents” and “The Do-Over” all failing to impress reviewers or audiences.
Meanwhile, Netflix’s No. 1 competitor Amazon Instant Video, has seen very favorable ratings for all of its original movies (since its first release, “Chi-Raq,” in early 2016), save one (“The Neon Demon”). According to Michael Pachter, analyst with Wedbush Securities, wrote in a research note that SVOD competition for exclusives has become more fierce, as both Netflix and Amazon look to keep subscribers on board.
At this year’s Sundance festival. Amazon paid as much as $10 million for “Manchester by the Sea” while shelled out similar cash for “Tallulah” and “The Fundamentals of Caring.”
“This is evidence that Amazon is putting upward pressure on content prices, and we believe that this pressure will cause Netflix’s content costs to rise much faster than our competitors have modeled,” Pachter wrote.
With Amazon offering both a $8.99 monthly standalone video subscription service, as well as its $99 a year Prime membership plan, Pachter said he sees Amazon going after Netflix’s subscribers in a big way, especially with Netflix raising its monthly subscription cost to $9.99 for all members by the end of the year. Pachter estimates that as many as 600,000 Netflix subscribers will leave by the end of the year due to the price hikes.
“We believe that Amazon will support its new standalone video subscription offering by spending more on both originals and licensed content, in the process increasing the ‘fair value’ content owners perceive for their licenses,” Pachter wrote. “In our view, Amazon’s standalone service will have the practical effect of increasing Netflix’s content costs; we expect Netflix’s costs to rise far faster than its revenues, and expect the company’s annual negative free cash flow to grow even more negative as a result.”
