Streaming Services' Quest for Content and a New Golden Age for Authors

​The coronavirus pandemic has accelerated a mélange of creative destruction trends, including the profound change in movie production and distribution.  Streaming services are booming but struggling to provide new, original content.  The novel has provided a proven source of inspiration for years, and the demand for new creative content will usher in a new golden age for authors.

Perhaps the Best Adaptation of a Novel to Film - To Kill a Mockingbird, in 1962

For a movie producer, it makes sense to use successful novels for screenplays, as the work has an audience who are somewhat pre-sold on it – who does not want to see the film version of a favorite piece?  Movie production companies and distributors like to pander to broad audiences and mitigate risk by using market-tested books as creative content. 

Movie producers typically buy movie rights options for a negotiated value and then purchase the work if they decided to produce the result.  Purchase prices are usually in the two to three percent range of the cost of making the film or series, with a cap or maximum value, and the average cost to produce a major studio movie has been around $65 million. Multiply that value by two percent, and one comes to a healthy $1.3 million fee.  There is a lot more to that if one digs into the details, however.  There are thousands of movies made in the United States every year, but only a tiny percentage of those are feature films with big budgets.  In other words, few authors hit it big with movie rights fees.

The $11.4 billion in domestic theatrical revenues from North America in 2019 represents an immense amount of money, but overseas sales dwarf that value, which accounts for some exciting outcomes.  Franchise action films such as Marvel, Transformers, Mission Impossible, and the like translate well to overseas audiences, so much of the major film studios' efforts go into those avenues.  Over half of the anticipated revenues for classic feature films for 2021 fall into the action/adventure category as a result.

In 2017 there were 646 feature films released in the United States, but a closer look reveals a more profound truth.  A 'feature film' must have a running time of 60 minutes or longer, includes works of fiction, animation, and documentaries, for cinema theaters.  This calculation excludes movies produced exclusively for television broadcasting, newsreels, commercials, films in video format, and films intended for adults (rated X).  No authoritative third-party source provides information about the total number of movies released in the United States each year, but independent producers account for many more films.

The well-capitalized streaming services need high-end content, albeit not at crazy production budgets that the next Tony Stark vehicle will require.  Netflix plans to release at least one new original movie every week this year.  In 2020, there were 499 straight-to-steaming films released to subscription services, up from 269 in 2019.  That number will almost certainly increase for 2021.  Streaming services such as Disney, Netflix, Amazon Prime, and Hulu are on the prowl for new creative content. 
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A glance at the Netflix top 10 for the week ending May 21 shows a platform struggling to provide original content.  That list contains six television series and four movies, with the films being:

• Army of the Dead, an action/zombie film produced by The Stone Quarry, distributed by Netflix.
• The Woman in the Window, a crime/drama/mystery, produced by 20th Century Studios and Fox 2000 Pictures, distributed by Netflix.
• The Mitchells vs. The Machines, an animation/adventure/comedy produced by Sony Pictures Animation, Lord Miller, and Columbia Pictures, distributed by Netflix.
• An outlier in Sabotage, an Action/Crime/Drama, produced in 2014, is perhaps an indication of an audience desperate for new content rather than a credit to this tepid film, which features a well over-the-hill Arnold Schwarzenegger.

Netflix Bought the Option for Knives Out 2 and Knives Out 3 for a King's Ransom

As evidence of platforms starving for content, Netflix purchased the rights to Knives Out 2 and Knives Out 3 for $450 million.  Films slated to premiere at major festivals like Tribeca and Sundance instead made their way to streaming platforms.

The coronavirus will contribute to the creative destruction of traditional movie distribution, although the effects are difficult to define.  Cinemas are no longer the first stop for new releases or even part of many distribution models.  Warner Bros. made its entire 2021 movie premieres on HBO Max and in theaters simultaneously.

The entertainment landscape has changed, and it is unlikely to revert entirely back to its baseline.  And with streaming distribution in its infancy with many platforms competing and all loaded with cash, they likely will be pursuing fresh creative content.  But production of dramas and mysteries is much less expensive than notable effects-rich action/adventure films, and they will undoubtedly be seeking new creative content.

Unlike commercial broadcasting, most streaming services derive their revenue through subscriptions rather than through advertising, further contributing to the creative destruction of the already-tottering conventional advertising industry.  Streaming services will develop and provide content to attract and keep consumers and pleasing advertisers, resulting in a superior experience for the consumers.
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Demographics of streaming services subscribers:

• 42% of streamers are Gen X (35-54 years old), 39% are Millennials (between 18-34 years old).
• More than half are single, and 78% live in urban or suburban areas.
• One-half have kids.
• While the United States average of college-educated is 39%, one-half are college-educated.
• Most streamers (65%) stream on their smartphone, and most (66%) use Android phones.
• Netflix customers (aka the 'Mainstreamers') skew slightly younger and less rural, and fewer tend to have incomes less than $100k per year.
• Amazon Prime Video customers (aka the 'Hip Seniors') tend to be older (55+) and are highly educated.
• Hulu users (the 'Bohemians') tend to be younger and are more likely to be single, less educated, and less wealthy. 

Streaming services have grown their library of feel-good, family-friendly movies and reduced genres like drama, crime, and horror.  Empirical evidence indicates these companies continue to grow higher percentages of proprietary content in their libraries to attract and keep customers.  Streaming services can procure exclusive rights and produce their original content meaning demand for creative content will continue to increase.
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How does this relate to authors selling creative content?  Here are some thoughts for consideration:

• Streaming services, saddled with old and tired libraries, will continue to invest in developing new content.
• Producers will struggle to meet demand.
• Much of the new film production will be lower production cost but not necessarily lower production quality.
• Cheap-to-produce character-driven creative content, as opposed to expensive action works, will be more desirable.
• Proven content such as novels with commercial success will be most attractive to film production firms.