The owner of content is King

The launch in Spain has been painful to Netflix because it was found that much of the product it wanted to distribute in that country had been already licensed to other parties, not necessarily competitors.
Original content is, of course, a solution to this, but it comes at a price: the 2016 Netflix budget for fully-owned inventory is in the order of $5 billion. Since the company does not disclose the individual performance of each market it enters or each title it launches, it is difficult to evaluate the income contribute by original content to the company, but it's not hard to perceive that $5 billion for a company with roughly $9 billion in gross revenue for 2015 is a lot of money. And, it also underscores that the initial business model of acquiring rights to content owners after the product has been exploited by linear pay television --and therefore considered devalued-- will be only marginally valid in the future.

In addition to this situation, the SVOD market has attracted --by various reasons-- a lot of heavyweights that are willing to give Netflix a ride for its money: Amazon, Apple and Google (through YouTube) are some of them. The telcos around the world are also interested in gaining additional income from their customers. Indeed, in Latin America, América Móvil is known to have been developing a new SVOD contender (it should have been launched by Year-End 2015) that will be available to people not using AMX's telecommunication services and its Clarovideo streaming service. On the other hand, since original product is commissioned to independent production houses, anyone with deep pockets has access to content that may win a Golden Globe.

Last but not least, Hollywood --thought of as a state of mind-- appears decided to curb Netflix's expansion. In addition to Hulu, which is owned by Comcast, Fox and Disney, HBO has been successful in expanding its service to people not subscribed to linear pay television; AT&T is expanding SlingTV; CBS launched All Access; Apple has been devoting efforts to compete in this field --so far unsuccessfully-- and several others are testing the waters in order to find a combination of linear TV and VOD that may result palatable to the masses. So, a content owner has now several options, a scenario that normally leads to higher prices, as it is happening with sports.

Some analysts have already warned that the underlying trend is that cord-cutting will become a less attractive option in the future. True, if a number of content owners follow a non-exclusive policy when licensing it to SVOD companies, it will be possible to access a certain movie or series through various streaming services in addition to linear television. But it is difficult to imagine the top streaming players sharing rights to some big-ticket success.

An educated guess is that, by 2020, the SVOD game will have the same industry structure held at their peak years by the radio, television and movie businesses: three top level players, up to five medium- to large-sized regional contenders --in Europe, Latin America and China, for instance-- and a maze of start-ups tweaking the status quo and testing new alternatives. Linear TV will be fragmented, as it has happened with radio, and distributed through fiberoptics and satellite communications networks. The most successful content producers, probably retaining the same 3+5 pyramid pattern, will remain the common link between this galaxy of outlets.