• by Karlene Lukovitz  @KLmarketdaily, June 27, 2023

As Netflix’s growth in North America and Europe has plateaued and its strategic emphasis on international markets has intensified, the streaming giant has also been leaning more heavily than ever into locally produced content.

Case in point: Netflix has just announced a new, multi-year original series deal with Indian filmmaker Hansal Mehta. Mehta’s first, original series for Netflix, the crime drama “Scoop,” quickly became one of its most popular offerings across markets following its early-June release.

Overall, the percentage of total Netflix Originals produced in the U.S. dropped from 75% in 2017 to just 38% in 2022, according to Omdia’s recently released Online Original Production - 2022 report.

But because non-U.S. productions are so much less costly — with Season Four of “Stranger Things” reportedly having cost $30 million per episode, compared to $21.4 million for the entire first season of South-Korea-produced phenomenon “Squid Game”— non-U.S.-produced content still accounted for less than half of Netflix’s total $5.8 billion in original content spend in 2022. (For context, the streamer’s total originals spend in 2017 was $1.9 billion, and, according to Statista, is projected to be about $7 billion this year — which is lower than the projections for Disney, Warner Bros. Discovery, Paramount and Comcast.)

Another, just-released analysis from Omdia, based on PlumResearch data, sheds some light on how Netflix Originals in general and locally-produced ones in particular are playing out in the viewing arena.

Looking at originals overall, last year, 403 of the total 935 Netflix Originals released were produced in the U.S., per this analysis. 
The U.S. is also still Netflix’s biggest viewing market, with a total of 14.8 billion hours streamed in this year’s first quarter.

However, the U.S. is not the streamer’s No. 1 market in terms of the amount of time devoted to watching originals.

In this year’s first quarter, 35.6% of total Netflix hours watched in the U.S. were devoted to originals. That puts the U.S. behind both Poland, at nearly 40%, and Spain, at more than 36% (chart top of page). Germany, Italy, the U.K., Brazil and Argentina follow.

Notably, India is at the lower end of the scale — a performance that Netflix no doubt hopes will be improved by Mehta’s new India-based crime series franchise. Only Mexico, South Korea and Japan currently show lower proportions of originals-watching versus total Netflix watchin hours than India.

But the analysis of the viewing patterns for local Netflix originals within their countries of origin offers a notably different, albeit mixed, perspective on the streamer's success with local production.

In some markets, locally produced Netflix content dominates Netflix watching.

Not surprisingly, the U.S. is a prime example: U.S.-produced originals commanded 61.4% of Netflix Originals viewing time in Q1. 

But the standout on this front has been South Korea, birthplace of “Squid Game,” which captured viewers worldwide and became Netflix’s most-watched series of all time after its debut in 2021. In this market, local originals accounted for nearly 68% of all hours of original Netflix viewing in Q1.

South Korea’s importance to Netflix was confirmed just last week by co-CEO Ted Sarandos, who reported during a trip to the country that worldwide viewership of South Korean-produced Netflix content has increased sixfold during the past four years. He also reported that 90% of Netflix viewers of Korean romance shows live outside of Korea.

Little wonder, then, that Netflix plans to spend $2.5 billion on Korean media over the next four years, according to Sarandos. But at the same time, the South Korean government recently pledged to invest about $390 million in local streaming services with the explicit aim of competing against Netflix.

Further, at present, time spent watching locally produced content is considerably less in the other major markets analyzed by Omdia. At the low end, German originals accounted for just 2.7% of all Netflix Originals watch time in Germany in Q1.

"Given its increasing emphasis on originals and heavy investment, the share of viewing actually going to [original] titles seems surprisingly low," says Tim Westcott, senior principal analyst at Omdia. “The reasons for this could include the continuing strong performance of certain non-original content — especially  theatrical movies, but also some TV series that have been acquired by Netflix. The Harry Potter movies and TV series like “Brooklyn Nine-Nine” and “Rick and Morty” feature among the top titles in other countries like Italy and Germany."

Another reason, he says, is depth of catalog. Netflix has issued more than 3,750 titles since it began producing originals since 2012, but it still lacks the volume of Walt Disney, Warner Bros. Discovery or Paramount.

The key point, however, is that given how crucial originals are in helping to differentiate Netflix from major rivals also intent on expanding their global footprints — and how much cheaper it is to produce content in non-U.S. markets, as Netflix and others focus on reduce content spending as part of boosting revenue and profits — Netflix can be counted on to keep doubling down on nurturing original content from international markets that is capable of capturing audiences worldwide.