One major theme of the last twelve months has been entertainment giants reverting to old business models, such as advertising and licensing. Despite Netflix's efforts and investment in creating original content, which led to a surge in the number of original shows in their catalog, a majority of the most popular shows available on Netflix are licensed content.
Between the last quarter of 2021 and the first quarter of 2023, the share of Netflix’s catalog made up of original shows grew from 52% to 61% of the total catalog. However, during this same period, the demand share of original content among the top 25 shows on the platform decreased to 24.9% in 2023 Q1, the lowest it has been in recent years. Out of the top 25 most popular shows on the platform in the first quarter of 2023, only 7 were Netflix originals. For context, 23 of the top 25 series available on HBO Max were HBO or Max originals. Several of Netflix’s popular originals on that list are not owned in-house by the platform or didn’t start on Netflix — like You, Cobra Kai, and Lucifer — and could eventually revert back to the original owner, leaving a hole in Netflix's library.
When looking at the overall demand for Netflix's licensed content, which made up about half of the total demand for the catalog in Q1 2023, shows that premiered on The CW had the highest share at 11.4%. This network provides some key shows from the DC Universe to Netflix, like The Flash (#2 most in-demand on Netflix in that quarter), DC's Legends of Tomorrow, and Arrow. Nickelodeon, which accounted for the second largest share, underscores the importance of animation to the Netflix catalog. Shows like Avatar: The Last Air Bender and Rise of the Teenage Mutant Ninja Turtles are still highly in-demand on the platform, and feature among the 25 most in-demand shows on the catalog.
Although there were just a handful of AMC original shows on Netflix, these series have a huge impact and collectively account for 6.8% of the demand for licensed content on this platform. This demand share is mainly due to the popularity of titles like The Walking Dead, Breaking Bad, and Better Call Saul, all of which were among the top 10 most in-demand shows on Netflix in that period.
Netflix's reliance on licensed content may pose a challenge for the platform's efforts to increase free cash flow in the medium and long term. For example, if Sony TV, the owner of the licensing rights to the two shows from the Breaking Bad franchise, determines that these shows are keeping high-risk churn subscribers on the Netflix platform, then they can negotiate significantly higher licensing fees if Netflix wants to hold onto this high-value content.
