With more than 167 million users in over 190 countries watching more than 140 million hours of streaming TV shows and movies each day, Netflix, Inc. (NFLX) continues to be a juggernaut in the digital entertainment space. However, the competition is becoming fierce, with Amazon.com, Inc. (AMZN), Hulu , and Alphabet, Inc.-owned YouTube (GOOG) going all out to win the streaming video war. For Netflix, it's all about content, and the company reportedly spent $15.3 billion on content in 2019 by adding high-quality original programming to its massive lineup of movies and TV shows.
Netflix's relationship with suppliers is multifaceted and varied. While Netflix’s top suppliers generate large portions of their revenues from Netflix, many are content providers themselves, who generate income either through licensing agreements or as developers of original content. Many of Netflix’s top content suppliers, such as Amazon, are also its competitors in the digital media space. Who are some of Netflix's suppliers?
Viewers from around the world have come to know DreamWorks Animation, now owned by Comcast, through its iconic family features, such as Shrek and Kung Fu Panda. Comcast, which acquired DreamWorks in 2016, has a current market capitalization of $174 billion. In addition to animated feature films, DreamWorks offers high-quality entertainment through television specials, series, and live entertainment. In fact, DreamWorks is perhaps best known for its 3D-animated films.
Netflix and DreamWorks first worked together in 2012, signing a deal for 300 hours of original television programming content. This was expanded in 2015 to more than 1,600 television episodes. The new deal also gives Netflix rights to the entire DreamWorks Animation feature film library. While Comcast also has stakes in rival streaming service Hulu, it's possible that Netflix will lose content to Comcast should it start its own service.
Gaumont Film Company
Founded in 1904, the Gaumont Film Company is the first and oldest film company in the world. As of 2016, it is a prominent producer and distributor of films. Its American subsidiary, Gaumont International Television, is gaining traction through the original programming it does for Netflix, having strung together four highly popular made-for-TV series and movies, including Narcos and Point Blank. In 2018, Gaumont’s revenues were $196.2 million.
As one of the leading Internet companies in the world, Amazon.com, Inc. has been doing everything it can to close the gap with Netflix in the streaming entertainment space. Amazon may be one of Netflix’s fiercest competitors, but it also happens to be a major supplier. For several years, Netflix has been moving pieces of its streaming operation to Amazon Web Services. In January 2016, it completed the migration, having moved everything except its own content delivery network, which it uses to distribute directly to the big network operators. In the fourth quarter of 2019, Amazon generated $87.4 billion in revenue, and currently has a market capitalization of $899.96 billion.
Lionsgate is one of Netflix’s largest content suppliers, with a history dating back all the way to Starz, Inc. (STRZA), which was acquired by Lionsgate back in 2016 for $4.4 billion. The two companies have had a bumpy relationship over the years. In 2012, Starz ended a longtime distribution agreement with Netflix because its executives felt that the company was contributing to the disruption of the television ecosystem, especially with Starz’s pay-TV partners. Three years later, the two companies went into business together again, with Netflix licensed to stream more than 2,500 movies, TV shows and concerts from Starz. Now, Lionsgate is resonsible for supplying Netflix with the ever-popular Orange is the New Black, Nashville, Dear White People, and Mad Men television series, among others. In its second fiscal quarter in 2020, Lionsgate generated $983.5 million in revenue.
RTL Group SA
Another competitor shooting for Netflix in the European market is RTL Group SA (OTR: RGLXY), and it is also one of Netflix's major suppliers. RTL Group is a German-based multimedia company that operates television and radio stations throughout Europe, and produces its own programming and Internet media. RTL Group, which is aiming develop its own streaming service and grow revenue to at least $535 million by 2025, licenses its programming to Netflix for its European subscribers. In 2019, RTL Group generated an all-time high of $7.1 billion in revenue.