Video streaming wars: Content production strategies for streaming platforms

The rapid growth of video streaming platforms (SPs), driven by digitalization and evolving viewer preferences, has intensified competition, making strategic content procurement crucial. However, there is limited understanding of how different content sourcing models affect profitability and subscriber behavior. To address this gap, we develop game theory-based analytical models to evaluate three procurement strategies: licensing from pure content providers (PCPs), producing in-house content solely, or adopting a joint approach that blends licensing with in-house content creation. Our findings reveal that the joint approach yields the highest subscription prices, content quality, and profits for both the SP and the PCP across nearly all modeled conditions. This reflects real-world practices among market leaders who leverage a combination of licensed and original content to scale and differentiate. Importantly, we show that sole in-house creation is never optimal under profit-maximizing conditions, even when future monetization of proprietary IP is considered. Our approach specifies analytical threshold conditions under which each strategy becomes dominant, showing how variations in content creation costs, licensing fees, and viewer willingness to pay jointly determine the optimal content sourcing choice. Additionally, we find that the PCP sets the same licensing fee across strategies utilizing licensed content, yet PCP’s profits are maximized under the joint strategy due to greater content demand and wider market exposure. Supported with recent decisions from Apple TV, Disney+ and Amazon Prime platforms, the results offer both theoretical advancements and practical guidance for streaming platforms navigating content investments in a saturated and rapidly evolving digital media landscape.