Originality vs. licensing: Optimal strategies of streaming platforms

With the rapid growth of the streaming media industry, an increasing number of platforms, such as Netflix and Disney+, have begun to produce their own original content rather than solely purchasing non-original content from upstream providers. We develop an analytical model to examine the content provision strategies of competing platforms, specifically focusing on the proportion of original content they produce. Our findings reveal several key insights. First, we demonstrate that platforms’ content provision strategies are influenced not only by the licensing fee but also consumer preferences. Second, counterintuitively, an increase in the licensing fee can disadvantage the content provider while benefiting the platforms. Third, contrary to expectations, lower efficiency in producing original content can incentivize platforms to increase their proportion of original content, particularly when consumers prefer non-original content. Finally, increased consumer preference for original content may paradoxically undermine platforms’ profits. Furthermore, when consumers’ preferences for original content are asymmetric between two platforms, a platform with a lower preference may instead increase its incentive to produce original content. Our work highlights that content providers should price content reasonably to avoid encouraging platforms to overproduce original content. Platforms should also balance content costs with consumer preferences for original and non-original content.