Netflix's Original Content Strategy Begins to Emerge

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Netflix's(NASDAQ: NFLX) new blockbuster movie, Bright, starring Will Smith, may be the most controversial movie of the year -- not for its subject matter but because critics and audiences had polar opposite reactions to it.

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The Hollywood elite roundly trashed the movie. CNN's Brian Lowry called it a "bloated, expensive mess"; "Ugly, dumb, and incoherent," said J. Olson of Cinemixtape; and Richard Roeper dismissed it as a "Tired, buddy cop movie." However, audiences loved the sci-fi action movie, giving it an 87% audience score on Rotten Tomatoes, while 93% of Google ratings gave it a thumbs up.

This isn't the first time we've seen this pattern play out with Netflix. Fuller House, the continuation of the hit 80's/90's family comedy Full House was also panned by critics and loved by audiences. Adam Sandler's Netflix originals have similarly been pilloried by critics, but Netflix said his movies have been among the most watched originals on the service with a combined 500 million hours watching his movies.

The emerging strategy

What separates Netflix's original programming from traditional networks and competitors like HBO, Amazon, and Hulu is the company's preference for stars that are past their prime, or looking for a second act. Not only Will Smith, Adam Sandler, and the Fuller House cast but also comedians like Jerry Seinfeld, Dave Chappelle, and David Letterman, who is hosting a new interview show on the streaming service.

Of course, this isn't the only kind of programming coming out of Netflix. Hit shows like Master of None, Orange Is the New Black, and The Crown don't fit into this category, and Netflix continues to favor breadth with a range of shows and movies on its service -- something for all audiences.

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And Netflix also has something to offer Hollywood talent. First, the creative freedom Netflix lavishes on its collaborators is unrivaled by traditional studios and networks, which have to please advertisers, get ratings, and fit into certain time slots. Bright director David Ayer said of the company's hands-off approach, "It is a credit to Netflix and how they do business. They ask where and how to shoot it and they let me do it ... Netflix is going to pull a lot of talented people to their side." Smith echoed him, saying, "There is really no difference in shooting except that Netflix will just give you the money and let you go make the movie you want to make."

Shonda Rhimes, creator of hit shows like Grey's Anatomy, left Walt Disney for Netflix and told Recode, "I love the creative freedom that's available there. There's no restrictions. There's no broadcast standards and practices. There's no. 'It has to be this long.'"

There's another big reason Netflix is luring so many stars: money. Dave Chappelle, who ended a 12-year odyssey away from comedy with a reported $60 million to make three specials for Netflix, was frank about it, answering Jimmy Kimmel's question about why he came back by simply saying, "Money." Other star comics have also received huge paydays from the company -- Seinfeld took a reported $100 million for two stand-up specials and the catalog of his show Comedians in Cars. Like Chappelle, Chris Rock also got $20 million a special, and the list goes on.

Why it works

Though Netflix produces plenty of awards fodder with series like Master of None, The Crown, and House of Cards all winning numerous awards, the meat of the company's originals strategy centers around big names with loyal audiences. For Netflix, the bar to engage its subscribers is much lower than it is for a movie theater that needs people to leave their homes and spend $15 at the box office. Netflix subscribers are already spending more than an hour with the service daily, so big-budget productions generate views and create buzz to attract new subscribers. If you were a Chappelle fan but not a Netflix subscriber, there's a good chance you'll join the service, or borrow a password, to watch his specials.

According to Nielsen, Bright garnered 11 million viewers in the first three days of its release. If Bright had been in the theater, the dollar amount generated would be in the $150 million range. With the film attracting that many viewers, it doesn't really matter what critics think. Netflix knows what its audience wants. You may not personally like those shows and movies, but you don't have to. Its ability to please subscribers with a range of programming is a big reason why the service has been so successful. With a pipeline of new high-profile releases on the way, I'd expect another strong quarter from Netflix when it reports earnings next week.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Jeremy Bowman owns shares of Netflix. The Motley Fool owns shares of and recommends Amazon, Netflix, and Walt Disney. The Motley Fool has a disclosure policy.