“Netflix’s Transformation of the Content Ecosystem”: Mid- and Low-Budget Productions Gain Ground as Major Players Cut Investment, Accelerating the Inroads of Private Capital and AI

Global content distribution networks reorganize around Netflix
Legacy media companies face deteriorating profitability as the production ecosystem loses momentum
Capital flows into mid- and low-budget productions increase, alongside growing AI adoption

Private capital is showing growing interest in independent and smaller production companies across the global content market. As content distribution reorganizes around streaming platforms such as Netflix, major studios and platforms are scaling back investment in high-cost projects to improve profitability. Mid- and low-budget productions, which require less funding and offer faster capital recoupment, are consequently emerging as new investment opportunities. More recently, a growing number of these productions have also adopted generative artificial intelligence (AI) to further reduce production schedules and costs.

Structural Changes in the Content Market Accelerate

U.S. business news outlet CNBC reported on October 4, local time, that private equity investment in independent and smaller content production companies has been increasing. One example is “Prima Facie,” starring Cynthia Erivo, which premiered at last month’s Toronto International Film Festival. Camelback Productions, an independent production company established with overseas investment, participated in its production. Camelback previously demonstrated its ability to move productions forward quickly by financing “Doin’ It,” starring Lilly Singh, and “Runner,” starring Owen Wilson. Elsewhere, private equity firm Silver Lake is backing talent agency WME, while Blackstone has invested in content studio Candle Media.

These inflows of private equity capital coincide with changes in Hollywood’s production and distribution structures. Over the past several years, Netflix and other streaming platforms have rapidly emerged as principal content distribution channels. According to market research firm Nielsen, streaming accounted for 44.8% of total U.S. television viewing time in May last year, surpassing the combined share of broadcast and cable television, at 44.2%, for the first time. Its share subsequently increased to 49.0% in July this year. Netflix, in particular, has maintained the largest viewing share among paid subscription streaming services for several years, establishing itself as a major buyer and distributor of Hollywood content.

Netflix’s Production Advantage

Netflix’s competitive position rests on the content production network it has established worldwide. Moving beyond Hollywood’s traditional export model of producing content in the United States and selling it overseas, Netflix has actively pursued a “local for local” strategy, producing titles in individual markets for local audiences. According to Netflix, its original films and series are currently produced across approximately 50 countries and more than 4,500 cities and locations. Its content supply is also diversifying rapidly. Market research firm Ampere Analysis found that non-English-language titles accounted for 52% of the original television seasons Netflix released last year, exceeding half of the total for the first time.

Content sourced from these regional production networks reaches audiences both in its home markets and worldwide, supported by Netflix’s substantial user base across countries. Last year, 70% of viewing by Netflix members was devoted to titles produced outside their country of residence. Content from the Asia-Pacific region has recorded particularly strong growth. Viewing hours for Asia-Pacific content on Netflix have increased approximately fourfold since 2019, while the region’s share of the platform’s global weekly non-English-language top 10 has risen from around 30% in 2021 to more than half recently.

Mounting Pressure on the Traditional Ecosystem

Established Hollywood studios and legacy media companies, by contrast, have incurred substantial costs in adapting to a distribution system increasingly dominated by streaming. Disney, Warner Bros. Discovery (WBD) and Paramount, which previously generated stable earnings from cable and broadcast television, are prominent examples. As the spread of cord-cutting weakened their traditional distribution networks, these companies built their own streaming services and sharply increased content investment to compete with Netflix. The problem was that the profitability of their new streaming businesses struggled to match that of their former pay-TV operations. Legacy media companies have therefore recently shifted their strategic priorities toward recouping investment and improving their earnings models. Rather than aggressively expanding subscriber numbers and content catalogs, they are seeking to improve profitability through price increases, broader adoption of advertising-supported plans and service bundles.

This more cautious approach to content investment has contributed to the decline of Los Angeles (LA), the largest U.S. production hub, which absorbed substantial commissioning volumes at the height of the streaming wars. According to filming permit agency FilmLA, total on-location shoot days in the LA region fell 12.7% year-on-year to 4,711 in the second quarter of this year. Television filming declined particularly sharply, dropping 27.7% from 2,224 days to 1,607, while television drama filming also fell 6.4%. The erosion of the industry’s long-term foundations is equally evident. Approximately 57,000 jobs have disappeared from LA’s local film and television industry over the past four years, while more than 80 production service companies handling sets, equipment, costumes and post-production have closed since 2022.

Table 1. Market Restructuring in the Global Content Industry

Mid- and Low-Budget Productions Attract Attention

Other market indicators also clearly illustrate the decline in content investment. According to Ampere Analysis, the six leading global streaming platforms—Netflix, Amazon Prime Video, Disney+, HBO Max, Paramount+ and Apple TV+—commissioned just 242 new or returning scripted television titles in the first half of last year. That represented a 24% decline from 318 in the same period a year earlier. Funding committed to actual production has also contracted. Production intelligence provider ProdPro reported that spending on scripted television series last year remained approximately 23% below its 2022 peak, while the number of series entering production fell 7% year-on-year.

Independent productions with comparatively modest budgets, however, have posted clear growth even as the broader market contracts. ProdPro’s figures show that the number of films entering production increased 19% last year, with most of the increase concentrated in titles budgeted below $40 million. “As major studios and streaming platforms become more selective about investing in high-cost projects, production demand has shifted toward mid- and low-budget titles,” one market expert said. “These productions limit the losses investors face if a title underperforms, while requiring less capital, allowing shorter production schedules and lowering the break-even threshold. That can make them an attractive option in a highly uncertain market.”

Efforts to Reduce Costs Through AI

More recently, a growing number of mid- and low-budget productions have incorporated generative AI to reduce costs and production schedules. In China, AI-assisted production is rapidly becoming widespread, particularly in short-form dramas and web animation. AI content producers in Shenzhen are using tools such as ByteDance’s video-generation model Seedance to shorten animation production schedules from several months to a matter of weeks. According to the South China Morning Post (SCMP), computing costs for producing an approximately 80-minute AI-animated drama can be as low as about $3,700, more than 80% below the minimum cost of approximately $23,900 for a conventional animated production of comparable length. Cost savings are also evident in live-action short-form dramas. An AI-produced short-form drama series costs approximately $14,900, with less than a month required from script approval to release. By contrast, a conventional short-form period drama employing actors and filming crews requires a minimum budget of approximately $44,700–$74,600 per production and takes around two to three months to complete.

This trend toward AI-assisted production efficiency is also spreading in Hollywood. Amazon MGM Studios launched its “GenAI Creators’ Fund” this year to support film and television projects using generative AI, and has begun reducing production schedules and costs for selected content through its AI production platform, Project Nara. Amazon MGM’s three-part production “The Old Stories: Moses” adopted a hybrid approach in which generative AI created many of the backgrounds, enabling a crew of approximately 100 to complete all live-action filming for the three installments in just one week at an LA studio. Independent film company A24 has also secured $75 million in investment from Google and is jointly developing AI filmmaking tools with Google DeepMind. Meanwhile, U.S. independent film and television company Lionsgate has partnered with AI company Runway to begin building a dedicated generative AI model trained on its content.