Netflix to spend US$8b on programming

Streaming giant Netflix has said it will spend a whopping US$8bn (AU$10.18b) on original content next year.

Chief content officer Ted Sarandos said Netflix will release more original movies next year than Hollywood’s three largest movie studios (Disney, Warner Brothers and Universal Pictures) combined.

Netflix has signed up more than 56 million customers outside the US. The company is ramping up production in several languages in a bid to sign more users in Europe, Africa, Asia and the Middle East.

Netflix will also spend more than US$1bn for marketing.

In a statement to shareholders Netflix said it was on track to exceed US$11bn (AU$14b) in revenue this year.

The company said the proliferation of new SVoD platforms around the world means it must focus more attention and money on its own commissions.

“While we have multi-year deals in place preventing any sudden reduction in content licensing, the long-term trends are clear. Our future largely lies in exclusive original content,” it said in a statement.

Programming licensed from others still accounts for the majority of the company’s annual spending. It said investment in originals accounted for more than 25% of its total profit-and-loss content budget in 2017 and will grow further, with US$17bn committed over the next “several years” and a spend of US$7bn to US$8bn on content planned for 2018.

“Our goal is to work with the best creators in the world and own the underlying intellectual property so that we can continue to deliver amazing content to our members across the globe,” it continued.

“Since 2013, we’ve taken the long-term view that we’re in the early stages of the worldwide, multi-decade transition from linear TV to internet entertainment. Recently, it’s been unfolding right before our eyes.

“Disney announced plans to launch direct-to-consumer services for ESPN and its other brands; cable network owners are licensing their channels to virtual MVPDs like Hulu, YouTube, Sling TV and DirecTV Now; CBS’s All Access is expanding internationally; Apple is reportedly planning on spending US$1bn on original content; and Amazon is streaming NFL games while its Prime Video service has gone global. Facebook launched its Watch tab for original videos.

“It’s an exciting period and both media and technology companies see the same big opportunity as we do. We have a good head start but our job is to improve Netflix as rapidly as possible.”

Netflix added more subscribers than expected in the third quarter as viewers craved its highly regarded original content and results did not show any new signs of stress, analysts said.

“We don’t see anything on the near-term horizon that is likely to materially slow this momentum,” Dougherty & Co analyst Steven Frankel said.

Source: C21, Independent, Reuters

12 Comments:

  1. Mr game show fan

    I know that the $8 billion is going to be spent on original programming but please Netflix acquire the rights for Brooklyn Nine Nine Season 4.
    Has Foxtel Now got Season 4?

  2. Looking at some of the recent new Netflix releases for Australia it would appear that Asia is going to be a prime market for them in the future, viewers must anticipate a substantial increase in Asian content.

  3. David

    Where does Netflix get their funds from? They have no advertising and spending millions of dollars on productions and cast…

    Subscribers aren’t in the $Billions are they?

    • Netflix is burning $US 2.5b of cash a year making original content they own the global rights to. They had cash from stock offerings, what they made mailing DVD and streaming movies and old series of TV shows before US producers realised the risk they pose, and have also borrowed $US 20b in short term debt. They are buying #1 in global streaming and betting that once FTA and cable drama production collapses they will have a virtual monopoly and the money will come pouring in.

      • Netflix tried to sell to blockbuster for $200m when they were mailing DVDs. Their IPO and subsequent public offers only raised $95m. Investors aren’t being paid dividend but then the stock as gone from $US15 to $US 195 so they aren’t complaining. They have about $1.2b in revenue from 110m subscribers worldwide (about half are in the US). But their expansion is being funded by debt, borrowed against future income and the value of the library of original content they are building.

  4. I’ve never seen a Netflix original film that has actually been worthy of recommendation. I’d prefer they put some of this money towards increasing the catalogue for Australia for both shows Foxtel and FTA do not obtain rights to, as well ended series that have and have not been broadcast in Australia. There are so many shows I’d watch again if they were available. I guess that’s another reason why piracy is so strong, current shows not being picked up in Australia, or older series in reruns. The downloader can retain series and re-watch it, rather than hoping a streaming service will pick it up.

    • Whilst I agree the majority of their original movies are average (what film studio hasn’t got their fair share of duds though?), there have been highlights. Namely the taut, heart pumping horror/thriller ‘Hush’ and the unique grandiose of ‘Okja’… the new Adam Sandler featuring drama is apparently a ripping good yarn too. I know in comparison to the sheer volume of films they release this is just a tip of the iceberg, but my point is that they are capable of making some really decent films.

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