Netflix to Spend $7 Billion on Original Programming Next Year

[MacRumors]

Hot on the heels of news that Apple has set aside $1 billion for original TV programming over the next year, Netflix revealed on Wednesday that it will spend seven times that amount in 2018.

In a new interview with Variety, Netflix's chief content officer Ted Sarandos quoted the number of $7 billion, which is up from more than $6 billion in 2017 and $5 billion in 2016. The vast majority of Netflix's budget is spent on licensed content, but the company is working towards balancing that out with more in-house content over the next couple of years, Sarandos said.

Some analysts and industry insiders are skeptical of the company's spending habits, arguing its stock is overinflated (it's soared to more than $170 a share, up from around $50 in early 2014, adjusted for a 2015 stock split). "We're not spending money we don't have," Sarandos counters. "We're spending revenue." The company reports its debt load is $4.8 billion, with an additional $15.7 billion in long-term content commitments with studios. "We have one of the low debt levels in the industry," insists Sarandos.

Using its budget, Netflix has produced some successful regional TV series such as the German show "Dark". The company hopes to increase that number to up to 100 series in the next couple of years. Netflix is also continuing to push into reality TV programming, with 50 unscripted shows coming to the streaming service next year. Feature films are already on the company's radar, with movies such as War Machine and Sandy Wexler having already debuted, and Bright starring Will Smith set for release in December.

For its part, Apple is said to be planning to procure and produce up to 10 original TV shows over the next year as it seeks to make up ground on services such as Netflix and Amazon. The $1 billion budget figure is about half of what Time Warner's HBO spent on content last year and around the same amount as Amazon spent in 2013, after it announced its own move into original programming. Apple has already kicked off its original programming schedule with "Planet of the Apps" and "Carpool Karaoke", although both shows have come in for criticism from reviewers.

Article Link: Netflix to Spend $7 Billion on Original Programming Next Year

 

[Cloudsurfer]

I would pay a lot of money to have a streaming service based on iTunes' movie library. All this original content crap is just a content filler because no one in the industry can offer a proper streaming service.

 

[JaySoul]

Glad regional TV was mentioned. For me, that's the key to unlocking international markets.

Netflix are making such smart decisions.

 

[djcerla]

Ted Sarandos quoted the number of $7 billion, which is up from more than $6 billion in 2017 and $5 billion in 2016. The vast majority of Netflix's budget is spent on licensed content

So, how much is the total spending if $7B is just for original content and it only represents the "vast minority" of content spending?

 

[ILikeAllOS]

Meanwhile Apple recently announced that they're spending just one billion dollars to compete with Netflix and everybody else?

 

[gnipgnop]

Meanwhile Apple recently announced that they're spending just one billion dollars to compete with Netflix and everybody else?

Apple has never said that their intent is to compete with Netflix. Most of their projects have been Apple Music oriented.

 

[headlessmike]

I would pay a lot of money to have a streaming service based on iTunes' movie library. All this original content crap is just a content filler because no one in the industry can offer a proper streaming service.

So would I!

I cancelled my Netflix subscription because I got tired of all of the original content. I had originally signed up for all of the content from different networks, but at least in Europe much of that has disappeared (or simply not been updated) in recent years while they have been pushing their own content (which I don't care about).

 

[jonnysods]

I'll chip in $140 a year if that helps guys

 

[Jsameds]

Meanwhile Apple recently announced that they're spending just one billion dollars to compete with Netflix and everybody else?

Netflix spent $120m on original content in their first year.

Now Apple is spending more than 8x that figure and some think it's not enough or something? Weird.

 

[maflynn]

With 20 billion in debt and they're burning through cash like its going out of style, they will be facing a reckoning.

 

[iapplelove]

With 20 billion in debt and they're burning through cash like its going out of style, they will be facing a reckoning.

Netflix is 20b in debt? Not really in the mood to look it up but if so that's crazy!

 

[JaySoul]

With 20 billion in debt and they're burning through cash like its going out of style, they will be facing a reckoning.

Doubtful. At least not anytime in the next 20 years. By which time they will be profitable.

 

[mmm1345]

Netflix spent $120m on original content in their first year.

Now Apple is spending more than 8x that figure and some think it's not enough or something? Weird.

Not at all comparable. 1. Netflix was a very small company, NOT a company valued at 1 trillion dollars. 2. Streaming wasn't a big thing. 3. Streaming ORIGINAL content wasn't a thing before Netflix got into it and got a couple of hits, 4. Creating content is expensive....

 

[Rocketman]

The media wars began again, they have - Yoda

 

[maflynn]

Doubtful. At least not anytime in the next 20 years. By which time they will be profitable.

They don't have 20 years, if they keep piling on the debt.
[doublepost=1502972405][/doublepost]

Netflix is 20b in debt? Not really in the mood to look it up but if so that's crazy!

Netflix is on the hook for $20 billion. Can it keep spending its way to success?

But some industry experts are warning of a Netflix bubble that may burst if the company fails to produce enough hit series to keep attracting new subscribers.

“Nobody is ever the dominant player forever,” said Mike Vorhaus, president of Magid Advisors, a media and digital video consultancy. “I think they're going to need some luck in not drowning in debt in the ultimate slowdown of growth.”

 

[JaySoul]

They don't have 20 years, if they keep piling on the debt.
[doublepost=1502972405][/doublepost]
Netflix is on the hook for $20 billion. Can it keep spending its way to success?

The current level of debt doesn't matter. That won't increase exponentially.

1) Interest rates are low so borrowing now makes sense

2) Netflix keep increasing subscribers, beating estimates too

3) Currently have about 104m worldwide, with half of that in USA. Opportunity for growth is huge.

4) At current rate, they should have 200m within 5 years, easily. That's an extra $8bn alone annually (at lowest-tier without price increases).

5) By that stage, they should have a gigantic content library (ergo they won't have to spend as much), plenty of tailor-made regional content and the price is still low enough (with better internet speeds/mobile streaming too).

6) By that stage, they should also be dominant, ubiquitous and yes, they will face threats from Amazon, Apple, whoever else BUT their lead will be so huge it won't matter to their business model.

In summary, I'm a shareholder so it helps to keep tabs on what they are doing with my money - if I didn't have faith in them, I wouldn't invest. What they are doing makes perfect sense and Reed Hastings is a damn clever CEO.

 

[maflynn]

Netflix keep increasing subscribers, beating estimates too

For now, and that's the point of the article I linked too, yes the investment community seems to approve of their tactics, but I agree with the author of the article and its quite possible, even probable in my opinion that they'll be in deep weeds with that much debt.

 

[Michael Scrip]

I would pay a lot of money to have a streaming service based on iTunes' movie library. All this original content crap is just a content filler because no one in the industry can offer a proper streaming service.

How much money?

Apparently... access to nearly every song ever made is worth about $10 a month.

But every movie and TV show ever made? That would cost a fortune!

 

[jsmith189]

How much money?

Hey Tim!

 

[Pilgrim1099]

They don't have 20 years, if they keep piling on the debt.
[doublepost=1502972405][/doublepost]
Netflix is on the hook for $20 billion. Can it keep spending its way to success?

I think Netflix is going to do fine as I've been subscribing to them for the last 3 years now. I recently heard that they've already bought some more new original anime series to expand on that library, even bringing in the new Godzilla anime that's coming up. That show is going to be amazing, done by the same animation house that worked on Knights of Sidonia, if I'm not mistaken, because the style is similar.

Second, their 2016 Voltron reboot series, now on its 3rd season ( not the rebooted CGI garbage in the 1990s ), is fantastic. They really did a nice job in investing in the right shows for certain audiences and I'm really happy what how Voltron is turning out.

Third, just wait until Stranger Things Season 2 comes up this October. It's going to have a huge surge of viewers since it's original season. Stranger Things is, IMO, one of the best shows Netflix has ever aired. Especially " Beasts of No Nation " with Idris Ilba. Brilliant film. I'm also looking forward to "MUTE" by Duncan Jones who directed "MOON" ( 2009 ) which is now one of the greatest science fiction films of all time and has a cult following. A masterpiece. MUTE is slated for a Netflix release soon this year, from what I'm hearing. It's going to be amazing.

What does Apple have then, to counter these shows? Not much from what I can see.

My view is that Netflix knows what its doing when it comes to content even it's on debt, I think things will pay off.
[doublepost=1502976180][/doublepost]

The current level of debt doesn't matter. That won't increase exponentially.

1) Interest rates are low so borrowing now makes sense

2) Netflix keep increasing subscribers, beating estimates too

3) Currently have about 104m worldwide, with half of that in USA. Opportunity for growth is huge.

4) At current rate, they should have 200m within 5 years, easily. That's an extra $8bn alone annually (at lowest-tier without price increases).

5) By that stage, they should have a gigantic content library (ergo they won't have to spend as much), plenty of tailor-made regional content and the price is still low enough (with better internet speeds/mobile streaming too).

6) By that stage, they should also be dominant, ubiquitous and yes, they will face threats from Amazon, Apple, whoever else BUT their lead will be so huge it won't matter to their business model.

In summary, I'm a shareholder so it helps to keep tabs on what they are doing with my money - if I didn't have faith in them, I wouldn't invest. What they are doing makes perfect sense and Reed Hastings is a damn clever CEO.

Wait until Stranger Things season 2 comes up. I've a feeling the numbers are going to go up because people want to see what happens next. Especially that Netflix is bringing in more original anime content and in talks with Duncan Jone's on his MUTE film which is supposedly going to be on there. His work on MOON ( 2009 ) is a masterpiece. And the next half of the Voltron season 3 will bring in viewers again.

They're doing a great job sustaining good entertainment on there.

 

[Askolan]

Apple has never said that their intent is to compete with Netflix. Most of their projects have been Apple Music oriented.

Then why spend any there money at all? Apple should either do it right or leave it alone. You know, like they used to do.

 

[JaySoul]

Wait until Stranger Things season 2 comes up. I've a feeling the numbers are going to go up because people want to see what happens next. Especially that Netflix is bringing in more original anime content and in talks with Duncan Jone's on his MUTE film which is supposedly going to be on there. His work on MOON ( 2009 ) is a masterpiece. And the next half of the Voltron season 3 will bring in viewers again.

They're doing a great job sustaining good entertainment on there.

I'm with you there, pal!

Narcos in September. Stranger Things in October. The Crown in December.

There is a reason why Netflix keep adding subscribers - a month's endless entertainment costs the same price as a couple of Starbucks coffees.

Again, people are worrying about the debt - that doesn't matter. The COMPETITION matters. That's the biggest threat.

 

[ILikeAllOS]

Netflix spent $120m on original content in their first year.

Now Apple is spending more than 8x that figure and some think it's not enough or something? Weird.

That's because there's 2 problems with your argument.

1. This isn't Netflix's first year anymore!
This is 2017 now and as the article mentioned, they have already spent $5B last year, $6B this year and now $7B next year. There's also growing competition from other companies compared to when Netflix first started.

2. Netflix was able to get away with spending less in the beginning because they have always had deals with other companies to carry their shows/movies and so Netflix's original content was just supplemental.
Apple however has no such deals, all they have is their own OC so to spend so little in this competitive market seems silly.

 

[Ronlap]

I would pay a lot of money to have a streaming service based on iTunes' movie library. All this original content crap is just a content filler because no one in the industry can offer a proper streaming service.

Absolutely agree. Don't WANT original content. Just take that money Netflix and Apple are wasting on original content and let me stream all of my favorite shows like "Wild, Wild West," 1960's "Batman," all of the Warners' cartoons and so on.

 

[drewyboy]

Netflix spent $120m on original content in their first year.

Now Apple is spending more than 8x that figure and some think it's not enough or something? Weird.

1. Apple has 200+ billion where as Netflix did and does not. So it makes them look "cheap".

2. This isn't 2012. Everyone is doing original programming now. The cost of buy-in gets higher every year.