Tuesday 25 September 2018

Netflix plans to spend $8 billion on programmes to boost growth

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Lucas Shaw

While competitors race to catch up with Netflix, the largest online TV service in the world is adhering to a simple strategy to maintain its lead: you have to spend money to make money.

The streaming pioneer will deploy as much as $8bn (€6.8bn) on programming next year, a third more than in 2017. Netflix will also spend more than $1bn for marketing.

The money will fund an ever-growing array of programming designed to attract even more customers. The company's long-term budget for movies and TV shows totals $17bn.

Critics say the spending is risky, and concerned investors sent shares down yesterday, even though on Monday the online TV service reported its best-ever third quarter for subscriber gains. The stock dropped as much as 2.4pc to $197.77 in New York trading.

Here's how Netflix will spend that $8bn:

80 original movies

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.

Most will be low-budget projects, yet Netflix is also starting to fund big-budget movies, like the Will Smith movie 'Bright' due out in December, meaning the company is mounting a growing threat to cinemas. By releasing more than one new movie a week online, Netflix is giving consumers reasons stay home.

Anime and Scandinavian thrillers

Netflix has signed up more than 56 million customers outside the US. Now 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 released its first Italian and German series this year, and plans a substantial increase in the number of shows it makes for foreign viewers in 2018.

Deals, deals, deals

Netflix bought comic book publisher Millarworld this summer, the first acquisition in the company's 20-year history.

Consider it the first of many deals. Though Netflix prefers to build rather than buy, the company said it would seek more opportunities to acquire intellectual property.

Netflix wants to claim hot book properties, top producers and new writers before rival media companies.

Teen and tween dramas

For all the money Netflix spends on its own shows, programming licensed from others still accounts for the majority of the company's annual spending.

In one of its biggest deals to date, Netflix licensed the rights last year to 'Supergirl', 'The Flash' and 'Riverdale' from the youth-oriented network CW.

CW - owned by CBS and Warner Brothers - is one of the few networks to deepen its ties to Netflix in recent years. Other large media companies are taking their shows off Netflix to bolster their own TV networks and support new streaming services.

Lots of jumpers

If your ultimate ambition is to be a fully integrated Hollywood studio, merchandising has to play a role.

At the end of Monday's call with investors, Hastings and Sarandos donned ugly Christmas jumpers tied to the hit show 'Stranger Things'.

They're part of Netflix's new push into merchandising and go on sale at Target later this month.


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