Netflix and its binge spending: $17.3 bn on content in 2020

In 2019, the streamer spent little up from $15 bn on content


MUMBAI: Netflix is stubborn with its content spending despite being criticised often for being “irrational”. The streaming firm is sticking to its 'grow now - pay later' strategy. According to a recent estimate, the streamer will invest around $17.3 billion on content in 2020.

In 2019, the streamer spent little up from $15 billion on content. The report by BMO Capital Markets predicts the company is on track to spend $26 billion by 2028. An increase of almost $2 billion indicates that users will not get a chance to lower their screen time from the streaming engine as most of the money is expected to go on originals.

While the popularity of the streaming platform rose with years, the competition has also turned tougher with the entry of other deep-pocket players in the ecosystem. Apple TV+ and Disney+ launch have thrown major challenges on the unofficial streaming king. Moreover, Warner Media’s HBO Max is also going to enter the market in mid 2020.

"Netflix remains the clear leader in the global streaming video, and we believe there is still room to grow as incremental investment points enter the story: continued international growth (particularly India and Japan), improving per subscriber leverage on content spending, and the beginning of long-promised FCF improvements," BMO Capital Markets entertainment analyst Daniel Salmon comments in the research note.

Considerably, among the other competitors, no one is spending extraordinarily big on content like Netflix. Disney said it would spend $1 billion on original programming for Disney Plus and will have nearly $1 billion in operating expenses in FY 20 while WarnerMedia will invest up to $2 billion in HBO Max in 2020. Comcast/NBCUniversal has planned about $2 bn for its streaming service Peacock in the first two years.

"We continue to believe the 'streaming wars' narrative is false and there will be multiple winners in global streaming and thus continue to recommend buying Netflix (NFLX), Amazon (AMZN) and Discovery (DIS) together," the note also adds.

Netflix is upping its India game significantly as the streaming giant is ready to spend Rs 3000 crore (around $418 mn)  on Indian content for this year and the next. Netflix founder and CEO Reed Hastings spoke about the investment during a recent India visit while illustrating the country’s importance in their business.

"We launched in 2016 and we have continued to invest. So we have a lot of content from the United States, the UK and Spain. We are developing our Indian content here,” Hastings said. "This year and next year, we will spend about Rs 3,000 crore developing content and you will start to see a lot of stuff hit the screens," he added.  

The streaming giant is set to report its fourth quarter earnings on 21 January. Netflix reported revenue of $5.24 billion, up 31 per cent year-over-year in the last quarter. 

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