Netflix Continues Its Content Spending Spree
A $3 Billion Spending Increase
As the pandemic continues to keep consumers inside on their couches, streaming companies are vying for their attention. Netflix (NFLX) remains the name to beat in the video streaming sphere, but the company faces more competition than ever before. Amazon (AMZN), Apple (AAPL), and Disney (DIS) are just a few of the companies going after Netflix’s crown.
In response to increased competition, Netflix is spending more on content than any of its rivals. Over the past five years, the company’s spending on content has gone up fivefold. The streaming giant’s spending on content is expected to rise by $3 billion to hit $13.6 billion this year.
Producing and Acquiring Content
Though Netflix produces some of its own content, like Stranger Things and Cobra Kai, the majority of its content budget goes to acquiring movies and shows produced elsewhere. Netflix spends about $4.4 billion on creating original content and about $9.2 billion on outside content.
As more and more companies enter the streaming space, the cost of acquiring content is soaring. Netflix bought the rights to Seinfeld for $500 million last year, and the show will begin streaming in 2021. HBO paid $1.5 billion for the rights to The Big Bang Theory and Two and a Half Men
Much of Netflix’s content budget has been funded by borrowing. The company has long-term debt of $15.3 billion.
If the pandemic continues to keep consumers at home and to hamper production of new content, the price of existing content could be pushed even higher. Investors will be carefully watching to see if Netflix will continue its strategy of pumping money into content as a way to stay ahead of competing streaming services.
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