Netflix is on a tear, remaking virtually everything and now estimating that 85 percent of its total spending is going to original content, which would suggest it’s going up against Hollywood giants, not just cable companies.
Speaking at a media and communications summit in New York recently, Netflix Chief Content Officer Ted Sarandos said the company now has 470 originals scheduled to premiere by the end of this year. That would mean a total of 1,000 original shows for the streaming behemoth.
But it looks even better in dollar figures: Netflix content spending for this year will be up to $8 billion, with the “bulk” of that spent on originals.
In less than a decade, Netflix has become one of the biggest buyers of video in the world.
Now we’re looking at Netflix phase two, because in the past 80 percent of Netflix viewing in the United States was from licensed content, but with the advent of a new streamlining services by studios themselves, the amount of available licensed content is dwindling because studios are holding out.
As Sarandos pointed out, “maybe we can put the billion dollars we’d put in an output deal into original films”.
It started out with big hits like House of Cards and Orange is the New Black, but now it’s widening its net to see what it catches. Netflix won’t be cast-type, either, like HBO, or—worse—Hallmark. There will be something for everyone, including B-movies.
The company is also stepping up true originals—those they actually produce rather than rebranding them as originals, as they did for House of Cards and Orange is the New Black. Pop-culture hit Stranger Things was a true original, as was 3 percent, and we should see much more of this coming up. Related: Is Gold Only For Long-Term Investors?
And the need for loads of fresh content is crucial as the competition stiffens, with Disney and Apple planning their own streaming projects, and Amazon Prime and Hulu posing a hefty threat.
It’s already seriously dented the cable and satellite business. In 2013, cable and satellite recorded their first-ever drop in subscribers, year-over-year. And it’s gotten worse every year since.
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By the end of last year, Netflix boasted more than 120 million subscribers globally, generating $11.7 billion in revenues. Disney’s studios generate around $32 billion but not from subscriptions, so it’s more difficult to compare.
Some predict that Netflix could generate $50 billion within five years—or at least top Disney by then.
Regardless, it’s enough to force Hollywood to try to ‘supersize’, as evidenced by the AT&T-Time Warner hoped-for mega-deal. Hollywood is having a hard enough time keeping up with Apple, let alone Netflix.
Forbes poignantly notes: “As merger maneuvers continue across Hollywood, the tech companies continue to grow and iterate and do deals with the brightest and best creators in town. As Hollywood plays M&A games, the new competition is playing the game for actual customers.”
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Netflix is now valued at over $142 billion, and it’s share price loves the original content news:
By Jan Bauer for Safehaven.com
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