Netflix to boost spending on content

NEW YORK • Netflix is casting a wider net for subscribers. The leading streaming service will spend between US$7 billion (S$9.5 billion) and US$8 billion on content next year, up from US$6 billion this year, it said, while announcing third-quarter earnings on Monday.

Netflix added 5.3 million subscribers in the quarter, surpassing expectations.

It had revenue of nearly US$3 billion, a 30 per cent hike from the same period last year.

It also saw net income rise to US$130 million, well over last year's third-quarter total of US$52 million, but short of the US$143 million that Wall Street had expected.

In after-hours trading, Netflix's shares inched up 1.2 per cent, just days after its stock surpassed US$200 for the first time.

It now has 104 million paid subscribers and saw the bulk of its third-quarter growth come from global markets, which accounted for 4.5 million new subscriptions.

The company said 25 per cent of its total content spending was now dedicated to original programming.

It expected that figure to grow.

Netflix already outspends its rivals, including HBO, FX and CBS, while Apple recently stated that it would spend more than US$1 billion on original content.

The earnings announcement came as Netflix's competitors are ramping up for a fight.

Hulu has found momentum after The Handmaid's Tale won it the best drama award at the Emmys last month. The parent companies of Hulu - which include 21st Century Fox, Comcast, Disney and Time Warner - also now seem intent on selling the back libraries of their television shows to Hulu rather than Netflix.

And starting in 2019, Disney is planning on starting its own streaming service, removing its library of movies from Netflix.

Mr Reed Hastings, chief executive of Netflix, downplayed the Disney news, pointing out that Disney's content was not available on Netflix in most foreign countries.

Another Netflix rival, Amazon, is going through a period of tumult. Roy Price, its head of content, was suspended last week over sexual harassment allegations.

Amazon is also undergoing something of a programming pivot, after several years of making big-budget shows that had failed to gain any real traction. It also cut ties with The Weinstein Co after numerous allegations of sexual harassment were made against film producer Harvey Weinstein, scrapping a project the company was planning to produce, which would have been directed by David O. Russell and starred Robert De Niro and Julianne Moore.

Netflix continues to sign up big names, including TV hitmaker Shonda Rhimes, who was lured from ABC, and Ryan Murphy, who has agreed to create a drama which will explore the origin story of the Nurse Ratched character from One Flew Over The Cuckoo's Nest.

In the next three months, Netflix will also release the second season of Stranger Things and Bright, a feature film starring Will Smith for which it has high hopes.

Part of the US$1 billion to US$2 billion increase in its content budget will come from original movies. Mr Ted Sarandos, the company's chief content officer, said Netflix released eight films this quarter.

By the end of next year, he expects the streaming service to release 80 original movies.

That will cost money.

The company recently bumped up subscription prices in the United States and parts of Europe.

In the US, the most popular plan, which supports high-definition video and allows simultaneous streaming to two screens, was raised by a dollar a month to US$10.99.


A version of this article appeared in the print edition of The Straits Times on October 18, 2017, with the headline 'Netflix to boost spending on content'. Print Edition | Subscribe