They say you have to spend money to make money, but where does it end?
Netflix (NFLX) dropped a cool $6 billion on content in 2017 alone and is planning to shell out a whopping $8 billion next year, $1 billion more than previously planned. While the company’s long-term forecast is a bit cloudy with a growing $20 billion debt looming over its head, the short-term prognosis is bright and sunny. The streaming giant added 5.3 million new subscribers in the last quarter, crushing its own internal goal and raising its worldwide total north of 104 million. No wonder the company is planning on raising prices this month. As long as that stock price keeps going up, up, up, does it really matter?
“With $17 billion in content commitments over the next several years and a growing library of owned content ($2.5 billion net book value at the end of the quarter), we remain quite comfortable with our ability to please our members around the world. We’ll spend $7-8 billion on content (on a P&L basis) in 2018,” Netflix wrote in its earnings release.
CEO Ted Sarandos is like a Vegas gambler riding a pair of hot dice at the Craps table. He’s betting big and winning big.
Though Hulu has been setting internal records with its subscriber growth this year, Netflix is still king. Increased spending on content gives them a good shot at retaining its current customer base while continuing to expand—especially overseas, where there are still large untapped markets.
More importantly, it gives them a bigger cushion between the competition, which includes Hulu, Amazon and HBO. Things are sure to get particularly interesting when Apple and Facebook finally throw their hats into the ring as well.
As for that mountain of debt, they’ll have to get Ozark levels of creative to figure that one out.