Netflix Could Become Industry's Biggest Spender On Content In 2018
- by Alex Weprin , October 17, 2017
Netflix says it may spend as much as $8 billion on content in 2018 -- a figure that could make it the biggest content buyer of any media or technology company.
The company slipped the figure into its quarterly letter to shareholders Monday evening, adding that it had $17 billion in content commitments over the next few years, and is expected to spend between $7 billion and $8 billion on content in 2018.
For comparison, the $8 billion figure would be nearly twice what broadcast networks like NBC and CBS spend on content, according to data from SNL Kagan and Boston Consulting Group.
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The only other company to spend more on content than Netflix until now has been ESPN, which totaled an estimated $7.3 billion in 2016, largely due to expensive live sports rights.
If ESPN's spend is similar to what it was in 2016, Netflix could be poised to surpass the Disney-owned cable sports giant. Of course, sports rights tend to rise in price over time, thanks to contracts that were signed years ago, before the cable bundle began to fray. So ESPN’s spot atop the content world may yet be secure.
Netflix’s rapidly growing content spend adds to its competitive challenge for ad-supported media. The more cash it spends on content, the more eyeballs Netflix can steal from other sources of video, including many ad-supported companies.
Pending new info from Nielsen's just announced SVOD service, Netflix in the U.S. probably garners about 6-7% of all viewing across all dayparts and a higher share in primetime. That makes it larger than any individual broadcast TV network in viewing tonnage, even though only half of the population has access to Netflix. Since only half of all Netflix subs are in the U.S. the claimed spending level for "new" content of $8 billion translates into roughly $4 billion for the U.S. And Netflix is also paying off contracts for "old" content. A typical broadcast TV network devotes about two-thirds of its ad revenues on program content, which means that it spends something like $2.5-3 billion, anually on programming. So, yes, Netflix is spending more but whether this translates to more per viewing impression is less clear. I suspect that Netflix is paying about 25% more per impression---just a guess folks----and this differential goes to the issue of making a profit. The broadcast TV networks make a nice profit, as we will demonstrate in "TV Dimensions 2018", shortly. Does Netflix make a profit?
Maybe not, but stock price goes up anyway so investors and employees are happy.
Maybe not, but stock price goes up anyway so investors and employees are happy.
Maybe not, but stock price goes up anyway so investors and employees are happy.