It looks like Netflix has no plans to let up on their spending. According to recent reports, Netflix plans to spend over $7 billion on content in 2018 up from $6 billion in 2017.
The question now is can Netflix keep this up. It’s not clear that all of Netflix’s growth is sustainable. Some analysts and industry insiders are skeptical of the company’s spending habits, arguing its stock is overinflated. “We’re not spending money we don’t have,” Sarandos counters. “We’re spending revenue.” Yet Netflix is $4.8 billion in debt according to reports, with an additional $15.7 billion in long-term content commitments with studios. “We have one of the low debt levels in the industry,” insists Sarandos.
Others are wondering if Netflix spending is an effort to off set future losses as studios pull their content. Yet Netflix seems very confident that they will keep their deals. “I would say that the relationship between studios and networks has always been that of a frenemy,” says Sarandos. Netflix has been down playing Disney’s move to establish itself as a streaming rival. “Everyone is doing some version of it already,” he says. “They just have to make a decision for their companies, their brands and their shareholders on how to best optimize the content.” Netflix, suggests Sarandos, has long been preparing for that inevitability. “We started making original content five years ago, betting this would happen,” he says.
So far Netflix current plan seems to be paying off as they recently topped 100 million subscribers.
Source: Variety
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