Netflix plans to invest $6bn in original content in 2017

19 Jan 2017

Netflix office. Image: Netflix

More global users and more original content – that’s the message from the Netflix leadership camp as the company revealed it made revenues of $8.3bn from streaming during 2016, and plans to invest $6bn in content in 2017.

Netflix, which started out as a DVD postal service before trying its hand at streaming 10 years ago in what seemed an unpromising start, is now the king of streaming media globally.

During the fourth quarter, the company added nearly 2m new subscribers in the US and 5m subscribers internationally. This was far ahead of what Wall Street analysts had been expecting.

‘We plan to invest over $6bn on content on a P&L basis’

The company reported $2.4bn in revenues for the fourth quarter, up 41pc. Profits were up 74pc year-over-year.

For the full year, the company generated $8.3bn in global streaming revenue, up 35pc year-on-year, and finished 2016 with 93.8m members – of which 19m were new users.

Overall, Netflix is projecting 5.2m in net additions, with 1.5m in the US and 3.7m internationally.

The company is pitching its future growth on accelerating global membership.

Content is king, says emperor of streaming

A key lever will be the timing of Netflix original content launches.

“We are in no rush to push margins up too quickly, as we want to ensure we are investing aggressively enough to continue to lead internet TV around the world,” CEO Reed Hastings said in a letter to shareholders.

“In Q1, we are forecasting a 9pc operating margin, higher than our full year target due to the timing of content spend, including moving House of Cards season five from Q1 to Q2.”

Hastings said the company plans to invest heavily in an international expansion in the remaining quarters of 2017.

Global originals like Marvel’s Luke Cage, The Crown and Black Mirror generated buzz around the world and the company closed the quarter with the release of supernatural drama The OA.

What is interesting to see here is how Netflix is impacting on the cross-pollination of content around the world.

“Gratifyingly, our first Brazilian original series 3pc, a sci-fi, post-apocalyptic thriller, premiered as one of the most watched originals in Brazil and played well throughout Latin America,” Hastings said.

“Moreover, bucking conventional wisdom, millions of US members have watched the show dubbed and subtitled into English, making 3pc the first Portuguese language television show to travel meaningfully beyond Latin America and Portugal.

“We continue to invest in local programming to complement our content offering, and as a means to introduce new members to our global library.”

For example, Netflix has forged a long-term deal with Red Chillies Entertainment, the film production company of Shah Rukh Khan – who is considered by many to be the biggest movie star on the planet – to make Netflix the exclusive home for Khan’s new films.

“It’s amazing to think that we launched original programming on Netflix in 2013 and in just four years, our original series accounted for five of the top 10 most searched TV shows of 2016 globally, including Stranger Things at number one, according to Google trends,” Hastings said.

The Crown received the Golden Globe Award for Best TV Series (Drama), while Claire Foy won the award for Best Performance by an Actress in a TV Series (Drama) for her portrayal of Queen Elizabeth II.

Later this month, the Screen Actors Guild Awards will feature eight individual Netflix original series with 17 nominations, the most of any network.

“We are incredibly excited about all the projects we have underway for our global members, no matter their age, taste or cultural background. In 2017, we plan to invest over $6bn on content on a P&L basis (up from $5bn in 2016),” Hastings told shareholders.

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years