Netflix, which started producing original programming in 2012, has now spent more on content than the BBC, according to IHS Technology Chief Analyst Ben Keen. The analyst further stated that the spending made Netflix even exceed it that of Discovery, but not of Sky, noting that sports rights come at very high costs.
Correlation between spending and subscriber growth
Amazon also spends a lot on content, according to Keen, who made the comments while speaking at a session called “The story behind the numbers.” Netflix’s subscriber growth correlates positively and closely with the amount of spending it does, as identified by Keen. It was observed that growth in any either led to a growth in the other as well.
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Talking about the outlook of the industry, Keen said revenues from global online videos, driven by subscriptions and advertising, are expected to more than double by 2018. The EMEA region has more than 40 million SVOD subscriptions, and standardized online services account for half of those. Local productions get a meager 20% share of the content spend made by Netflix, but it is expected that the figure will rise in the coming days, says a report from Broadband TV News.
In the past 10 years, more than €12 billion in value has been added to the European cable market, which has doubled in this time period. The analyst noted that the industry as a whole has seen good growth in recent years, but cable operators have been losing subscribers.
Netflix to continue investing in content
To further up its investment in content, Netflix recently announced plans to offer $1.5 billion in senior notes. Also during the time of the company’s last earnings announcement, CEO Reed Hastings revealed plans to continue investing in original content.
“Over the next few years we expect to continue financing our original content expansion with long-term debt,” the CEO noted.
According to the S&P, as of Dec. 31, Netflix had $9.5 billion in streaming content commitments, compared to $7.3 billion in 2013. Owing to its original content, Netflix has been nominated for Emmys and other awards, but results have been mixed. It will be interesting to see how Netflix utilizes its investments to fund its ambitious expansion plan of covering 200 countries in the next two years.