That’s exactly how much Netflix will soon spend on its shows which might not show up on the platform anytime soon. The much awaited new seasons of “The Crown”, “Stranger Things” add up to the list. This video streaming giant is spending far more than traditional players like HBO and Walt Disney.
Optimistic investors of Netflix are betting big time on this unconventional model: Spend big now, and draw huge profits later. Actually, much later. Netflix’s current subscriber count is 130 million but the investors are eyeing on a target of 300 million or more. This number explains why Netflix is valued so high when compared to other services. It is currently valued at $156 billion while Disney’s worth is $174 billion. In the last 12 months, the former generated $14.9 billion in revenue and $1.3 billion in profit while the latter $58 billion in revenue and $10.1 billion in profit.
This clearly indicates that Disney is worth just 12% more than Netflix despite making eight times more money. Another take on this is that for every $1 of profit generated, investors of Netflix are paying $120 while that of Disney are paying only $17.
Robert A. Iger led Disney has already introduced ESPN plus, a sports streaming service and will be launching an entertainment offering next year. Experts say that Netflix is also one of the reasons why AT&T spent $85.4 billion for Time Warner (Now WarnerMedia) which would also be unveiling its streaming service built around HBO.
“There are so many competitors. Disney’s going to enter. AT&T is going to expand HBO. YouTube is on fire. And there’s video gaming like Fortnight. There are so many ways to have great entertainment on the screen”, said Reed Hastings, Netflix’s chief executive.
Netflix’s hunger for content makes it spend more which results in “negative cash flow” which means more money is going out than coming in but can still show profits by recording production costs later on. For example, an episode of “Stranger Things”, a Netflix original, would cost $8 million per episode which has to be paid upfront. However, this cost isn’t counted until the show is streamed on the service. An excellent marketing strategy for the aggressive original content is leading to a larger subscriber base.
For the Eleven fans out there: Season 3 of Stranger Things will be released in the Summer of 2019.
With traditional services like Disney and AT&T offering tough competition, Netflix is likely to fall short of content. However, the former will also have to forgo licensing fees which in turn makes making up the revenue difficult.
Netflix and India
This video streaming pioneer has more than half a million fans in India and is in plans to reach a million subscribers’ milestone by offerings its services at a lower price. It is currently the most expensive video streaming service in India and lowering the price will likely help it penetrate deep into the market.