Netflix will increase its content budget next year to $7 billion in a big push to license and acquire programs, with part of the money going to the production of its renewed original shows, such as Orange is the New Black, Glow, and Stranger Things.
Why Netflix Overspends
The news shouldn't be a surprise, as Netflix is known to overspend, a quality it's often criticized for. But Ted Sarandos, the video streaming service's content chief, believes this is appropriate practice.
"[Distributors] should pay more," Sarandos said in an interview with Variety. "I don't know how to understand that. It's a competitive marketplace."
An example of this is Netflix's reported $100 million deal with comedian Jerry Seinfeld for two comedy specials and possibly other scripted content. Netflix also recently managed to strike a deal with Scandal and Grey's Anatomy creator Shonda Rhimes, with the numbers believed to be in millions.
Netflix Programming Diversity
Spending $7 billion on content seems ridiculously large, especially with recent news of Apple investing $1 billion to reportedly kickstart its own original content. But Netflix is enjoying over 100 million subscribers, and it needs to spend money to make sure its audience doesn't run out of things to watch. At present, the library is large, composed of documentaries, TV shows, movies, animated films, kids programming, and even foreign films. There's surely something in there for everybody.
The company's subscriber count is huge, and those people have different tastes in programming. Netflix has to make sure it caters to every type of audience, including those who prefer dramas, those who like comedies better, those who'd rather watch documentaries, or comic book fans.
Netflix acquired Millarworld recently, with plans to produce a full-scale Millarworld cinematic universe.
"I want it to reflect your taste. Netflix has to be great for you," said Sarandos when asked if Netflix's programming should reflect the chief's own taste in content.
In the future, Netflix hopes to increase more original content. As of 2016, David Wells, the company's CFO, said 16 to 25 percent of the library remained licensed content, meaning programs, shows, and films made by other content creators that Netflix paid for distribution rights.
"The vast majority is still licensed content," Sarandos said. "We're still a couple years from seeing it go 50-50." This implies Netflix will only add more original content going forward. Film festivals such as Sundance and SXSW are prime venues for possible purchases. Some of the company's past buys include I Don't Feel at Home in This World Anymore, The Discovery, and White Girl — all from Sundance.
The Evolution Of Netflix
With that in mind, it'll be interesting to see how Netflix grows going forward, and in turn, how the broader video streaming industry grows, too. Netflix's success is already eating into the longstanding market capture of cable TV, with some people even deciding to drop their cable subscription and instead subscribe to Netflix, Amazon, or both. The future of TV is certainly intriguing.