Top video streaming service Netflix has over $12 billion in content obligations due to content suppliers and studios, from which it has leased or purchased rights to air content, according to the company. The amount is a significant rise in the dollar amount due on such content obligations, and is a result of the company's significant recent global expansion, according to Netflix.
Recently, we reported that Netflix has upped its game in terms of the original content it is producing for consumption by members of its video streaming service, and now, thanks to the company's recent earnings call, we're getting a look at some of the receipts for the increased expenditures.
Those expenses amounted to $12.3 billion for the end of first quarter 2016, which is a significant increase from the prior quarter, when that number totaled $10.9 billion, and represented a 26 percent spike from the same quarter a year ago.
The company attributes the higher numbers to its aggressive global expansion, which has resulted in the VOD service now being available in 190 countries, 130 of which were introduced just this January.
"As we're adding more content now for the rest of the world ... those markets are growing in content spend more quickly than some of our more established markets," CFO David Wells explained during the company's recent earnings call.
Netflix expects to be able to cover its increased content expenditures by adding new subscribers, but also by way of the highly-publicized price increase set to kick in for millions of its long-term subscribers this year. Viewers on its most popular HD two-screen plan will see their now grandfathered rates of $7.99 or $8.99 per month increase to the current new subscriber rate of $9.99. The rate increase will be administered gradually throughout 2016, with the oldest subscribers remaining on the less expensive plans the longest.
Netflix original content production is one of the main reasons viewers subscribe to the service, according to a recent survey, in which the VOD streamer overtook HBO for the first time when consumers were asked which pay TV service produces the best original content. Recent reports also indicate that Netflix now far outspends HBO when it comes to annual content production expenditures.