Netflix raises $1.6bn extra funding for new content
David Farnor | On 25, Oct 2017
Netflix is raising an additional $1.6 billion funding, as the streaming giant continues to step up its original content production.
The VOD service is selling almost $2 billion worth of notes to “qualified institutional buyers”. The proceeds from that wave of investment will then be used for general business purposes, the company said in a statement, which primarily means content acquisition and development.
Netflix is gradually evolving its content strategy, relying less on short-term deals and windows and more on long-term exclusivity; alongside flagship original shows are a growing number of co-productions with broadcasters around the world, from Canada to Germany. As well as inking overall deals directly with talent such as Shonda Rhimes, these give Netflix the chance to be the permanent home for an increasingly diverse range of content, while also keeping production costs as low as possible.
Netflix’s investment in content has certainly paid off to date, positioning the streaming service at the front of the pack in the new age of streaming video. 5.3 million people signed up to the site in the third quarter of 2017, up 49 per cent from same three months a year ago. Over the year to date, Netflix has added 15.5 million members, up 29 per cent versus the same period in 2016.
Speaking in an earnings video call alongside the results, CFO Ted Sarandos said that the aim is to create a “steady drumbeat of the new show you can’t live without”.
“Our goal is to work with the best creators in the world and own the underlying intellectual property so that we can continue to deliver amazing content to our members across the globe,” said CEO Reed Hastings in an earnings call this month. “In working with the best talent, we strive hard for awards recognition. At this year’s Primetime Emmys, we scored 20 wins out of 92 nominations, second only to HBO, spread across eight different titles.”
All of this, though, takes a hefty chunk of cash: Apple TV recently began its push into original content production, with a $1 billion fund to help build a slate of audience-winning titles. Netflix’s latest funding round eclipses that sum. The streaming service, meanwhile, plans to spend around $7-8 billion on original content in the next year – up from its original estimate of $7 billion.
Netflix has already increased its price multiple times in recent years to help shoulder the burden of its expanding global footprint. At the same time, it has cancelled original productions, as it looks to balance its books.
But even with the price hike, a more balanced budget and selling off a new batch of notes, Netflix’s ambitions show no signs of slowing: this summer, the streaming giant acquired Millarworld, its first M&A transaction in a 20-year history, the home of comic book writer Mark Millar. It is also stepping up its original feature film arm, with movies on the way including Martin Scorsese’s The Irishman, currently in production, and Bright, David Ayer’s fantasy blockbuster starring Will Smith.
Netflix to spend $8 billion on original content in 2018
17th October 2017
Netflix is planning to spend up to $8 billion on original content in 2018.
The streaming service continues to ramp up its investment in original content, as breakout hits such as Stranger Things help to attract subscribers and retain members. It’s a gamble that is expensive, but paying off, with 5.3 million people signing up to Netflix in the third quarter of 2017, up 49 per cent from same three months a year ago. Over the year to date, Netflix has added 15.5 million members, up 29 per cent versus the same period in 2016.
Speaking in an earnings video call alongside the results, CFO Ted Sarandos said that the aim is to create a “steady drumbeat of the new show you can’t live without”.
Rival Amazon is aiming to do the same thing, by doubling down on large productions and cancelling smaller projects that have not gained reaction, in an effort to find a global word-of-mouth hit. Asked about trying to find the next Game of Thrones, Netflix CEO Reed Hastings replied: “So is [HBO head] Richard Plepler! So is Sarandos!”
Netflix is slowly changing the way it invests in content too. Just as it moved from second-run content to licensed originals and then to Netflix-produced originals, Netflix is “progressing even further up the value chain to work directly with talented content creators”, said Hastings in a letter to shareholders.
In August, the company announced an overall deal with Shonda Rhimes, the creator of global smash hits like Grey’s Anatomy, How to Get Away with Murder, Scandal, and others. It also acquired Millarworld, its first M&A transaction in a 20-year history, the home of comic book writer Mark Millar.
“Our goal is to work with the best creators in the world and own the underlying intellectual property so that we can continue to deliver amazing content to our members across the globe,” said Hastings. “In working with the best talent, we strive hard for awards recognition. At this year’s Primetime Emmys, we scored 20 wins out of 92 nominations, second only to HBO, spread across eight different titles.”
Alongside original series, though, is Netflix’s growing focus on original feature films, which the service says it is “making good strides” with, after hiring Scott Stuber from Universal to head up its movie development.
Netflix measures its success by member viewing relative to its investment, highlighting successes in the last quarter with the debut of Death Note (based on the popular Japanese IP), Naked (a romantic comedy featuring Marlon Wayans) and To the Bone (an intense drama starring Lily Collins). Netflix is planning to step up its spending even more, though, aiming for a total of 80 releases in 2018. That’s one more than every five days on average – compared to eight in the last three months.
Original movies on the way include The Irishman, currently in production, and Bright, David Ayer’s fantasy blockbuster starring Will Smith. With Netflix’s growing ambitions, though, comes the looming question of how it will intersect with the traditional Hollywood industry: cinemas are not keen to book titles that will be released day-and-date online, something that has prompted Amazon Studios to adopt a softer approach of maintaining the theatrical window around any releases. Bright’s high-profile scale, though, could help to break that trend, alongside strong reviews for Noah Baumbach’s The Meyerowitz Stories, which premiered at Cannes and the London Film Festival and proves Netflix can be a critical darling too.
“People will start seeing the potential for this big movie initiative,” said Sarandos.