Netflix has reported a record first quarter this week, but to keep up that momentum, most of which seems to be driven by its Watch Instantly streaming service, it means that it will have to keep acquiring more rights to content. To that end, The Hollywood Reporter has said that analysts predict the company will spend around $1 billion this year alone on content deals.
Yes, that’s “billion” with a “b”.
While that may seem like a staggering amount, when you consider what Netflix has already spent this year on content, you almost have to think that number may be a little low. In March they spent $100 million for 26 episodes of the new Kevin Spacey series House of Cards , $75 million was spent this month for the rights to Mad Men and dollar amount was announced for the deal with CBS that was struck back in Feb. The company has already been on a spending tear this year, and it isn’t even halfway over.
The big question mark will come this fall when the Watch Instantly deal with Starz comes to an end. The original deal struck in 2008 for $30 million a year through 2011 has been criticized as an insanely low deal by studios and channels alike in Hollywood, with some saying it should have been closer to $250 million a year. When the deal comes up for renewal, there is no way Netflix will get anything close to that deal again, and some have even speculated it would be cheaper for if they just bought the cable channel outright.
As Netflix continues its migration from being a DVD rental company to a streaming content service, there will be a lot of money being spent to make sure they have the best content it can. Add in the fact that there seems to be a lot of competition looming on the horizon, and it’s going to have to spend that $1 billion, if not more, to make sure it stays the market leader. When you also consider that the company is rumored to be looking into opening up operations in the United Kingdom, which will require all new licenses, and you have to wonder just how much it can spend and stay solvent.
These are interesting times for the streaming content industry, and they look to get even more complex as time goes on and larger sums of money are needed to keep it going.
[via The Hollywood Reporter]