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Understanding Netflix’s Content Strategy

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Jul. 12 2017, Updated 8:08 a.m. ET

Netflix’s content expenditure likely to go up

In 2017, Netflix (NFLX) expects to spend $6 billion on content, and the company expects that this expenditure will rise even more going forward. Netflix’s CEO (chief executive officer). Reed Hastings, stated at the Code Conference in California in May 2017 that the company expects to take more risks when it comes to its original content, which should boost content spending.

But according to an iNews report from July 7, which cited research by Ampere, there is a slightly different rationale behind Netflix’s strategy to do away with popular original programming. According to the report, Netflix’s decision to cut popular shows such as The Get Down and Sense 8 was influenced by production costs.

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Genre exploration and content obligations

Netflix is also exploring different content genres like comedy and plans to invest in it on a larger scale, considering the success of comedy shows like Dave Chappelle. It’s also looking at extending its content portfolio and include shows from different content genres that are suitable for family viewing.

The emphasis on content when it comes to gaining new subscribers has meant a rise in streaming content obligations, or the costs that Netflix pays for licensing, acquiring, and producing content. In fiscal 1Q17, Netflix’s streaming content obligations rose 24% YoY to $15.3 billion, and these costs will likely keep rising.

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