Netflix to spend 85% of its new spending on originals
It’s no secret that Netflix (NFLX) has been spending big on content. The company said last month that it plans to raise a further $1.5 billion in debt. The company’s debt has been surging over the last few years as it directs capital toward growing its on-demand video library.
According to Variety, Netflix chief content officer Ted Sarandos stated that 85% of the video streaming giant’s new spending would be on original content. Netflix previously said that it would be spending $7.5 billion–$8 billion on content this year.
Netflix needs to spend aggressively on content as competition heats up
Netflix is ramping up its original content to be less dependent on expensive third-party content. Also, Disney (DIS) plans to create its own streaming service next year and make its content unavailable on Netflix.
Disney could pose a formidable threat to Netflix, especially if it manages to acquire 21st Century Fox’s (FOX) assets. The company has roped in high-profile producers such as Shonda Rhimes and Ryan Murphy, giving them a free hand to explore a wide range of projects. Netflix is likely to continue to spend big on content as competition heats up, meaning the company is likely to have negative cash flow for some time.