Netflix continues to pursue original content
Netflix (NFLX) is working on its first African original series for release next year to its global audience. The series, which is called Queen Sono, is a dramedy starring South African actress Pearl Thusi. The African original further highlights Netflix’s continuing bet on original programming at a time when it is facing growing competition for subscribers.
In addition to expanding and diversifying its content library, investment in original productions is also viewed as part of Netflix’s attempts to take control of its business as some of its content partners turn into competitors. Walt Disney (DIS) and Sony (SNE), two of Netflix’s prominent content suppliers, have moved to launch their own video services that compete with Netflix for subscribers.
Filling gaps left by lost licensed content
Disney is not only launching its own video services to challenge Netflix, but it’s also set to become the majority shareholder in Hulu, one of Netflix’s fiercest competitors in the United States. Disney currently co-owns Hulu alongside Comcast (CMCSA), 21st Century Fox (FOX), and AT&T (T). Disney is buying Fox’s 30% stake in Hulu to double its stake in the business to 60%.
Besides launching services that compete with Netflix and backing Netflix rival Hulu, Disney is also pulling its movies from Netflix. Therefore, investing in originals can also be viewed as Netflix filling gaps left by lost licensed content.
Netflix’s content costs are soaring
As much as original programming is helping fuel Netflix’s growth, it’s also an expensive affair as can be seen from the company’s soaring content cost. Last year, Netflix outspent all its major video streaming competitors on content acquisition. Its more than $6.0 billion content spending in 2017 compared to Amazon’s (AMZN) $4.5 billion and Hulu’s $2.5 billion, according to data from MoffettNathanson. Netflix’s content spending this year could rise to as much as $8.0 billion.