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Netflix plans $8bn content spend in 2018

Reed HastingsNetflix added a record number of third quarter subscribers in its most recent quarter and announced that it now plans to spend up to US$8 billion on content in 2018.

The SVOD giant said in its latest earnings report that it added 5.3 million members globally in the third quarter of 2017, up 49% year-on-year and better than its guidance of 4.4 million net additions.

Year-to-date Netflix added 15.5 million members, up 29% compared to a year earlier, as it reported strong appetite for its original series and films alongside the wider global adoption of online video.

On the content front, Netflix said it has US$17 billion in content commitments over the next several years and plans to spend US$7 billion and US$8 billion on content on a profit-and-loss basis in 2018.

Speaking on Netflix’s Q3 earnings call, chief content officer Ted Sarandos said the company is “producing at larger and larger scale outside the United States” and plans to ramp up its original movie efforts.

“This past quarter we released eight original films. We plan on about 80 coming up next year and they range anywhere from the million-dollar Sundance hit, all the way up to something on a much larger scale,” said Sarandos.

Speaking on the same call, chief financial officer David Wells added that Netflix’s previously-stated goal of reaching a 50-50 split between original and licensed content “could be higher in the future” as it accelerates its content development.

In its Q3 letter to its shareholders, Netflix said: “Five years ago, we embarked on our original programming strategy and we’re very pleased with our progress in transforming Netflix from a service with not just second run content but also must-see new releases, like Stranger ThingsOrange is the New BlackHouse of CardsFuller HouseMaking a MurdererNarcosThe Crown and 13 Reasons Why, among many others.”

For the quarter, Netflix said that global streaming revenue rose 33% year-on-year to US$2.88 billion, driven by a 24% increase in average paid memberships. Operating income nearly doubled year-over-year to US$209 million.

Commenting on the results, Paolo Pescatore, vice president, multiplay and media, at analyst house CCS Insight, said that while subscriber growth stood out in the quarter, the challenge for Netflix in Q4 will be whether recent price rises have an impact.

“These latest set of results support our opinion that it [Netflix] needs to continue acquiring customers quickly, in order to balance its rising costs.” said Pescatore.

“With many local providers and operators are strengthening their video services, the competitive environment continues to intensify, and Netflix will face stiffer competition as rivals launch live TV services and move into sports rights, especially in the US.”