Netflix, Inc (NASDAQ:NFLX) has a warning for the likes of Amazon.com, Inc (NASDAQ:AMZN), Hulu and HBO and the cable dinosaurs: watch out. The online streaming titan announced this week a $5 billion budget to buy new and vintage films and TV shows in 2016. This move could grab that market that continues to put down the television remote.
Netflix, Inc and Others Take the Spend, Spend, Spend Approach
There has been a streaming war brewing (or downloading?) over the last year between the likes of Amazon Prime, Netflix, Hulu, HBO Now and many other firms. All of these media giants are vying for your few bucks a month and your many, many hours available at your disposal each week.
Although it seems the consuming public’s entertainment budget is vast – these four firms are reporting huge numbers – conventional media companies want to combat the declining viewership they’re witnessing. The solution for the likes of Viacom Inc (NASDAQ:VIAB) and Discovery Communications Inc (NASDAQ:DISCA) is to spend a lot more than it does now. And that could be good news for avid media watchers, if they’re still interested in the old way of consuming movies and shows.
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The idea behind this move is that before cable juggernauts could play re-runs and ensure that people will continue to tune in to their channels. However, Netflix and the like now have those same old episodes in addition to new content. So why would consumers bother tuning in?
With television audiences declining each year, investors are concerned that it’s a waste of money if no one is watching these productions. It’s true; Netflix churns out both popular and critically-acclaimed content. It could be a superfluous move on the part of Starz and Viacom, which are launching an array of new original programming, day and night.
Is it too late? Analysts are asking that same question.
Netflix confirmed that it’s putting forward a $5 billion budget to buy new and vintage films and TV shows, which are keeping its audience engaged. Also, it’s estimated that the streaming website will spend around $11 billion over the next five years on content. What’s perplexing is that Netflix is spending more than any other television network. And, at the same time, Amazon and Hulu are putting up the big bucks to compete with Netflix.
Indeed, Netflix’s spending ways may not be great for CBS Corporation (NYSE:CBS) or Discovery. However, the fact is is that they always have the option to sell these shows to various video-on-demand (VOD) services. They could also establish their own online services or sell them worldwide – a plausible option with a shrinking domestic TV market.
Another question: if Amazon can’t keep up with Netflix, despite it spending millions of dollars, how can a cable empire of yesterday compete?
A Brief Look at Netflix, Inc’s 2016
It’s only been three months into 2016, but it has already been an interesting year for Netflix.
Although Netflix shares are down 14 percent year-to-date, analysts expect its stock to climb above the $100 range once again in the coming months. Netflix is also working on expanding its product.
Here are a few developments that have occurred since the start of the year:
- Netflix captured nearly six million more subscribers in the fourth quarter last year.
- Major movie studios are having a hard time bidding for films because Netflix is leading the way.
- The website is expanding its High Dynamic Range (HDR) content worldwide.
- Of course, Netflix continues to roll out news series all the time.
- It released the fourth season of “House of Cards,” one of the most successful franchises owned by Netflix, which is a big deal in a variety of ways.
Analysts polled have put the Netflix price target as high as $164 a share. The streaming service has never reached that much in its history.
The future looks bright for Netflix, and many are confident it can beat HBO Go and Amazon Prime Instant Video. Unsure what to pick? This list ranks the main streaming services in different categories.