Leaks suggest Netflix boss is mandating stricter hold on purse strings
Streaming video on demand (SVOD) market leader Netflix has swiftly become a major producer of original content. The company’s homemade shows, including smash hits like Stranger Things and Orange is the New Black, have proved to be a hit with audiences around the world. Add to that a slew of foreign language content that appeals directly to Netflix’s many international markets, and exclusively licensed shows and films that give it the heads up on competitors, and it’s easy to see why Netflix commits such a massive budget to content. Now, that budget might be more judiciously allocated.
Netflix’s share price has appreciated by 49% so far this year
Source: Yahoo Finance
According to a report from The Information, Netflix will be pickier in regards to the content it greenlights. The report reads: “In early June, Netflix content chief Ted Sarandos met with several dozen of his middle-ranking and senior film and TV executives and delivered a blunt message: Be more careful with money.”
This message might be timely. In its early days, Netflix struggled to be taken seriously as a content creator. That meant getting the best talent to write, direct, and star in, it’s films and shows was a struggle. The solution? Throw money at the problem – enable young film makers to work on the kind of ambitious projects that big studios aren’t up for funding, and pay top talent top dollar in order to capture their creative output. That strategy was an overwhelming success, and is largely responsible for Netflix’s enviable position in the entertainment industry today. But now, it doesn’t have anything left to prove… why go crazy with the cheque book when everyone’s already willing to work with you?
Netflix will continue to be a big spender, but if these reports are to be believed, it will be a more cautious one. Assuming it manages to continue producing the kind of quality shows and films that bought it such success while eliminating costly mistakes, that’s a move that investors should get behind.
Dominion holds Netflix in its Global Trends Ecommerce Fund.
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