Netflix's Big Bet on Original Shows Finally Seen Paying Off (reuters.com)

Netflix shares jumped as much as 20 percent on Tuesday, after the company added 50 percent more subscribers than expected in the third quarter. Reuters adds: At least 10 brokerages, including Goldman Sachs and RBC Capital Markets, raised their price targets on the stock, praising the company's focus on developing original content. The video streaming company also said it was getting ready to spend $6 billion on content next year, up $1 billion from 2016. "The benefits of Netflix-produced original content including attractive economics and greater control are clear and we believe returns on original spend are high," J.P. Morgan Securities analyst Doug Anmuth said in a research note. Strong subscriber additions after two quarters of disappointing growth helped Netflix post a 31.7 percent jump in third-quarter revenue. Anmuth said he believed Netflix was on track toward 60 million plus subscribers in the United States and about 100 million internationally by 2020.A study by IHS Markit this month noted that both Netflix and Amazon are challenging major networks by upping spending on original shows. The study noted that Amazon and Netflix both had doubled spending on new shows in the last two years. Amazon dropped $1.22 billion in 2013 and spent $2.67 billion in 2015. Netflix's spending on original content rose from $2.38 billion to $4.91 billion over the same period.

Comments

Re:Luke Cage and Daredevil Season 2 were awesome

[MightyMartian]

I think the long term is likely to be a heavy mix of both; licensing material from other studios, along with producing its own. Netflix largely got into this because of House of Cards, which, as I understand it, had already had a first season in the can and Netflix shelled out for it. It was the great experiment, and its success convinced Netflix that it could work at least in some capacity as its own network.

I think the long-term game for Netflix is probably convincing more studios to make content for it to distribute, and that is disruptive. Amazon is moving in the same direction, so I think we are seeing the first waves of what will be a heavy disruption of the traditional model. The more content the online services have, the more people will cut the cord, and the long term outlook for the traditional TV networks looks pretty grim.