Netflix may be tightening its purse strings as it begins to cut costs in the content department. On Tuesday, following the release of its second-quarter earnings report, the streaming leader revealed that it plans to maintain 2021’s $17 billion dollar budget for the foreseeable future, a stark contrast to its previous ever-increasing investment strategy.
As the streaming industry changes, Netflix remains the big dog in the pack. Even after losing 970,000 subscribers globally during Q2, it remains the “must have” streaming service for a large portion of consumers. Netflix’s staying power can seemingly be attributed — at least partially — to the streamer’s library, which itself may be dwindling as 10-year licensing agreements are beginning to expire.
That’s why CFO Spencer Neumann’s pronouncement that Netflix isn’t increasing its content budget came as a bit of a surprise. In 2021, the streamer allotted $17 billion of its budget to content, a figure that Neumann indicated is “in the right zip code” moving forward. While justifying past spending as necessary to make them the current market leader, he feels that the drop in extra Covid expenses should compensate for the neutrally buoyant budget.
The fourth season of “Stranger Things” is an excellent example of Covid-style inflation, as the show suffered from early shutdowns due to the pandemic, according to Neumann. Though it did help bolster the streamer’s subscriber base, production was delayed to such an extent that Netflix was forced to release the season in two parts.
Netflix has indicated that it is cutting back in some not-so-subtle ways before. In March, the company reduced its workforce by 2%, while also announcing it wouldn’t release as many originals in preference for “bigger, better, [and] fewer” films and shows. Netflix is also fiercely promoting its $200 million blockbuster, “The Gray Man,” much more than usual, hinting that its marketing strategy is shifting focus as well.
It seems that a dip in content financing would be counterproductive for a streamer that prides itself on hosting a vast library of original and third-party content. But given the 1.17 million subscribers lost so far this calendar year, perhaps a slight reprioritization is in order. By trimming back on spending, Netflix is hoping to spend more time and money focusing on the titles that will have the biggest impact on attracting and retaining subscribers.
However, the streaming giant may be taking a bit of a chance on limiting the main thing that its customers have always looked to the service for, its massive library. Investors and subscribers will have to hope that Neumann and company know the best way to tackle the financial losses Netflix has faced in the recent past.
Netflix is a subscription video streaming service that includes on-demand access to 3,000+ movies, 2,000+ TV Shows, and Netflix Originals like Stranger Things, Squid Game, The Crown, Tiger King, and Bridgerton. They are constantly adding new shows and movies. Some of their Academy Award-winning exclusives include Roma, Marriage Story, Mank, and Ma Rainey’s Black Bottom.
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