Netflix Spends $2B Per Year On Content, Primarily On Licensing Movies And TV Shows

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Following up on their strong quarterly earnings report earlier this week, Netflix has just released a big ol’ mission statement document to their investor relations site, and it’s jam packed with all sorts of great lil’ details.

For example: you know how every Netflix customer’s first complaint is that there’s just not enough great streaming content on the service? They know — and they’re spending $2B a year to fix it.

The document is a rather painful 11 pages long, but here’s some of the more interesting stuff we’ve gleaned out of it so far:

On Spending:

- Netflix is currently spending $350 million per year to improve their services and apps
- More notably, they’re spending $2 billion per year on content licensing and original shows. The “vast majority” of this spending goes to licensing movies and prior-season TV shows, with a much smaller chunk of it going to their recent original content efforts.

On The Content They’re Choosing To License:

Netflix seems to be realizing that quality is better than quantity. For all of us who’ve killed an evening digging through all of Netflix’s offerings in search of that diamond in the rough, that’s great news.

As we’ve gained experience, we’ve realized that the 20th documentary about the financial crisis will mostly just take away viewing from the other 19 such docs, and instead of trying to have everything, we should strive to have the best in each category. As such, we are actively curating our service rather than carrying as many titles as we can.

On their focus:

Netflix knows they can’t be exhaustive. They can’t offer every genre of video out there, so they’re keeping their focus on movies and tv shows. More specifically, they want long-lived TV shows — topical things like The Daily Show, reality shows, and sports are specifically mentioned as things Netflix isn’t interested in right now.

“We don’t and can’t compete on breadth with Comcast, Sky, Amazon, Apple, Microsoft, Sony, or Google. For us to be hugely successful we have to be a focused passion brand. Starbucks, not 7-Eleven. Southwest, not United. HBO, not Dish.”

Speaking of HBO…

Netflix sees HBO as their primary competition:

“The network that we think likely to be our biggest long-term competitor-for-content is HBO. They recently won, for example, long-term exclusive domestic movie output deals with Universal and Fox. They bid against us on many Original projects, but are not currently a bidder against us for prior-season television from other networks”

With that said, Netflix estimates that they’ll eventually be “2 to 3 times larger than current linear-HBO”, with 60-90 million subscribers (versus the roughly 30 million or so that both Netflix and HBO each have today).

Beyond that, Netflix sees piracy and pay-per-view services as the only competition that can offer up exhaustive sets of content, but seemingly sees Amazon/Hulu/et al. as secondary worries for the time being.

As mentioned, the new mission statement comes in at a pretty heavy 11 pages — the quotes above are just the choice bits that really stood out. You can read the full document here if you’re so inclined.