Netflix is expected to outspend all its major rivals on entertainment content this year, as the pandemic increases the gap in firepower between streaming services and advertising-reliant broadcasters around the world.
Research by Ampere Analysis for the Financial Times estimates that the US streaming service’s spending on films and programming will rise by $3bn to $13.6bn in 2020, outstripping its nearest rivals ViacomCBS, Disney and NBCUniversal when purchases of sports rights are excluded.
Netflix’s bumper outlay is part of a record-setting year for Hollywood, where expenditure on original shows and the rights to old content is still expected to increase to new highs in 2020, despite the economic downturn and production delays.
Daniel Gadher, an analyst at Ampere, forecasts $206bn spending in total this year, a figure that covers new productions, rights purchases, and sports. “We’ve seen a content boom since 2009. The rapid growth is slowing but we still expect it to be positive with growth in spending increasingly being driven by streaming platforms,” he said.
But because of the pandemic and delays to production, fewer shows have been commissioned this year, particularly in television drama. Mr Gadher expected to create a shortfall of potentially up to one in 10 new scripted shows.
Big US media groups that merged with rivals during the 2018-19 wave of dealmaking are, through combined firepower, managing to keep within touching distance of Netflix’s spending.
ViacomCBS, which owns Nickelodeon and the Paramount studio, is expected to spend around $13.5bn on commissioning or licensing content, Disney around $11bn and NBCUniversal close to $9.5bn.
But the severe hit to advertising has dented the budget of broadcasters in Europe, with spending by Mediaset, ProSiebenSat. 1, RTL and ITV either remaining flat or falling this year, according to Ampere.
Public broadcasters are also increasingly outgunned by their US rivals, who are moving into their national markets with streaming services.
The BBC is expected to devote around $2.1bn to entertainment content in 2020, less than a sixth of that spent by Netflix worldwide, while Germany’s ARD/ZDF is estimated to spend around $4.2bn.
Although it has been rapidly expanding its own productions, such as Stranger Things or Cobra Kai, Netflix still spends the bulk of its annual budget on acquiring films and shows. Around $4.4bn of its $13.6bn spending is on original content, according to Ampere.
The streaming services pipeline of titles has been funded in recent years by borrowing. The company has long-term debt of $15.3bn. While the long lead time for premium drama has protected its 2020 schedule, it expects delays will affect the release schedule for its big titles next year.
“There is no question Netflix has a meaningful content advantage and its ability to produce programming on a global basis adds to its advantage,” said Richard Greenfield, a media analyst at Lightshed Partners, in a recent note. “That said, the amount of Hollywood content being created today is still a fraction of what it would be pre-pandemic, which is creating increased concern for the content pipeline.”