ESPN has been the biggest spender in television entertainment for several years now. With an average of $7.3 billion budgeted every year, they continually outspend other networks by a large margin. Buying the rights to things like Monday Night Football and NBA and MLB games, it makes sense that the network has to spend big to maintain rights to this programming. Live sports are expensive, and ESPN is, at least now, the leader in sports broadcasting. But as far as budgets go, Netflix is catching up fast, and will almost certainly surpass ESPN in 2018.
“Netflix will spend between $7-7.6 billion on content in 2018, surpassing ESPN as the biggest spender in televised entertainment, and moving into the number one spot for the first time.”
Netflix is currently slated to spend over $6 billion in 2017 on content, and is prepared to expand on this rapidly. Our models predict that based on budgetary growth, recent bond issuance (1, 2), and statements from the CEO, that Netflix will spend more than any other television network, including current king ESPN, in 2018, a first for the streaming service. This will place them firmly at the top of all content spenders. Our estimations put them between $7-7.6 billion in expenditure, and likely above $8 billion a year by the end of the decade.
And while Netflix has been prospering in recent years, we expect that they will likely be cutting budgets and spending in the coming years, as a recent major layoff of key talent is evidence of this. This will make it even easier for Netflix to overtake them at the top.
While Netflix won’t comment directly on our financial modeling, their CEO Reed Hastings has recently stated in the press that they do, in fact, plan on spending way more, moving way faster, and trying way more big ideas when it comes to their original shows. They have a hungry subscriber base who needs to be appeased if Netflix wants to keep them as customers.
From an interview with ReCode, Hastings stated that they’re fully prepared to fail more in order to find more winners.
“Our hit ratio is way too high right now. I’m always pushing the content team, we have to take more risk. You have to try more crazy things, because we should have a higher cancel rate overall.”
Hastings stated to CNBC recently that they need to spend “a lot more” in order to remain relevant. Services like Hulu and Amazon Prime are expanding rapidly, HBO remains a major competitor with Game of Thrones and several other key properties. A whole bunch of new competition is starting to crop up, from services offering live streams of sports, to others building specific niche catalogs to attract specific audiences.
This is very exciting for Netflix, but as ESPN knows, heavy is the head that wears the crown. At least in the short term, though, Netflix subscribers are slated for a wild ride, with a content-producing machine that’s just hitting its stride.