Netflix Has A $5 Billion Warchest. Look Out HBO

When Netflix released its first original series, “Lilyhammer,” in 2012, critics thought the move would barely faze rival HBO.

To an extent, they were correct. Netflix confirmed Thursday that it will not renew “Lilyhammer” after just three seasons. The comedy-drama never came close to generating the buzz of HBO blockbusters like “Game of Thrones.”

But Netflix has come a long way from Lilyhammer. Last week, the Los Gatos company received 34 primetime Emmy nominations for “House of Cards,” “Orange Is the New Black” and the new “Unbreakable Kimmy Schmidt.” (HBO led the field with a record 126 nominations). And behind the scenes, Netflix confirmed plans to pour a whopping $5 billion into next year’s programming budget — a move that will give HBO a run for its money.

Analyst Tony Wible of Janney Montgomery Scott says that figure is more than the estimated $4.5 billion for original programing spent last year by HBO, Showtime, Amazon and Starz combined.

Netflix is also profiting from “the Lilyhammer effect,” analyst Alan Wolk’s term for the TV industry’s transformation from a linear model — the old TV network strategy of showing episodes in sequence every week — to a video on demand online model, allowing viewers to watch whenever they choose.

Netflix isn’t saying exactly how much it will spend on original series. CEO Reed Hastings said in a letter to investors last week that the company “will devote more investment to originals both in absolute dollars and percentage terms. This includes not only series, documentaries and stand-up but also original feature films.” In other words, a significant chunk of the $5 billion programming budget could go toward making movies.

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