Netflix is expected to spend between $7 billion and $8 billion on programming in 2018. Its library of hit shows and movies will continue to drive revenue beyond the horizon.
According to a review by analysts from Morgan Stanley, Netflix’s library is being valued at a whopping $11 billion, as of March 2017. In perspective, it is more than the combined catalog of Time Warner and its subsidiary HBO, valued at a little over $10 billion. It is also worth more than the total combined programming assets of several popular media companies including Viacom, AMC Networks, Discovery Communications, and Scripps Network.
Lead Analyst – Morgan Stanley, Ben Swinburne, revealed that Netflix currently makes $1 for every dollar spent on programming while other video streaming services earn between $2 and $4 per dollar. “Netflix is building a much larger profit pool than the market understands,” the analyst wrote, “Nevertheless, the implications would suggest a dramatic opportunity to drive earnings. As Netflix owns more of its content outright, the longer average life and increasingly global nature of its assets could drive increased content efficiencies and higher margins over time.”
Swinburne believes that the company has yet to fully cash in on its content library. As the company expands internationally and gains more subscribers, he sees the company ramping up the revenue it produces from those investments.