Netflix to Invest $17.3 Billion in Content in 2020, Analyst Estimates

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Netflix chief content officer Ted Sarandos and Noah Baumbach attend 'Marriage Story' New York Premiere at Paris Theater in November

BMO Capital Markets forecasts the streamer will spend $26.3 billion by 2028, mostly on originals, as Hollywood's streaming wars escalate.

Don't expect Netflix to end its cash burn anytime soon.

Netflix as the top global streamer is set to binge-spend $17.3 billion on content in 2020, and mostly on originals, according to an estimate from BMO Capital Markets entertainment analyst Daniel Salmon. His Jan. 15 research note said Netflix's aggressive content investment will grow to $26.3 billion by 2028 to keep pace with rivals as it goes international beyond the U.S. market.

Netflix and other streamers have sparked Hollywood's current production binge as traditional TV players also play catch-up with the video giant while they compete for the best original content and talent.

"Netflix remains the clear leader in global streaming video, and we believe there is still room to grow as incremental investment points enter the story: continued international growth (particularly India and Japan), improving per subscriber leverage on content spending, and the beginning of long-promised FCF improvements," Salmon argues.

As Apple TV+ and Disney+ launch and other streaming players get set to compete against Netflix, the BMO Capital Markets analyst also dismissed talk of the Hollywood studios and Silicon Valley players greatly bleeding Netflix of subscribers.

"We continue to believe the 'streaming wars' narrative is false and there will be multiple winners in global streaming and thus continue to recommend buying Netflix (NFLX), Amazon (AMZN) and Discovery (DIS) together," Salmon said ahead of Netflix releasing its latest financial results on Jan. 21.

More recent streaming arena entrants like Facebook Watch, Apple and Google-owned YouTube are also ramping up investment in originals even as Netflix faces new competition in the form of WarnerMedia's HBO Max, Comcast's Peacock and Disney+.

Salmon also pointed to earnings growth for Netflix as it expands its international partnerships. "Recent highlights include a long-term partnership with Nickelodeon for animated originals (key to shoring up kids programming in the face of Disney+), a multiyear film and TV deal (reported for $200mm) with David Benioff and Dan Weiss and a three-year deal with top Korean media conglomerate CJ ENM for originals and distribution of selected other titles (a stepping stone to scaling subs in one of APAC's wealthiest and largest addressable markets)," the analyst added.