Netflix’s content obligations — payments for licensed or original produced content over several years — increased by nearly 13% in Q1, rising from $10.9 billion in the previous quarter to $12.3 billion, with $5.16B of those obligations due within the next year. The increase is the result of the streaming service’s recent global expansion, which saw Netflix become available in 130 new countries, including India, the Philippines and Saudi Arabia. The service now has nearly 82 million members worldwide.
News of the increase, which came in an SEC filing today, comes after Netflix posted mixed results for Q1 on Monday, reporting a net income of $27.7 million with revenues of $1.96 billion. That’s an increase of 16.7% and 24.5% year over year, respectively, though analysts expected revenues of $1.97 billion. Those returns were revealed along with more tepid-than-expected projections for Q2, with Netflix expecting to add 500K customers in the U.S., below Wall Street’s expectations for more than 600K, and 2 million subscribers internationally, below an anticipated 2.89 million. Despite earnings of 6 cents per share that came in above the forecasted 3 cents, the company’s stock declined by 10% after Monday’s results were made public.
Netflix Shares Drop On Weaker-Than-Expected Q2 Subscriber Forecast
However, the service is set to increase the cost of a monthly subscription to $9.99 beginning in May, which it says will fund the higher content obligations.
“We are investing about 5% of our cash content budget in original films,” the company said on Monday. “As we learn, we may spend beyond that, once we’ve established that new, fully exclusive movies debuting on Netflix creates more consumer excitement and member viewing than the territory-by-territory licensing of nine-month-old ‘Pay one’ movies that are also available on [TV video on demand] and DVD.”
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