Analysts positive on Netflix’s new ‘selective’ content strategy

Moody’s says Netflix is successfully managing the risk of increased programming costs with a more selective approach to acquiring content.

The influential credit ratings agency issued a report on Netflix in the wake of the US-listed streaming service announcing its largest ever original content deal, with DreamWorks, which spans 300 hours of new kids and family programming.

Moody’s said that it still has concerns about large fixed content agreements and the huge number of subscribers Netflix requires to hit breakeven in its streaming business, but that the company is successfully limiting risk with a new focus on a number of big-ticket programming deals and agreements for targeted niche content.

“We believe that the company is increasingly becoming more selective about the content it acquires, such as more original, exclusive, and/or niche content, instead of focusing on growing as it has in the past, by acquiring deep library and volume content,” Moody’s noted.

It also noted that focusing on exclusive and original content means that programming costs are more front-loaded than library-based acquisitions, but it expects the company to stick to previously stated content spending plans.

Examining Netflix’s international expansion, Moody’s said that it does not expect the company will need to increase its borrowing to continue to expand and that the “speed of expansion [will be] based on the success and profitability of its existing markets”.

Netflix announced a Netherlands launch earlier this week and Moody’s added: “We view the company’s international investments as a favorable use of cash flow generated from its domestic and other more mature markets.”