iWorld
Netflix and its binge spending: $17.3 bn on content in 2020
MUMBAI: Netflix is stubborn with its content spending despite being criticised often for being “irrational”. The streaming firm is sticking to its 'grow now – pay later' strategy. According to a recent estimate, the streamer will invest around $17.3 billion on content in 2020.
In 2019, the streamer spent little up from $15 billion on content. The report by BMO Capital Markets predicts the company is on track to spend $26 billion by 2028. An increase of almost $2 billion indicates that users will not get a chance to lower their screen time from the streaming engine as most of the money is expected to go on originals.
While the popularity of the streaming platform rose with years, the competition has also turned tougher with the entry of other deep-pocket players in the ecosystem. Apple TV+ and Disney+ launch have thrown major challenges on the unofficial streaming king. Moreover, Warner Media’s HBO Max is also going to enter the market in mid 2020.
"Netflix remains the clear leader in the 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," BMO Capital Markets entertainment analyst Daniel Salmon comments in the research note.
Considerably, among the other competitors, no one is spending extraordinarily big on content like Netflix. Disney said it would spend $1 billion on original programming for Disney Plus and will have nearly $1 billion in operating expenses in FY 20 while WarnerMedia will invest up to $2 billion in HBO Max in 2020. Comcast/NBCUniversal has planned about $2 bn for its streaming service Peacock in the first two years.
"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," the note also adds.
Netflix is upping its India game significantly as the streaming giant is ready to spend Rs 3000 crore (around $418 mn) on Indian content for this year and the next. Netflix founder and CEO Reed Hastings spoke about the investment during a recent India visit while illustrating the country’s importance in their business.
"We launched in 2016 and we have continued to invest. So we have a lot of content from the United States, the UK and Spain. We are developing our Indian content here,” Hastings said. "This year and next year, we will spend about Rs 3,000 crore developing content and you will start to see a lot of stuff hit the screens," he added.
The streaming giant is set to report its fourth quarter earnings on 21 January. Netflix reported revenue of $5.24 billion, up 31 per cent year-over-year in the last quarter.
iWorld
Bill Ackman’s Pershing Square makes $64 billion bid to acquire Universal Music Group
Ackman pitches NYSE relisting plan as UMG board weighs unsolicited offer
The hedge fund has proposed a business combination that values UMG at €30.40 per share, representing a hefty 78 per cent premium to its current trading price. The offer includes €9.4 billion in cash alongside stock in a newly formed entity, with shareholders set to receive €5.05 per share in cash and 0.77 shares in the new company for each UMG share they hold.
Under the proposal, UMG would merge with Pershing Square SPARC Holdings Ltd and re-emerge as a Nevada-based entity listed on the New York Stock Exchange. The move is designed to boost investor visibility and potentially secure inclusion in major indices such as the S&P 500.
Pershing Square Capital Management ceo Bill Ackman argued that while UMG’s operational performance remains strong, its market valuation has lagged due to external factors. “UMG’s stock price has languished due to a combination of issues that are unrelated to the performance of its music business,” Ackman said, pointing to concerns ranging from shareholder overhang to delayed US listing plans.
Ackman also flagged what he sees as untapped potential in UMG’s balance sheet and a lack of clear capital allocation strategy. He added that the market has not fully recognised the value of UMG’s €2.7 billion stake in Spotify, alongside gaps in investor communication.
The proposed transaction would also result in the cancellation of around 17 per cent of UMG’s outstanding shares, while maintaining its investment-grade balance sheet. Pershing Square has said it will fully backstop the equity financing, with debt commitments secured at signing. The deal is targeted for completion by the end of the year.
UMG, however, has struck a measured tone. The company confirmed that its board has received the non-binding proposal and will review it with advisers. It reiterated confidence in its current strategy and leadership under Lucian Grainge, signalling no immediate shift in stance.
The proposal comes at a time when global music companies are navigating evolving investor expectations, streaming economics and capital allocation pressures. For Pershing Square, the bet is clear: sharpen the financial story, relist in the US, and let the music play louder in the markets.
Whether UMG’s board is ready to change the tune remains to be seen, but the spotlight on its valuation just got a lot brighter.
