Netflix Content Obligations Balloon to $12.3 Billion on Global Expansion

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Netflix keeps pumping more dollars into global licensing and production deals — and the company has increased its bet that continued subscriber growth will keep pace to pay for its long-term content contracts.

The subscription VOD leader’s content obligations soared to $12.3 billion as of the end of the first quarter of 2016, up 26% from a year earlier, and up from $10.9 billion in the previous quarter. Of note, $5.16 billion of those content obligations as of March 31 are due in less than one year, according to Netflix’s 10-Q quarterly filing Wednesday. That’s up more than $1 billion from a year earlier.

But that’s not the whole story. The content obligation figures that Netflix discloses don’t include what it says could be “significant” payments for future titles that are not yet determinable. Those include traditional film output deals, like the U.S. output deal with Disney that kicks in starting this fall, as well as certain TV series license agreements where the number of seasons to be aired is unknown.

The tab for those “unknown” titles? It could amount to $3 billion to $5 billion over the next three years, Netflix disclosed in its 2015 annual filing in January.

The company said it expects “modestly increased churn” with the price increases. It better hope so: Netflix is banking on the fact that it won’t lose a big number of users — and in fact will keep bringing in more new ones — because if that growth stalls, it won’t have the cash in years ahead when its hefty content bills come due.

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