Netflix Set to Establish Dedicated Production Hub Near London
Netflix NFLX is establishing a dedicated production hub at the Shepperton Studios in Surrey, near London.
Per engadget, the studio has been used to shoot well-known movies like Lawrence of Arabia, Star Wars, The Princess Bride and Gladiator. Disney DIS has also filmed a number of Marvel movies at this location.
Reportedly, Netflix will use 14 sound stages along with workshops and office spaces in the property owned by Pinewood Group. Charlize Theron’s The Old Guard is the company’s first project set to be filmed at the Shepperton Studios.
Expanding Local Content Aids Netflix
The establishment of the production hub expands Netflix’s presence in the United Kingdom. The company has a number of U.K.-based projects set to be filmed this year, including Jingle Jingle, Cursed and The English Game.
Netflix’s unwavering focus on augmenting local content strengthens its competitive position against the likes of Amazon AMZN and Hulu. The company’s strategy of establishing production hubs in cities like Toronto, New York and Madrid helps it tap local acting and production talent.
Netflix, Inc. Price and Consensus
Notably, Netflix focuses on expanding its international footprint. The company is working on projects across Mexico, Spain, Italy, Germany, Brazil, France, Turkey and the entire Middle East. It also has a strong slate of shows for India, including 12 local language original series and 20 local language films.
Netflix plans to add more regional languages to make the service more appealing. Per Variety, the company expects to launch 100 non-English language originals in two years’ time.
The investments in local content have been a key catalyst behind the increase in international revenues, which rose 32.8% year over year to $2.37 billion in the last reported quarter.
Netflix expects to add 4.7 million paid subscribers in the international segment for the to-be-reported quarter.
Netflix Looking to Reduce Cash Burn Rate
The establishment of local production hubs not only lowers cost of production but also provides opportunities for tax credits in the long haul.
For instance, the company is likely to receive $4 million in tax credits over 10 years in New York, if it can fulfil its promise of creating 127 office jobs and retaining the existing 32 positions at its New York City production hub, per engadget.
Cash burn has been a major headwind for Netflix amid intensifying competition in the streaming space from new entrants like Disney+, Apple TV+, AT&T’s T WarnerMedia and Comcast’s CMCSA NBCU.
Reportedly, the company is planning to put a brake on original content spending, particularly for big-budget projects, which lack viewership. This strategy will help reduce cash burn rate.
Notably, Netflix expects 2019 free cash outflow to be modestly higher at roughly $3.5 billion due to higher cash taxes related to change in its corporate structure, and additional investments in real estate and other infrastructure.
However, the company expects free cash flow to improve in 2020 and each year after that, driven by growing user base, revenues and operating margins.
Currently, Netflix has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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