Here, you see that the forward cost projections only recently caught up to actual streaming costs. In the recently reported second quarter, trailing content costs were just 6% above the short-term obligations reported a year earlier.
To put this into perspective, the next-year obligations from the appropriate year-ago period accounted for just 35% of content costs just three quarters ago (analyzing the oldest available streaming costs information). Today, it’s 94%.
That little line item has become a reliable proxy for coming content costs — maybe not quarter by quarter but certainly year by year. Netflix, Inc. (NASDAQ:NFLX) is no longer flying by the seat of its pants but placing lots of firm orders with predictable price tags.
Looking ahead, you can see short-term costs on a fairly gently upward slope. If these numbers are any indication (and I think we just established that they are), then Netflix, Inc. (NASDAQ:NFLX) should spend about $1.1 billion on domestic and international content costs in the back half of 2013. Perhaps a little more if short-term opportunities pop up, but that doesn’t seem to be the company’s modus operandi anymore. It’s all about the long term.
The article Will These Content Deals Crush Netflix? originally appeared on Fool.com and is written by Anders Bylund.
Fool contributor Anders Bylund owns shares of Netflix, but he holds no other position in any company mentioned.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.