Netflix Builds Advanced Content Studio in New Jersey, USA

$17 Billion to Be Spent on Content Investment Next Year

[Asia Economy Reporter Yujin Cho] Leading the way with Netflix, major U.S. media companies are making massive investments in the online video service (OTT) business next year. OTT companies, driven into excessive competition, are betting everything on content investment as a breakthrough to overcome growth stagnation.

According to major foreign media on the 22nd (local time), Netflix, the largest OTT company in the U.S., is investing a total of $900 million (approximately 1.1547 trillion KRW) to build an advanced studio complex for content production in New Jersey on the U.S. East Coast.

The board of the Portsmouth Economic Redevelopment Authority (FMERA) approved the final contract the day before to sell the former U.S. Army base in Jersey Shore, New Jersey, to Netflix for $55 million. FMERA is the agency responsible for redeveloping the former U.S. Army base Portsmouth, which was closed in 2011.

This site, covering 300 acres (approximately 370,000 pyeong), will house 12 advanced studios for producing movies, dramas, and other content, along with office buildings and related facilities. Netflix plans to invest $55 million for land acquisition and $850 million for studio construction, aiming to develop this facility as a production hub on the East Coast. Netflix stated in a press release, "We will reinvent this studio complex as the Hollywood of the U.S. East Coast."

This investment by Netflix is part of OTT companies' 'all-in on content' strategy. Companies, driven into excessive competition to capture the suddenly expanded market due to the COVID-19 pandemic, have been betting everything on content investment as a breakthrough to overcome growth stagnation.

Netflix is reportedly planning to spend more than $17 billion on its own content investment next year, including the construction of this advanced studio. This represents a 25% increase compared to this year's investment and a 57% increase compared to last year ($10.8 billion).

Disney Plus, considered a rival to Netflix, is estimated to increase its content investment by 35-40% next year compared to this year. Morgan Stanley predicted that Disney Plus will invest between $23 billion and $33 billion solely in movie and TV program production.

The total new investment by the top eight U.S. OTT companies, including Netflix, is expected to reach at least $115 billion next year. This figure is based on business reports disclosed by each company, and when including investments in sports broadcasting rights along with securing their own content such as movies and TV programs, the total investment is expected to reach $140 billion.

Content investment is emerging as a key variable that will change the OTT market landscape next year. The OTT market, which had been on the rise benefiting from the closure of theaters and increased remote work due to the COVID-19 pandemic, grew explosively, surpassing mainstream media. New entrants have continued to enter the suddenly expanded OTT market, and companies driven into excessive competition have bet everything on building their own studios and mergers and acquisitions (M&A) to secure their own content.

Michael Nathanson, a media analyst at MoffettNathanson, a Wall Street research firm, said, "In the fierce competition of the OTT market, the only way for companies to gain an advantageous position is to secure their own content."

Currently, the companies competing in the global OTT market include Netflix, ranked first, followed by Amazon Prime Video and Disney Plus in second and third place. Additionally, recent entrants over the past two to three years such as Apple TV, Peacock, Hulu, HBO Max, and Paramount Plus are aiming to become rivals to Netflix by strengthening their original content.