Netflix bets on online streaming, shells out $115M for content

Video rental and streaming service Netflix paid about $115 million in its most recent quarter to acquire new content for its online streaming video library, according to its earnings reports released today. The company’s quarterly profit jumped by about 27 percent year-over-year last quarter.

Netflix has all but won the video rental wars now that Blockbuster has filed for bankruptcy, but it’s stepping up its game in the video streaming sector. Newcomers like video streaming site Hulu have emerged as the number one threat to Netflix and competitor Redbox’s dominance over subscription video services. Hulu, which streams broadcast content from networks like Fox and ABC, was recently the subject of IPO rumors that valued the company at around $2 billion and is preparing to launch its own premium subscription service Hulu Plus.

As a result, Netflix has begun pouring massive amounts of money into acquiring content to stream online. The $115 million payout this quarter was more than 10 times greater than the $10 million it paid in the same quarter last year. Netflix also paid out $66 million last quarter to acquire additional content for online streaming. It represents a substantial investment — about one fifth of Netflix’s operating revenue last quarter was used to acquire new streaming content — and a clear bet on where video subscription services are going on Netflix’s end.

Netflix’s net income jumped to about $38 million this quarter, compared to $30 million in the same quarter last year, after adding another million subscribers in the last quarter. That brings Netflix’s total subscribers to somewhere between 19 million and 19.7 million, according to its earnings report. Netflix’s revenue jumped 31 percent to $553 million this quarter compared to $423 million in the same quarter last year.

Investors bought into the strategy, sending the subscription service’s shares up 8.6 percent to $166.30 in extended trading today.