Super money "black hole"! The U.S. streaming giant plans to "burn" hundreds of billions of dollars next year

$115 billion! The eight major U.S. media giants plan to inject huge sums of money into new movies and TV series programs again next year to develop the streaming business.

On December 29, according to the Financial Times, in order to attract more new users and seize market share, the streaming giant plans to spend huge sums of money again in 2022 after investing a lot of money in 2020 and 2021.

Michael Nathanson, a media analyst at Moffett Nathanson, points out that there is no turning back and that the only way to compete now is to invest more and more money in membership content.

Entertainment executives have also complained that the pressure is enormous.

Compete for market share and start a price war

U.S. media giants, including Disney, Comcast, Warner and Amazon, have increased their total spending to around $140 billion in a bid to grow their streaming businesses and compete for sports rights.

The Morgan Stanley report notes that Disney's investment in streaming content could increase by 35-40% by 2022. Disney's spending on new movies and TV shows is expected to reach $23 billion, including the broadcast of sporting events, or as high as $33 billion, with total spending in 2021 up 65 percent from 2020.

In 2022, Disney plans to launch the live-action film Pinocchio, starring Tom Hanks, while Netflix plans to launch an animated version of Pinocchio directed by Gilmour Del Toro.

Netflix, Viacom, Fox and Apple also plan to spend billions of dollars on content. Netflix plans to spend $17 billion on content next year, up 25 percent from 2021 and up 57 percent from $10.8 billion spent in 2020. Netflix has reached break even and expects net cash flow to turn positive in 2022.

Behind the huge investment is that in the past few quarters, the user growth of services such as Netflix Premium and Disney Plus has slowed down. Netflix executives said that due to the epidemic, the related output delays, the programming schedule is poor. It's not just Netflix, it's a problem that plagues the entire industry.

Is streaming a good business?

But even industry leaders are asking if streaming is a good business because they have to invest heavily to produce quality programming and keep up with their competitors.

Morgan Stanley recently noted in a report that there is a certain profit margin for traditional media companies to switch from traditional TV and film to streaming.

Morgan Stanley analysts further pointed out that the market is increasingly worried about whether it can make money at the end of this rainbow road.

As entertainment and tech companies scramble to stream and produce more shows, production costs are rising and it's getting harder and harder to find a filming location in Los Angeles.

Disney Chief Financial Officer Christine McCarthy told investors last month that simply competing for talent increases the cost of the content production process.