Time Warner boosting HBO budget as Netflix, Amazon keep spending

Time Warner Center. Image courtesy of Time Warner, Inc.
Image: Time Warner Inc.

Time Warner Inc. will increase the content budget for HBO, a move that is likely due in part to continued pressure to keep pace with the spending habits of Netflix and Amazon.

Speaking at the UBS Global Media and Communications Conference, Time Warner CEO Jeff Bewkes said HBO has a “pretty hefty” budget.

"We’re not spending our programming money on library product. We’re doing original shows. … We’ve been increasing it, and we’ll keep increasing it,” Bewkes said, according to Deadline.

Bewkes also said that the HBO budget won’t be affected by the somewhat surprising $5 add-on tier price point for HBO on AT&T’s newly launched DirecTV Now. He did describe the pricing arrangements for HBO as “complicated” but said that the premium network has always wanted to come in at an “affordable price range.”

RELATED: HBO for $5 a month? AT&T’s DirecTV Now offerings ‘aren’t going to make any money’

Of course, the price point is only part of the equation for HBO: it still needs to keep up with original content, an area in which Amazon and Netflix have emerged as serious competitors with deep pockets.

With Amazon’s recently revealed aspirations to take its Prime Video service into nearly 200 countries, the SVOD service could be on track to surpass even Netflix’s massive $6 billion per year content budget.

Jefferies analyst Brian Fitzgerald estimated that Amazon’s video content budget for 2016 was between $4 billion and $5 billion, but that the cost of international expansion to nearly 200 countries could drive that total up another $1 billion to $2 billion in 2017.

“That would bring AMZN's annual content expenditure in line with Netflix, which disclosed ~$6B content budget on P&L basis for 2017. AMZN management highlighted on the last earnings call that content was among the top three categories in which the company was, and planned to continue, investing. On the call, CFO Oslavsky said that ‘video content and marketing associated with that’ was nearly doubling Y/Y in 2H16,” Fitzgerald said in a research note.

Meanwhile, Netflix has promised to double its current slate of 30 original series in 2017, a move that will undoubtedly inflate the SVOD’s content budget.