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Netflix (NFLX) Expands Production Capabilities With New Studio – December 29, 2022

Netflix (nflx Free Report) is expanding in-house production capabilities with the recently announced development of a state-of-the-art facility on the Fort Monmouth campus in New Jersey.

Netflix recently purchased the former Army facility for $55 million from the Fort Monmouth Economic Revitalization Authority. The company is spending $848 million to develop a 292-acre parcel, adjacent to Route 35 in Eatontown and Oceanport, with 12 sound stages (approximately 500,000 square feet) and ancillary production spaces.

According to a USA Today report, the broadcast giant expects to generate between $7.4 billion and $8.9 billion in output over the next 20 years for production and construction. Netflix expects the new studios to add value to the New Jersey economy to the tune of $3.8-$4.6 billion, including new jobs. It is expected to create more than 1,500 permanent production-related jobs, as well as 3,500 construction-related jobs.

Netflix is ​​known for its aggressive spending on content development and is expected to spend more than $17 billion this year. The company has major production facilities in Albuquerque, New Mexico (300 acres, its largest facility), Brooklyn, Atlanta, Toronto, Vancouver, and throughout California, as well as internationally in London, Tokyo, Seoul, and Madrid.

New Jersey has become an attractive location due to the availability of a highly knowledgeable and experienced crew, and its proximity to major metropolitan cities, as well as beaches, farmland, and scenic settings. This is attracting studios, including Netflix and lionsgate (LGF.A free report).

Lionsgate recently became New Jersey’s first “study partner,” making it eligible to capture additional above-the-line wage and salary costs as qualified expenses under the state’s industry tax credits.

What awaits Netflix in 2023?

Shares of Netflix are down 54.7% year-to-date, trailing Zacks Consumer & Discretionary, which is down 53.1% in the same time period.

Netflix is ​​suffering from declining demand as its subscriber base dwindles amid stiff competition from companies like Disney (DIS free report) and Amazon (AMZN Free Report), a trend that will likely continue into 2023.

According to a recent report by Parks Associates, Netflix has been surpassed by Amazon Prime Video in terms of its subscriber base in the United States.

In the third quarter of 2022, the US and Canada paid subscriber base decreased 0.9% from the prior-year quarter to 73.39 million. The company gained 0.10 million paid subscribers in the reported quarter.

Netflix’s latest ad-supported service also failed to excite its user base. The ad-supported plan, launched on November 3, accounted for just 9% of new Netflix subscriptions in the United States in November.

In addition, Netflix is ​​expected to face competition in the ad-supported streaming market from companies like Disney and Comcast.

Disney followed in Netflix’s footsteps to offer its ad-supported tier starting December 8, 2022. The company’s streaming service, Disney+, as of October 1, 2022, had 164.2 million paid subscribers compared to 118. .1 million as of October 2, 2021.

Comcast Peacock also offers a free ad-supported tier that has approximately 40,000 hours of content. Peacock is well poised to grow, due to its extensive IP library and new productions.

Netflix expects to gain 4.5 million paying subscribers in Q4 2022. At the end of Q3, this Zacks Rank #3 (Hold) company had 223.09 million paying subscribers worldwide. You can see Full list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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