Why Netflix $450M 'Knives Out' gambit is becoming

[ritcha]

Netflix (NFLX) is keeping up with tradition and spending big money on new content.

Late last week, several reports cited the streamer spending upwards of $450 million to secure the rights of the next two sequels for "Knives Out" — one of 2019's biggest its. If confirmed, the deal would be one of the largest movie streamer deals in history.

The first film cost $40 million to make, and brought in over $311 million globally at the box office. Director, writer and producer Rian Johnson, as well as star Daniel Craig, are both signed on to return for the next installments.

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"It's not a question of spending — they have to," Santosh Rao, head of research at Manhattan Venture Partners, told Yahoo Finance in an interview.

He explained that competitors from Amazon Prime Video (AMZN) to Disney Plus (DIS) are "neck and neck" with Netflix when it comes to aggressively pursuing content and attracting new subscribers.

"The name of the game is to have content — good content and a continuous stream of content — to keep the people in your ecosystem," Rao added.

On Friday, Netflix's stock closed over 3% higher — a solid gain but roughly in line with its usual range. It raises the question of whether investors were impressed with the content splurge.

"I think it's just par for the course," Rao surmised, saying that the new deal "is nothing exceptional.

He added: This is something the platform needed to do and now they're doing it, so it's nothing out of line or out of sync with their strategy," he said. The sequels' $450 million price tag won't break the bank as it's just "a drop in the bucket" compared to what the streamer plans to spend this year.

"People expect good content from Netflix and it has to feed the beast," he added.