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Netflix (NFLX) to Expand Production Hub in New Mexico Studio

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Netflix (NFLX - Free Report) plans to establish one of the largest production hubs in North America by expanding its Albuquerque Studios in New Mexico and commit an additional $1 billion in production spending, per Albuquerque Economic Development report.

Markedly, Netflix signed the agreement to purchase Albuquerque Studios in January 2019, promising $1 billion in production spending over the next 10 years in exchange for economic development assistance from the State of New Mexico and City of Albuquerque.

The streaming giant is currently expanding its content portfolio with the production of original films in Mexico including The Harder They Fall and Intrusion and is expected to soon begin filming original series Stranger Things Season 4 in Albuquerque.

Other productions filmed by Netflix in New Mexico include Army of the Dead, El Camino, Godless, Daybreak, Chambers and Messiah.

Terms of Expansion to Boost Presence

The expansion involves the creation of over another 1,000 production jobs over the next decade and addition of 300 acres to the existing studios. In addition to the private land acquisition, Netflix will also lease over 130 acres from the State Land Office.

Moreover, it is expected to further add an additional 1,467 construction jobs as Netflix adds crew training programs, postproduction services, production offices and more to its campus at Albuquerque Studios in the near term.

Notably, the streaming giant spent more than $150 million in New Mexico, hired over 1,600 cast and crew members and worked with more than 2,000 production vendors in 2019.

Additionally, The State of New Mexico will provide up to $17 million in funding under the Local Economic Development Act (LEDA), while the City of Albuquerque will extend up to $7 million under LEDA funding for the expansion project.

Moreover, the City of Albuquerque will also issue bonds to partially abate property and other tax over a 20-year period for the initial $500 million investment by Netflix to build the facility.

International Expansion to Drive the Top Line

Heavy investments in the production and distribution of localized, foreign-language content and an expanding international footprint has led Netflix to dominate the streaming space despite the launch of services like Disney+ from Disney (DIS - Free Report) and Apple TV+ from Apple (AAPL - Free Report) as well as existing services like Amazon (AMZN - Free Report) prime video.

The company’s shares have returned 47.3% year to date, outperforming the Zacks Broadcast Radio and Television industry’s rally of 20.4%.

Robust regional-language content portfolio has helped Netflix improve its competitive position in APAC, Europe, Middle East & Africa (EMEA) and Latin America (LATAM).

Notably, APAC revenues surged 66.2% year over year to $635 million in third-quarter 2020. Moreover, revenues from EMEA and LATAM increased 41.4% and 6.5% to $2.02 billion and $789 million, respectively.

Markedly, this Zacks Rank #3 (Hold) company has been spending aggressively to build its original-show portfolio. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Mexican show Oscuro Deseo (Dark Desire) season 1 was the company’s biggest local-language original globally in the third quarter. Indian Matchmaking also witnessed healthy viewership.

Moreover, a record-setting 62 million households chose to watch The Queen’s Gambit in its first 28 days attributed to its global reach and popularity in Russia, Hong Kong, France, Taiwan and Australia.

Meanwhile, the streaming giant is set to host an entire weekend of free streaming in India on Dec 5-6 to pull audiences for the recently released series The Haunting of Bly Manor, The Crown season 4 and Emily in Paris season 1 among others.

 Other noteworthy films include The Midnight Sky, Hillbilly Elegy, Ma Rainey’s Black Bottom, The Christmas Chronicles 2, Jingle Jangle: A Christmas Journey, MANK and The Prom.

This, in turn, is expected to have negatively impacted profitability in the near term.

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