As Netflix Inc. (NFLX) - Get Report reportedly nears a deal with former president Barack Obama to create a high-profile new show, some analysts are questioning how long the company can keep spending so freely on content.
The ex-POTUS and his wife Michelle Obama are in "advanced" talks to produce a series of inspirational programs for the streaming video giant, The New York Times reported late Thursday.
The potential deal is the latest in a series of large investments in original content by the company, and comes on the heels of the company's Oscar win for the documentary "Icarus" and this year's premiere of David Letterman's new series "My Next Guest Needs No Introduction," which also featured Obama. Last fall, Netflix said it expects to spend between $7 billion and $8 billion on content in 2018.
However, the company is not yet profitable and is burning through cash at a rapid rate, Wedbush analyst Michael Pachter told TheStreet, adding that Netflix should instead focus on investing in "low-cost, long-lived original content" like the Stranger Things series that will be more profitable in the long run.
"I don't see how Netflix can get to a steady state of content and keep growing," said Pachter, a longtime Netflix bear.
GBH Insights analyst Daniel Ives wrote Friday that the Obama deal would be a "home run" for the company and could help Netflix recruit other high profile projects such as major films and long-term content agreements over the next year or so.
"While the landscape for original content has become increasingly competitive with new entrants entering the market by the day (Disney/Fox remains a clear competitive worry), we believe Netflix remains in a unique position of strength to grow its content and distribution tentacles over the next 12 to 18 months," Ives wrote.
Netflix shares were up 2.6% to $325.10 in early morning trading on Friday. Since the beginning of this year, the stock is up more than 67%.