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Netflix Spending Aggressively On Real Estate To Shore Up Subscribers

Icon at Sunset Bronson Studios, the Hollywood hub for Netflix as of May 2019

As the streaming wars keep heating up, Netflix is fighting by increasing its real-world territory.

The subscription video service spent about $100M on property and equipment in the first half of this year, a 55% increase from the first half of 2018, CoStar reports. The spend has resulted in an 8% increase in the overall value of Netflix's property and equipment assets from the start of the year.

As Netflix continues to pour money into creating original shows and movies, its requirements for office and studio space have soared. The company now occupies 1.5M SF in the Hollywood neighborhood of Los Angeles alone, a quarter of the total office real estate in the submarket, CoStar reports.

Earlier this year, the streaming giant announced plans to expand its New York offices in Manhattan's Flatiron District, alongside plans to lease 161K SF to build six soundstages in Brooklyn's Bushwick neighborhood. In October, Netflix purchased Albuquerque Studios in New Mexico, an operational complex of production lots, offices and "mill space" where Breaking Bad was filmed, King5 News reports.

Several shows and productions are active in the 287K SF studio campus, and Netflix announced it would honor in-place contracts and leases to other companies. Netflix plans to spend $1B in Albuquerque over the next 10 years, facilitated by $14M in local and state incentives, according to King5 News.

Netflix is also investing in real estate in Toronto and Spain as it looks to grow not just the number, but the diversity of its original offerings. The pressure to entice viewers has never been greater, as the company reported losing 126,000 U.S. subscribers in the second quarter.

Globally, Netflix gained 2.7 million subscribers, badly missing its projection of 5 million. It had projected 300,000 new U.S. subscribers for the quarter, and its stock price dropped 10% the day its earnings were released, according to CoStar.

Competition for subscribers will only intensify from here, as Disney, NBCUniversal, Apple and AT&T have all planned their own streaming services to debut in the next year or so. Netflix will lose two of its biggest streaming hits in the process, as AT&T will take exclusive rights to Friends when its HBO Max service launches, and NBCUniversal will do the same for The Office