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Netflix is reportedly getting more disciplined about big-budget projects

Key Points
  • Netflix content chief Ted Sarandos told film and TV executives big budget projects must be more cost-effective, The Information reported.
  • Netflix is notorious for its massive content spend, but it has said it expects cash burn to peak in 2019. 
  • The reported messaging marks a shift in Netflix's strategy, which has previously justified lower viewership numbers for some content with buzz and credibility.
Netflix content executive director, Ted Sarandos attends the Vive Netflix 2017 at Museo Casa de la Bola on August 2, 2017 in Mexico City, Mexico.
Victor Chavez | Getty Images

Netflix is tightening its wallet when it comes to big-budget projects with a narrow appeal, according to a new report from The Information.

Chief Content Officer Ted Sarandos reportedly told some Netflix executives last month that their spending needs to be more cost-effective in terms of the viewership for a show. In the past, Netflix has let chatter around a big project help justify its spending, even if viewership was not equally massive. But Sarandos' new guidance calls for shows and movies to bring in audiences that make up for their production spend, the report says.

Netflix has been spending big for original content. In the first quarter of 2019, the company reported net cash flow of negative $380 million, compared with negative $287 million for the same quarter the previous year. In April, Netflix announced that it would offer about $2 billion in debt to fuel its content spend and other expenses. The company had already announced a separate $2 billion offering several months earlier.

But recently, Netflix has been looking for a future with a more sustainable cash burn rate. In January, the company said it expects its cash burn to peak in 2019 and then fall in future years. The shift comes as an increasing number of media players are entering the streaming market, including Disney, Apple, AT&T's WarnerMedia and Comcast's NBCUniversal.

In the meeting with executives, Sarandos gave the example of Netflix's action-drama "Triple Frontier," starring Ben Affleck, according to The Information. He said the film did not attract enough viewers to justify its $115 million price tag, according to the report.

Reached by CNBC, a Netflix spokesperson pointed to comments in The Information report.

"There's been no change to our content budgets, nor any big shifts in the sorts of projects we're investing in, or the way we greenlight them," a spokesperson told The Information.

Read the full report at The Information.

Disclosure: Comcast is the owner of NBCUniversal, parent company of CNBC and CNBC.com.

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