Here’s Why Netflix Is Taking on Another $1.6 Billion in Debt
Netflix is fattening up its war chest.
The streaming service plans to offer $1.6 billion in new debt to ensure it’s able to buy or produce whichever new shows it wants in 2018, the company said in a statement Monday. Netflix also said it could potentially use the money for other “strategic transactions” (including acquisitions).
The streaming service, which is facing increasing competition from Hulu, as well as portals from CBS and, in the coming year,Disney, plans to release 80 films next year, a 60% increase over what it produced this year. Raising debt to fund programming is nothing new for Netflix. The company announced an $800 million debt offering a year ago, with another $1.1 billion raise taking place six months later. The company raised its subscription prices earlier this month.
All of that debt, and the interest that’s tied to it, means Netflix will likely continue to have negative cash flow for the next several years. But the company says that’s necessary as it fights for viewers and builds a library of original content—including hits like House of Cards, Stranger Things, Daredevil and Jessica Jones—which will make it less reliant on outside producers and studios in the years to come.