With the launch of Disney+ on the immediate horizon and new services such as NBCUniversal’s Peacock and WarnerMedia’s HBO Max coming soon, Netflix is taking on another big round of debt to pay for more original content.
The streaming service announced plans Monday to raise another $2 billion in debt to fund content creation (and other needs). That’s likely to once again raise concerns about the company’s cash burn.
Netflix raises debt on a regular basis to ensure it has high quality original content as it fights to keep its audience and keep competitors at bay. Earlier this year, the company said it expected that cash burn to peak this year
Not every analyst believes it, however.
“We expect content spending to trigger substantial cash burn for many years; in spite of four Netflix price increases in the last five years, cash burn continues to grow,” said Michael Pachter of Wedbush in an Oct. 17 note to investors. “The company’s focus over the past few years has been to build its content library, funding ‘original’ content at a madman’s pace. It is this investment in original content that has fueled negative free cash flow that has increased (gotten worse) every year since 2013.”
Netflix has downplayed the growing competitive threat, but consumer excitement about the Disney+ launch lineup (which includes new original series in the Star Wars universe) and the number of popular shows that will be leaving Netflix in the coming months and years has not gone unnoticed.
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