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Even though making content is not cheap, the Netflix machine is on a roll.
The world’s voracious appetite for content has spurred Netflix to return to the debt markets to raise $2bn to fund its next phase of growth. The move can also be seen as defensive as it views investing in original shows as a solid strategy for fending off competition.
“Netflix intends to use the net proceeds from this offering for general corporate purposes, which may include content acquisitions, production and development, capital expenditures, investments, working capital, and potential acquisitions and strategic transactions,” the company said.
However, it is the sixth time in less than four years that Netflix has raised $1bn or more through bonds.
At the end of September, Netflix reported $8.34bn in long-term debt, up 71pc on the previous year. Producing original content is not cheap and, in the past year, the company revealed plans to spend several billion dollars on producing its own movies and shows.
Streaming kills the TV star
The strategy appears to be working because in its recent third- quarter results where it made $4bn in revenue, Netflix revealed that streaming revenue jumped by 36pc this quarter compared with the same time last year.
Subscriber numbers were significantly higher than expected, too, with more than 1m added in the US versus an expected 673,800, while international subscribers rose 5.87m versus an expected 4.46m. Netflix now expects a further 9.4m to be added in Q4.
“Our own original shows tend to be more valuable than licensing someone else’s shows in later windows,” said Netflix’s chief content officer, Ted Sarandos.
The streaming platform’s evolution from postal DVD player to online giant is pretty much a fait accompli when you consider that US teens watch more than twice as much Netflix as cable TV, according to a new survey by Piper Jaffray. According to the report Taking Stock With Teens, Netflix led the pack with 37.6pc of teens’ daily video consumption, a consistent factor over the past two years.
