Netflix's business strategy is one wrapped in secrecy, but there's been growing evidence over the last few years that the streaming service really does take the concept of "Gotta spend money to make money," to a whole new level. Netflix's "cash burn" spending splurges have gained infamy lately, as analysts and even causal viewers attempt to understand how the company ever hopes to make a profit. Well, now that intrigue is about to get a whole lot deeper, as a new report reveal that Netflix is hoping to up its debt by another $2 billion, in effort to fund a new found of original programming.
As CNBC reports, "Netflix is raising another $2 billion in debt to fund additional content creation and other expenses," noting that the previous increase in debut was an additional $2 billion debt that was offered up in April - building on an additional $2 billion in debt that was added in October 2018. At that time last year, Netflix's total debt was reported to be in the $12 billion range - a number that has obviously grown since then. Shares of Netflix stock feel slightly with news of this latest debt increase, but those numbers have since evened out, which is pretty much been the pattern of things everytime the company has announced another debt increase.
So why is Netflix taking on so much debut? In a word: war. 2020 will see a drastic realignment of the entertainment industry and its approach to offering consumers content. Between the time of writing this and a year from point, Apple, Disney, NBCUniversal and Warner Media will have all launched new streaming services, with current Netflix competitors like Hulu and Amazon Prime Video also gearing up to battle it out for supremacy in this new world order.0comments
Netflix is in an especially precarious position as the streaming service has largely rested its success on the combination of buzz-worth original content, and high-priced licenses to stream the most popular syndicated TV programs (Friends, The Office) and/or franchise movies (Marvel, Star Wars, Disney). The latter half of that content strategy (high value licenses) is about to be decimated, as other movie and TV studios are snatching back their high-value licensed content for their own streaming services. Netflix does indeed need to increase the value of its original content offerings to make up the difference, and with other services now competing to lock down the industry's best creators (see: Apple and Warner's bidding war for J.J. Abrams), it's a fast-paced race. Immediate capitol to throw at new creators, for new original content, is very necessary, if these new shows are going to be ready in time to pull viewers away from Disney+ or Apple TV+'s heavy buzz.
We'll keep you updated on what new shows this Neftlix money buys.