Netflix to Raise $2 Billion For New Original Content
Good Bet, Or Bad Debt?
The streaming competition is intensifying for Netflix. Globally, there are already rivals such as Amazon. Most countries have their own streaming options, in the UK we have likes of BBC iPlayer and Now TV etc.In the USA there are the likes of HBO, Go and Hulu. And that's not to mention the likes of Disney who have their own service ready to launch in 2019. So Netflix clearly have lots of competition now and more in the future. What is their response to this scenario?
As more and more streaming services start to flood the market, original content has become the way for the likes of Netflix and Amazon to set themselves apart. However, for consumers, this means subscribing to more and more services to get the latest content. Either consumers will pay for more services or they will start to prioritise the streaming providers with the best, most hyped, content.
With this in mind, it becomes more obvious why Netflix is going further into debt. The announced plans to raise around $2 billion from selling bonds in dollars and euros, will fund further content acquisitions, production and development, capital expenditures, investments, working capital and potential acquisitions and strategic transactions.
In layman's terms, it will help fuel further investment in its original programming and acquired content.
However, Netflix are making losses every year. $2 billion, for investors, seems like a small price to pay for ensuring a higher number of Netflix exclusive shows and movies. Investors clearly believe this strategy will work in the long term. Though, if Netflix’s growth slows, investors will start to worry about the amount of debt that the company has raised.
Is $2 billion a small price to pay for securing the market dominance? Or is Netflix a bubble waiting to burst?
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