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Netflix Increasing Debt With $1.6 Billion Bond Offering

23 Oct, 2017 By: Erik Gruenwedel

Netflix ended its most recent fiscal period with $17 billion in third-party content obligations and $4.9 billion in long-term debt. The SVOD pioneer Oct. 23 announced it is upping the latter by another $1.6 billion in proposed senior notes sold to institutional investors.

Netflix, which has pledged to produce upwards of 80 movies through 2018, said it intends to use the net proceeds for general corporate purposes, which may include content acquisitions, production and development, capital expenditures, investments, working capital and potential acquisitions and strategic transactions.

Indeed, Netflix plans to spend $7 billion to $8 billion on original content in 2018.

UBS analyst Doug Mitchelson, who has moderated recent Netflix fiscal webcasts, last summer said the streaming service’s ongoing subscriber-additions continue to justify increased spending and debt.

“We expect Netflix’s original content ramp to continue to drive accelerating international net additions, especially as Netflix increases investment in local content overseas and expands genres such as movies and non-fiction,” Mitchelson wrote in a July note.

With heightened content spending, Netflix is hardly taking the safe road creatively. Instead, it is becoming more critical about programming, cutting titles such as “Sense8,” “The Get Down,” “Chelsea,” “Girlboss,” “Gypsy,” ‘Marco Polo” and “Bloodline,” among others.

In May at Code Conference in Newport Beach, Calif., Netflix CEO Reed Hastings said the increased program shuffling reflected added pressure being applied to the service’s content team to push the envelope creatively.

“We have to take more risk,” Hastings said. “You have to try more crazy things. Because we should have a higher cancel rate overall.”

About the Author: Erik Gruenwedel

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