Netflix has turned to debt financing once again to create new content, but this is the most to date. As of Monday evening, the streaming service took a $1.9 billion debt offering — a major increase from the $1.5 billion debt announced earlier that day.
This is the second time this year that Netflix dipped into the debt market to finance their business. With the massive success of some of their original content, like Stranger Things, A Series of Unfortunate Events, and Jessica Jones, they have focused the money on creating more original shows and films. Last October the streaming giant raised $1.6 billion in debt for this very purpose in hopes of driving subscription numbers globally. However, this is the fifth time in a little over three years that Netflix has raised over $1 billion to create content.
Netflix has also announced that they hope to spend around $8 billion on creating new content for their platform in 2018. The rest of the debt will go toward general corporate purposes, like content acquisition, production costs, etc. According to Variety, they had “$6.54 billion in long-term debt and $17.9 billion in streaming content payment obligations.” And at the end of the first quarter in 2018, a report showed the streaming service had $2.6 billion in cash and equivalents on hand.
Obviously, this is not the first time that Netflix has dipped into debt. The executives have stressed how this is better than raising the money through equity markets. In a letter to shareholders earlier this month, executives wrote, “we believe the debt is lower cost of capital compared to equity.” And this won’t be the last time they dip into debt to finance their projects.
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