Netflix is Squeezing its Resources to Fund New Content

As the industry continues to gain subscribers and popularity, cord cutters can expect to see more and more new streaming services

Netflix has shown no hesitation in their “spend money to make money” philosophy. This year they’ve announced their intention to spend over $2.8 billion on activities that will allow them to remain competitive. The streaming giant is turning to debt markets for the second time in 2018, causing a sudden drop in the value of the company’s bonds.

This has also resulted in serious concern among shareholders who fear that Netflix is overstepping its bounds and allowing ambition to cloud its business sense. These types of grandiose plans will either push the company into the next phase of growth, or lead to a major increase in debt and eventual financial trouble.

The Sept 30 report indicated that Netflix is currently facing $8.34 billion in debt. This number is up from $4.89 billion last year; indicating an increase of 71-percent. According to a report by Variety, Netflix stocks fell roughly 3-percent on Monday, but managed to recover some by the end of the day.

This was a direct response to the announcement of the additional $2 billion in debt planned for the upcoming projects. These could include everything from new original content to the acquisition of A-list talent that seems to be flocking towards the streaming industry. Netflix has made no secret of their big spending tactics. The company has previously announced a free flowing cash strategy that’s supposed to carry on for one more year before they begin cash conservation.

Moody’s financial advisors have referred to Netflix’s newest offering as a junk bond; but they have still classified the company as stable in the long-term. This indicates that they believe that Netflix will largely recover from these financial plans in the near future.

As the industry continues to gain subscribers and popularity, cord cutters can expect to see more and more new streaming services. This is the law of supply and demand, and cord cutters are definitely fueling a whole new era in the entertainment industry.

Patricia Howard

Contributor

Article Author

Patricia Howard is a freelance journalist and Netflix enthusiast from rural Indiana. She has a bachelor''s degree in communication with a concentration in journalism. When Patricia isn''t writing, she enjoys catching up on her favorite shows with her husband and seven children.

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