Yesterday, Netflix announced that it’s raising another $2 billion in debt to fund additional content creation and other expenses.
Netflix said it plans to use the proceeds to fund “content acquisitions, production and development, capital expenditures, investments, working capital and potential acquisitions and strategic transactions.” Netflix said the interest rate, maturity date and other terms of the offering will be determined by negotiations between the company and the initial purchasers.
Netflix is readying itself for war as it faces an onslaught of competition from Apple, Disney, WarnerMedia, and NBCUniversal. And in order to keep customers from churning, Netflix understands that it needs to up its content game.
“Amazing content can be expensive,” Reed Hastings wrote in his letter to shareholders last week, “We don’t shy away from taking bold swings if we think the business impact will also be amazing. We don’t close every deal we chase and we don’t chase every deal on the table.
In addition, Netflix said its growing revenue base and expanding margins would allow the company to fund more content spending internally, with cash flow freeing up in 2020 and beyond. But in the meantime, expect Netflix to take on additional debt.