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Netflix said Monday it is tacking on an additional $2 billion in debt so it can continue to make original shows and movies and license content from others as it faces mounting competition from other streamers, including services expected next year from Disney and WarnerMedia.
Netflix finished last quarter with $8.3 billion in long-term debt so the new debt, details of interest and maturity dates still to come, will put the leader in streaming over $10 billion in debt as it still burns cash. In the most recent quarter, it reported a cash-burn of about $1.7 billion.
Netflix said it will use the $2 billion in borrowed money for “content acquisitions, production and development,” as well as potential acquisitions, investments and general corporate purposes.
Netflix has said it will spend $8 billion on content this year, but some analysts expect it to spend as much as $13 billion producing north of six dozen movies and paying for talent like David Letterman, Shonda Rhimes, Chris Rock, Ryan Murphy, Ricky Gervais and others.
So far, investors have overlooked Netflix’s increasing debt and penchant for burning through cash. On Monday, the stock was up a little on the announcement that it will borrow more money, and it is up nearly 200 percent in two years.
The soaring stock price keeps Netflix, which has more than 130 million subscribers, under the gun to keep up rapid growth globally, even as competition mounts from Amazon, CBS All Access, HBO Now, Hulu and others that haven’t yet launched.
None of those competitors spend anything near what Netflix spends on acquiring content, but CEO Reed Hastings addressed the growing competition on an earnings call last week.
“Someday there will have to be competition for wallet share. We’re not naive about that. But it seems very far off,” Hastings said.
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