Competition between online video streaming services continues to grow. Even though Netflix has a pretty strong position in the market it has to take radical steps to ensure that no one encroaches upon its market share, and that it continues to grow. The company announced today that it is going to raise $1 billion in long term debt through senior notes and plans to fund more content acquisitions, increase investments in original content product as well as use the money for expansion into new markets.
To be precise Netflix says that this money will be used to cover general corporate purposes, “which may include content acquisitions, capital expenditures, investments, working capital and potential acquisitions and strategic transactions.”
The company hasn’t made this move completely out of the blue. When it published earnings on January 20th a note from CEO Reed Hastings and CFO David Wells to shareholders detailed Netflix’s plans to increase investment in original content.
Following today’s announcement Netflix’s stock took a slight hit. Looks like the markets aren’t excited by this. Rating agency S&P also downgraded Netflix’s debt rating from BB- to B+. The agency’s analysts say Netflix continues to remain dependent upon studios for content and while it is investing more into original content the success for those ventures is “unpredictable.”
Granted that it is a gamble for Netflix but the company has scored some major wins with its original productions. House of Cards has won multiple Emmy awards. Other shows like Orange Is The New Black have scooped up numerous awards as well apart from critical acclaim.
Netflix also points out that the debt its raising will be used to fund expansion as well. Currently the streaming service is available in 50 countries. Later this year it intends to entering Australia and New Zealand. Over the next two years it wants to be available in 200 countries.
Filed in . Read more about Entertainment and Netflix. Source: techcrunch