Netflix’s original content library is growing, and they’re taking on some debt to help finance it. Content isn’t cheap, and the company announced today they’re taking on $1 billion of “non U.S.” debt to help generate content, cover capital expenditures, increase working capital and pave the way for any future acquisitions.
As they continue to produce some of the most expensive television content ever, they’ll need financing to help keep going. Of course, Netflix could use this money for essentially anything, but content is going to be the focus.
This sort of move isn’t a new thing, as Netflix made a similar move last fall and in February of 2015. The move also wasn’t a surprised, as the company announced earlier this month they were seeking more debt financing. “Our debt-to-total-cap ratio, at under 10%, is quite conservative compared to most of our media peers at 30%-70%, and conservative compared to efficient capital-structure theory,” their letter to investors a few months ago read. “Thus we will continue to add long-term debt as needed to finance our expansion of original content, including in Q2’17.”
According to Variety, Netflix said the company was specifically targeting funds from outside of the US because “Netflix is a global company and we want to have access to global capital markets. Interest rates are also currently attractive in Europe.”
Of course, in overall terms, Netflix’s content library is smaller now. But Netflix is closing in on the 100 million subscriber mark, and original content has been the biggest part of their growth. As more customers come on board (and as current subscribers stay on longer and longer), they’re going to need more original content.
The move has been called “fairly conservative” for the entertainment industry, and it wouldn’t be surprising to see the company take on even more debt before the year is out.
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