Shortly following an announcement that they want to produce 20 new original shows per year, Netflix announced that they will be raising $1.5 billion worth of corporate debt.
This is a half billion more than was originally reported. $700 million of the notes will mature in 2022 and another $800 million in 2025.
As officially described, the company will use the proceeds for “general corporate purposes.” There’s a good chance that a portion of that money will go towards producing these new original shows. However, it’s not out of the realm of possibility that Netflix may try to make some strategic transactions in terms of acquiring other platforms.
While Netflix has been hugely successful in the streaming space, there are plenty of competitors vying for a portion of the audience. One way to acquire a competitor’s audience is to simply purchase the competitor.
It’s likely that Netflix is betting on their original programming to help them grow, as well. Original content is something that they have had success with in the past with shows like House of Cards and Orange is the New Black. More original programming would also instantly give Netflix differentiation from any competitors.
However, there is a danger that the platform is going for quantity over quality. So far Netflix has been great at producing a few high-quality shows. It may become difficult to keep those same quality standards as the quantity of programming increases.
While raising debt for corporate operations isn’t uncommon (Apple made a similar announcement on the same day), the debt rating agencies don’t seem too impressed with this move from Netflix. Moody’s sees the investment as too risky and Standard & Poor’s has downgraded the Netflix bonds to junk status.
Of course, a debt agency’s rating has nothing to do with how the company will actually operate. So it will be interesting to see what Netflix does with this new cash infusion and what kind of programming they can create on a larger scale.