Netflix is expected to spend $7.5 billion to $8 billion on original content
One of Netflix’s (NFLX) main strengths, which keeps driving subscriber growth, is the consistent quality of its original content, which includes movies like The Cloverfield Paradox in addition to the gamut of third-party content that it offers. The streaming giant said towards the end of 2017 that it expected to spend between $7 billion and $8 billion on original content in 2018. Netflix said after reporting 1Q18 earnings that it expected to spend between $7.5 billion and $8 billion on original content this year.
Netflix saw free cash flow of around -$2 billion in 2017. The company said it estimates free cash flow of -$3 billion to -$4 billion in 2018, which underscores the company’s aggressive push for original shows and new third-party content.
Netflix’s long-term debt is increasing
The company also said it will raise more debt in order to fund its push into original content. Netflix had long-term debt of $6.3 billion as of the end of 1Q18. The company raised $1.6 billion in long-term debt in October 2016.
The company’s track record of consistently producing high-quality original content is one of the main reasons behind its success, as mentioned earlier. Thus, investors don’t really mind the increasing debt and the cash burn, as new original shows are what will likely attract more subscribers.