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Netflix Piles on $2 Billion in Debt, Invests in Original Content

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Netflix raises debt

Online video streaming giant Netflix (NFLX) is making another bond offering worth $2 billion as it seeks to fund its investment in original shows and content acquisition amid intensifying competition. 

The content king sold $1.6 billion worth of debt in April this year after raising $1.9 billion in November 2017.

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Netflix’s debt load

With its new bond offering, Netflix’s debt load will rise to nearly $10.4 billion, the majority of which it’s raised in the past three years. As of September 30, Netflix had ~$8.3 billion in long-term debt to finance its spending on original content. The company expects to see higher debt levels as it continues to invest in original content.

Netflix’s investment in original content

Netflix has already invested $6.9 billion in original TV shows and movies as of the end of its third quarter, and it has plans to spend $8 billion on content this year. Netflix’s aggressive spending on high-quality original content has resulted in negative free cash flow. In the third quarter, Netflix’s free cash flow was ~-$859 million compared to its cash flow of -$465 million in the previous year’s quarter and -$287 million in the first quarter.

Like Netflix, other tech companies have been pouring in money into premium programming and original content to attract consumers. Facebook (FB) allocated ~$1 billion to the acquisition of new content last year, while Apple has plans to allocate more than $4 billion toward original content in 2022 compared to $0.5 billion in 2017, according to projections by Loup Ventures.

According to the Diffusion Group, Netflix, Hulu, and Amazon (AMZN) Prime are expected to spend $10 billion annually and triple their combined investments in original shows by 2022.

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