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Netflix’s Debt Is $14.8 Billion, Keeps Attracting Investors


Mar. 11 2020, Published 7:45 a.m. ET

Netflix’s (NASDAQ:NFLX) debt has been rising steadily for at least the past five years. The company finished 2019 with $14.8 billion in debt, which rose from $10.4 billion in 2018. In 2017, Netflix’s debt was $6.5 billion compared to $3.4 billion in 2016. Meanwhile, the company had $2.4 billion in debt in 2015.

However, Netflix isn’t the only media business that’s in debt. Comcast (NASDAQ:CMCSA) wrapped up 2019 with over $102 billion in debt. Comcast’s debt rose so high after it acquired Sky that it decided to pause its stock repurchase program. The Sky deal set Comcast back about $40 billion, which the company financed partially through loans.

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The debt also soared at Walt Disney (NYSE:DIS) after it purchased a collection of assets from 21st Century Fox for more than $71 billion. The company finished 2019 with about $48 billion in debt. AT&T (NYSE:T) exited 2019 with $151.3 billion in debt. The media and wireless company’s debt jumped following its acquisition of WarnerMedia for $85 billion.

Big content costs behind Netflix’s soaring debt

While big-ticket acquisitions resulted in debt for Comcast, Disney, and AT&T, big content spending is behind Netflix’s soaring debt.

Netflix thinks that great content will help it withstand growing competition in its market. Last fall, Disney and Apple launched new video streaming services to challenge Netflix. Currently, Netflix dominates the video streaming scene with over 167 million subscribers. The company will also face more competition this year as Comcast and AT&T launch new video services. Comcast’s Peacock video service will launch in April, while AT&T’s HBO Max video service will debut in May.

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Netflix realized that great content helps it drive subscriber growth and improve customer retention. Therefore, the company continues investing big in content to counter the rising competition. Netflix spent over $15 billion on content in 2019 compared to $12 billion in 2018. Wall Street expects that the company will spend over $17 billion on content in 2020.

Currently, Netflix doesn’t generate enough cash from its operations to pay all of its bills. Therefore, the company resorts to borrowing to meet its investment needs. The company raised about $4.0 billion last year through bond sales, which drove its debt to $14.8 billion. Netflix’s debt will continue to rise since it plans to keep borrowing to plug its funding gaps.

Stock struggles as coronavirus hits markets

Despite Netflix’s soaring debt, strong financial results have continued to draw investors to the stock. Netflix stock gained 15% year-to-date by the end of February. However, the recent sell-off due to the fallout in oil prices and coronavirus crisis slashed the stock’s gains.


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