Netflix has spent massive amounts of money to build its streaming empire and it has now taken on a loan of $2 billion geared towards content acquisition and production costs.Netflix has grown tremendously because it creates its own content.So far this strategy has worked for the streaming giant that has seen its shows win Oscars and Golden Globes so far.The company spent $8 billion only on content on 2018 however it is estimated to spend $13 billion on content next year.
The streaming service has taken on the $2 billion in new debt by offering unsecured bank notes.It is the third time in a year that Netflix has raised debt this way after taking a loan in October 2018 and April 2019 for $1.6 billion and $1.9 billion respectively.The news comes on the heels of a great financial quarter after it announced that it has more than 137 million subscribers and about 130 million who pay for the service.
But Netflix knows it will have to spend a lot of money if it wants to dominate the streaming service industry.Next year Disney and Warner Media will take a slice from the thriving streaming market by launching their own services.This means Netflix will likely have less licensed content because Disney said it would pull content from Netflix ahead of the release of its service.Netflix however recently poached TV geniuses Shonda Rhimes and Ryan Murphy to make exclusive content for them.Netflix’s strategy of building out its own original content library has “positive long-term implications because a library of owned content instead of licensed content is valuable to both consumers and investors.
Netflix said last week that it expected negative free cash flow of about $3 billion this year and its expectations for next year are similar. Free cash flow measures how much cash is generated after the company covers investments in its business.