Netflix takes on extra $2bn debt

Netflix will offer the 180 episodes of Seinfeld from 2021

Streaming giant Netflix has taken on a further US$2bn in debt to prepare for an onslaught of competition as the streaming wars heat up.

Netflix regularly raises debt to help it cover the costs of production and IP acquisition, and previously raised US$2bn in April. This latest round sees it offer unsecured bonds that will mature in 2030.

The service is preparing itself for the launch of a number of high-profile competitors in the SVoD market, including Disney+, Apple TV+, HBO Max and NBCUniversal’s Peacock.

Their impending arrival has led to a race for library content, with Netflix recently paying a reported US$500m for the Seinfeld catalogue, having previously lost the rights to popular sitcom Friends to WarnerMedia’s forthcoming HBO Max.

Peacock has the rights to the US version of The Office, while HBO Max recently paid a reported US$1bn for all 12 seasons of The Big Bang Theory. The rivals have also commissioned a number of new series, including Apple TV+, which promises to only air original content.

Netflix’s revenue grew 30% year-on-year in the third quarter to US$5.2bn, according to its latest set of financial results, released last week.

Its latest debt acquisition will bring its total spending on content to about US$15bn in 2019 alone.

Netflix acknowledged some “modest headwind to our near-term growth,” thanks to the arrival of the fierce competition, but argued it has always competed strongly against other SVoD services, such as Amazon and Hulu.

“While the new competitors have some great titles (especially catalogue titles), none have the variety, diversity and quality of new original programming that we are producing around the world,” Netflix said in a letter to its shareholders in October.

“In the long term, though, we expect we’ll continue to grow nicely given the strength of our service and the large market opportunity. By way of example, our growth in Canada, where Hulu does not exist, is nearly identical to our growth in the US.”

Netflix also argued it has been preparing for an influx of competition to the market for the past seven years.

“We did well during the first decade of streaming. We’ve been preparing for this new wave of competition for a long time. It’s why we started investing in originals in 2012 and expanded aggressively ever since – across programming categories and countries with an ambition to share stories from the world to the world,” the letter said.