Netflix is one of those companies that you look at from the outside and think that they must be making a lot of money; it’s like the ‘Facebook’ of television and movies. In case you haven’t heard of it, Netflix is a multinational entertainment service that streams directly to the whole family for one monthly subscription fee. They license thousands of shows and films, and even produce their own content that seems to be well received by most, but unfortunately, this good user experience doesn’t guarantee a profit. This past week, Netflix went public about the fact that are going into an extremely expensive debt.
Netflix is already about $2.37 billion in debt, but as of now they are adding another $800 million onto that, so their debt is totaling more than $3 billion. Netflix’s CEO Ted Sarandos clarified the release, stating that the money was going towards the production of more Netflix Original series and films, with the goal to total the budget to around $6 billion. This means that Netflix is increasing their debt specifically to put out higher quality content for their user base, an admirable and unique move for a company of their size. A study done by Allflicks revealed that Netflix Originals received an average 11% better rating when compared to licensed content, and it would seem that Netflix only wants that to go up.
Sarandos has come out to say that Netflix’s goal as a platform is to have about a 50/50 split between Netflix Original content and the standard licensed content. This statement is controversial among some Netflix subscribers, who wonder whether that involves an increase in original production, or just a reduced catalog of entertainment. Netflix is known for quietly losing its third-party content, when contracts expire or deals with cable networks fall through, but it makes sense to worry if Netflix will even attempt to re-license these lost films and series. In fact, it was observed that Netflix’s entertainment library is steadily decreasing, so much so that the entire catalog has seen a 50% shrink in size over the past four years. This statistic may have been what prompted a move towards Netflix Originals in the first place.
The company has stated that there isn’t anything to be worried about in terms of the debt. As of now, it is just to allow a ramp up in production, but this doesn’t imply that Netflix is on the decrease in popularity. The increase in quality and content production is still expected to drive subscriber growth for the next few years, even if it’s reportedly slower than expected. Netflix is still the world’s most popular legal streaming service of films and series, and continues to replace the traditional cable/satellite TV entertainment setup. This debt is just a phase in the a long term plan to increase the quality and output rate of original content, which, in the end, will probably make Netflix a better service for everyone.
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