For the second time this year, Netflix is offering $2 billion in debt to fund its investment in content, including original programming, content acquisitions, investments, and more.
The decision to increase its investment in content production follows Netflix’s well-received earnings beat last week, when it reported revenues of $5.24 billion versus the $5.25 billion expected, and EPS of $1.47 versus the $1.07 expected.
However, the streaming service will soon face significant competition, especially among families with children,when Disney+ launches next month. Apple is also poised to launch Apple TV+, NBCU is bringing us Peacock, and AT&T’s TimeWarner is debuting HBO Max.
On Netflix’s Q3 earnings call, Netflix CEO Reed Hastings said that Disney is going to be “a great competitor.” However, he said that all of the services, including Hulu, YouTube and Amazon Prime, have been competing more with linear TV than with each other.
“We don’t shy away from taking bold swings if we think the business impact will also be amazing. We don’t close every deal we chase and we don’t chase every deal on the table,” said Hastings, in Netflix’s Q3 letter to shareholders.
The company also said its growing revenue base and expanding margins would allow it to fund more content spending internally, with cash flow freeing up further in 2020 and beyond.
Netflix says it intends to use the net proceeds from this offering “for general corporate purposes, which may include content acquisitions, production and development, capital expenditures, investments, working capital and potential acquisitions and strategic transactions.”