On a daily basis, Netflix basically transforms the way many of us now consume television and film. Such a large-scale change though, has come at a price and a rather large one at that.
The LA Times is reporting that the company has accumulated $20.54 BILLION in long-term debt and obligations in its effort to produce more original content. The company isn’t showing signs of slowing down either and expects to spend at least $6 billion in content this year, while net cash outflow is forecast to grow to as much as $2.5 billion.
The service currently boasts 104 million subscribers worldwide, up 25% from last year and almost quadruple from five years ago. Its series and movies account for more than a third of all prime-time download Internet traffic in North America, and its stock is up nearly 50% this year alone.
So the question becomes what happens when subscriber growth slows (or stalls)? CEO Reed Hastings isn’t worried and says the payoff will be worth it: “That’s a lot of capital up front, and then you get a payout over many years. The irony is the faster that we grow and the faster we grow the ‘owned originals’, the more drawn on free cash flow that we’ll be.”