Netflix's Growth Comes at a Cost

Company has gained $5.1B in debt in one year
By Newser Editors and Wire Services
Posted Oct 17, 2017 11:50 AM CDT
Netflix's Growth Comes at a Cost
A person displays Netflix on a tablet in North Andover, Mass.   (AP Photo/Elise Amendola, File)

Netflix is sinking deeper into debt in its relentless pursuit of more viewers, leaving the company little margin for error as it tries to build the world's biggest video subscription service, reports the AP. Netflix's long-term debt and other obligations totaled $21.9 billion as of Sept. 30, up from $16.8 billion at the same time last year. That includes $17 billion for video programming, up from $14.4 billion a year ago. Yet that big burden hasn't been a major concern on Wall Street so far, as CEO Reed Hastings' strategy has been paying off. The billions of dollars that Netflix has borrowed to pay for House of Cards, Stranger Things, and The Crown has helped its service more than triple its global audience during the past four years—leaving it with 109 million subscribers worldwide through September, according to quarterly earnings released Monday.

That includes 5.3 million subscribers added during the July-September period, growth that exceeded management forecasts and analyst projections. If the subscribers keep coming at the current pace—management expects to add 6.3 million during the October-December period—Netflix may surpass HBO's 134 million subscribers (as of January) within the next few years. But Netflix's subscriber growth could slow if it can't continue to win programming rights to hit TV series and movies, now that there are more competitors such as Apple, Amazon, Hulu, and YouTube. If that happens, there will be more attention on Netflix's huge programming bills, most of which are due within the next five years. For now, Netflix is remaining profitable, under US accounting rules, earning $130 million on $3 billion in revenue in its latest quarter. (Read more Netflix stories.)

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