Netflix has dominated the streaming market in a seriously short amount of time, and helped to change how TV is consumed with their all-episodes-at-once model of binge-watching. They’ve got a lot of shows, a lot of movies, and big plans for the future.
They’re also up to their ears in debt. How much? Try about $20 billion.
A report in the LA Times goes into depth with just how much debt they’re in and how this business model is unlikely to change any time soon. Essentially, Netflix is borrowing billions to pay for their original shows and movies, but even with steadily increasing subscriber numbers, it’s not enough to offset the negative cash-flow. Netflix has apparently accepted this and are moving forward with more borrowing to fund stuff, but investors are panicky, which isn’t hard to understand.
Netflix has done well for the past few years coasting off a secretive business agenda that never reveals viewership numbers or ratings, unlike other networks, but they’ve also benefitted from the supposed underdog narrative (see the booing at Cannes) coupled with a perception that their pockets are bottomless. They make expensive shows — both The Crown and The Get Down cost at least $100m each per season. It’s worked on some level in keeping subscribers interested, but that’s not a budget you can sustain for every show. Netflix is also moving into the film world more and hoping to gain a foothold in a more prestigious market following this year’s inclusion of two movies in competition at Cannes and high hopes for Sundance favourite Mudbound. That would certainly bring them clout if they were to succeed, but there’s no guarantee it would bring in more sign-ups, and therein lies the problem.
Will the Netflix bubble burst? We’ve all seen Too Big To Fail before. This is a company playing the long game, but getting to that end-goal could cost tens of billions, and it wouldn’t be a surprise if they just couldn’t hang in that long. Maybe hang onto your DVD collections for a little while longer.