Seeking Alpha

Netflix raising another $400M in debt

  • A year after selling $500M worth of senior notes due 2021, Netflix (NFLX -0.2%) is selling $400M worth of senior notes due 2024. (PR)
  • The streaming giant only says the funds will be used for "general corporate purposes," a catch-all phrase that covers capex, working capital, and potential acquisitions (among other things). Given Netflix's history, there's a good chance the money will be directed towards new content investments.
  • Netflix had $1.2B in cash/investments at the end of Q4 to go with $500M in debt. The company's content obligations totaled $7.3B (+$700M Q/Q).
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Comments (12)
  • Sakelaris
    , contributor
    Comments (1684) | Send Message
     
    I am sure that the short-sellers will paint this as the end Netflix, but this borrowing might actually pay off as part of the expansion of this mold-breaking company.
    4 Feb 2014, 12:19 PM Reply Like
  • canigetanamenooneused
    , contributor
    Comments (329) | Send Message
     
    @Sakelaris: They have $7.3B in content obligations anyways. add in $400M to that. You are only worsening the balance sheet. And how much profits did they have this quarter: $48M. Even twice of that * 4 quarters = $400 million. Not enough to justify it's valuation.
    4 Feb 2014, 12:31 PM Reply Like
  • Sakelaris
    , contributor
    Comments (1684) | Send Message
     
    Thanks for the clarification. Please note also that my comment said nothing about the appropriate current, specific price of Netflix stock.
    4 Feb 2014, 12:49 PM Reply Like
  • canigetanamenooneused
    , contributor
    Comments (329) | Send Message
     
    @Sakelaris: But you talking about "short-sellers painting this as end of Netflix" suggested that you were concerned about NFLX's valuation.
    4 Feb 2014, 01:54 PM Reply Like
  • DanoX
    , contributor
    Comments (2842) | Send Message
     
    There isn't any large long term pot of gold renting movies or TV shows someone else owns the rights. Netflix is and always will be a no profit business. Netflix is bubble waiting to burst.
    4 Feb 2014, 01:19 PM Reply Like
  • mike_dallas@hotmail.com
    , contributor
    Comments (13) | Send Message
     
    A business that makes a profit is now called a "no profit business?"

     

    Are there only three people on Seeking Alpha that have used Netflix (and it's competitors) and see that they don't have any competition?????

     

    "Given Netflix's history, there's a good chance the money will be directed towards new content investments." Is it possible they may also use the money for something different that Netflix doesn't want the general public to know about???
    4 Feb 2014, 04:41 PM Reply Like
  • Sakelaris
    , contributor
    Comments (1684) | Send Message
     
    Well, I for one would be happy to be counted as one of those three people on Seeking Alpha who were attracted to investing a little money in Netflix because first I was a Netflix customer (both for streaming and DVDs).

     

    And Netflix has been one of the greatest consumer products I have ever paid for in my life.
    4 Feb 2014, 05:12 PM Reply Like
  • canigetanamenooneused
    , contributor
    Comments (329) | Send Message
     
    @mike_dallas: no competitors?? What about Hulu Plus, Amazon Instant Video, though they are not as good as NFLX but they can improve I guess.
    4 Feb 2014, 10:22 PM Reply Like
  • Sakelaris
    , contributor
    Comments (1684) | Send Message
     
    I have posted about this before as here goes again: At the low cost of $8 a month, consumers can subscribe both to Netflix and to one of its so-called competitors. The current line of Roku players make this easy.

     

    I myself enjoy both Netflix and the also inexpensive Amazon Prime. Their content does not overlap too much; I find good stuff in both places. I use Netflix DVDs to fill gaps and I avoid Amazon's pay-per-view content.

     

    Some might also like the similarly low-priced Hulu Plus, although I, for one, cannot stand its commercials and I think many will agree with me. Nor do I think that Comcast, a cable giant that owns part of Hulu Plus, will allow the Hulu Plus service to become much more appealing, lest it divert customers away from its cable packages.

     

    As for Amazon's future, well what if Amazon does someday use its resources to make its service significantly better than Netflix? Would I and others already subscribed to Netflix actually cancel Netflix? I do not really see this. Wouldn't we still want both? There is so much content out there that Netflix would still have its good share, including its own original programming.

     

    Other companies mentioned as competition to Netflix are using a pay-per-view model. That may work for them, but those of us now enjoying all-you-can-watch streaming on Netflix would be unlikely to cancel Netflix for a pay-per-view arrangement that would quickly add up to be more expensive.
    5 Feb 2014, 08:57 AM Reply Like
  • canigetanamenooneused
    , contributor
    Comments (329) | Send Message
     
    @Sakelaris: valid points. I too don't like Hulu Plus for exactly the same reason. You made an interesting point about Comcast controlling Hulu and pulling it down thing.

     

    ya, I too don't like to add pay-per-view companies being considered competitors to NFLX. but they might decide to change their models. who knows.
    5 Feb 2014, 12:31 PM Reply Like
  • Hoa Duong
    , contributor
    Comments (7) | Send Message
     
    In regards to competition, one should also throw in Apple, Microsoft and Google as potential competitors in the long-form video streaming market.

     

    Google can re-prioritize YouTube for the purpose, and Apple has been curiously inactive in this space - streaming, that is - despite having been in the content delivery game for a long time. Lastly, if Microsoft chooses to intensify its efforts with the Windows Marketplace (or movies on Xbox Live), it can use its hardware platforms (Xbox and Surface) to chip away at Netflix.

     

    Another disadvantage that Netflix has is the lack of vertical integration. This is reflected by their lack of a flagship hardware platform. While this fact has not been an issue thanks to their savvy partnerships with Microsoft and the various set-top box firms, it's an issue that the existing would-be competitors do not have (Amazon, Apple, and Google).
    The lack of a deeply entrenched eco-system means that Netflix is at the whims of the major integrated firms (Apple, Google, and Microsoft) in terms of what they choose to do with respect to long-form video delivery.

     

    In sum, one should probably not so easily cast aside the question of increased competition should one be in a long position for Netflix.
    7 Feb 2014, 04:21 PM Reply Like
  • Sakelaris
    , contributor
    Comments (1684) | Send Message
     
    As you yourself acknowledged, Apple has been "curiously inactive in this space." Therefore, this kind of vague jargon-laced effort to put down Netflix is boring. Where is the real evidence of meaningful future competition to the existing Netflix and Amazon Prime services?
    And I mean competition of the fixed-price, all-you-can-stream type, not the silly and high-priced pay-per-view format which is already around in the form of M-Go, Vudu, and a few other services.
    Meanwhile, Netflix keeps adding people.
    8 Feb 2014, 09:19 AM Reply Like
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