Netflix has plans to take on approximately US$2 billion in new debt by offering unsecured bank notes. The streaming platform looks to use the net proceeds from this offering for content acquisitions, production and development, as well as capital expenditures. This may further include investments, working capital and potential acquisitions and strategic transactions.
The move comes as Netflix had stated in its earlier shareholders’ letter, that it aims for an estimated US$8 billion of content expense (on a P&L basis) in 2018. This will span across a variety of formats such as series, films, unscripted, documentaries, comedy specials as well as non-English language content to further grow its global membership base.
According to Netflix’s third quarter 2018 letter to shareholders, its slate of original programming helped to drive a quarter of growth with streaming revenue increasing 36% year over year. This includes a global membership surpassing US$130 million paid, with US$137 million overall. It saw “greater-than-expected” acquisition globally, with steady growth broadly across all its markets including Asia.
In addition, Netflix also plans to “reclassify” certain personnel costs from general and administrative (G&A) to under content and marketing. It would also do the same from technology and development to other cost of revenues. According to Netflix, the change reflects the “ongoing evolution” of its business to include self-production of content.
The streaming giant explained that a growing number of employees are becoming involved in developing content as the platform migrates to self-produce more of its content versus only licensing original and non-original content.
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