Netflix to Expand
Netflix the streaming media giant is raising $1.5 billion to expand investment in content acquisitions, and strategic transactions. This comes as the online streaming video competition is heating up between tech companies like Google, Amazon, Facebook and Netflix. Looking to gain an edge in acquiring certain undisclosed content, Netflix raised its initial debt announcement from $1 billion to $1.5 billion. It will be comprised of senior notes $700 million of which with hold a 5.5% rate due 2022, and $800 million at 5.875% due in 2025.
Market reaction to the news was non-accepting, with Netflix value dropping slightly, and the company’s debt rating falling from B+ to BB-. The rising risk assessment is due to its dependence on TV and movie content for revenue. With its recent output of original and exclusive content being strong it is an unpredictable growth factor.
Speculated ways to use the long term debt is for the prolonged production of their exclusive content, as well as international market expansion. Their current international exposure is within 50 countries, their two year goal is to be live in 200 countries. On the shortlist for Netflix, Australia and New Zealand late in the first quarter of 2015.
Their pie in the sky is China, with their vale of government regulation it makes expansion into the giant country a difficult one. The claim to be “ Exploring…modestly” the market potential of China, much permission is needed before entry.
Growth has been present and continuous for Netflix as it had $9.5 billion in commitment as of the end of 2014. That is up from 7.3 billion the prior year. As they continue to produce original content, viewer commitment is likely to grow over the coming year. Such titles as ‘House of Cards’ and ‘Orange is the New Black’ have received a number of Emmy nominations which drive the popularity of the streaming service, and increased demand to see their hit originals.