It's safe to say that Netflix is king of the hill when it comes to streaming video, but by like token, there are plenty of other outlets looking to send Netflix screaming back down that same hill. To that end, Netflix talked about plans to get into some debt financing in order to make some moves that should, hopefully, keep its place quite cemented among the wide array of streaming video outlets.
Netflix's plans, as they revealed in recent discussions, involved raising fully $400 million in new debt, just over half of which--$225 million--will go to refinance the current debt load, redeeming outstanding senior notes with an 8.5 percent rate thats due in 2017. The remaining portion--$175 million--will go toward a variety of functions, including "capital expenditures, investments, working capital and potential acquisitions and strategic transactions."
A letter penned by CEO Reed Hastings and CFO David Wells summed up the reasons for the debt load change, mostly revolving around the lower interest rates and the attendant savings that would be had by paying off old, higher-interest debt with new, lower-interest debt. But with the new cash also came some exciting possibilities, including not only the possibility for "additional reserves," but also "increased flexibility to fund future originals."
Image via netflix.com
The letter also detailed a fairly bright future for Netflix as a whole, with 2.05 million new streaming users added in just the fourth quarter of 2012, bringing the total up to a hefty 27.15 million members in just the United States. That in turn lit a fire under share prices, and the jump in subscribers was mostly attributed to Christmas shopping, which provided a slew of new devices for users that, happily, work with Netflix like tablets and smart TV systems.
This actually opens up exciting new possibilities as far as Netflix goes. Netflix has some excellent streaming offerings--sufficiently so that more than a few people have thrown over their cable bills to replace them with Netflix's offerings--but at the same time, its clear there's plenty of competition. There's Hulu Plus, Amazon Instant Video, Blockbuster Online and even iTunes has a hand in the streaming video mix. Netflix, much like a shark, needs to be constantly moving in order to stay alive. New content needs to arrive on a regular basis, and with studios hesitant to provide that content at Netflix's profoundly affordable rates, more original content may be the way to go.
But with $175 million on its side, Netflix could finance at least two major summer movie releases...or a whole lot of small-screen series affairs. There's plenty of room on Netflix for more streaming content, and with folks looking to save money over their cable subscriptions, plenty of users interested in watching more on Netflix. That's an opportunity Netflix can ill afford to pass up, and one they look to be moving to take clear advantage of.
Contributing TechZone360 Writer
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