Netflix asks for another $1B in investments to challenge established media

Image: Netflix
Netflix has made its video streaming strategy abundantly clear over the years: The company is spending billions of dollars every year on buying the best that Hollywood has to offer in an attempt to get more people to sign up for its internet video service.

Netflix announced it intends to raise another $1 billion from international investors, an amount the company said it would spend on “general corporate purposes, which may include content acquisitions, capital expenditures, investments, working capital and potential acquisitions and strategic transactions.”

The company’s news comes as little surprise. Netflix has made its video streaming strategy abundantly clear over the years: The company is spending billions of dollars every year on buying the best that Hollywood has to offer in an attempt to get more people to sign up for its internet video service. The result has been a well-documented land-grab among SVOD companies like Netflix and established media giants like Time Warner for the writers, directors and actors who can produce the kind of quality content that generates revenues and subscriptions.

Related: Netflix’s disruption of old media points to the future of television, analyst says

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The $1 billion Netflix said today it is raising (PDF) will likely go toward the company’s stated intent to spend roughly $6 billion this year acquiring new content like Brad Pitt’s "War Machine." It’s that kind of high-profile content that Netflix has said is the driver behind its growth; the company said earlier this month that it surpassed the 100 million-subscriber mark, a figure that highlights both the popularity of Netflix’s titles like "House of Cards" and "Daredevil" as well as the company’s international expansion efforts.

“We’re still on a great growth path. Our content is working,” said Netflix CFO David Wells during the company’s earnings conference call with investors last week. “We’re pleased with our international growth and we’ve got a lot of growth left in the U.S. as well.”

Specifically, Netflix said it expects to add another 3.2 million subscribers in its current quarter. But analysts believe that figure might be an understatement.

“From this perspective, the platform will have already reached ~40% of their 2Q guide (+3.2M subs), with growth likely somewhat front end loaded due to the early success of '13 Reasons Why',” wrote Jefferies analyst John Janedis, adding that Netflix’s content slate looks strong in the back half of the second quarter due to new seasons of shows like "Orange is the New Black" and "Master of None."

However, as Recode noted, Netflix remains in a growth position, and as a result its finances aren’t keeping pace. The publication pointed out Netflix will have roughly $2 billion in negative cash flow this year as it works to acquire more content, and as a result, more subscribers.

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