Top SVOD provider Netflix plans to raise $1 billion through a debt offering to pay for “general corporate purposes” that likely include content acquisition and production, bringing its debt load to more than $3 billion.
While Netflix didn’t specify in a media statement what the latest debt offering would be spent on, content costs make up a significant portion of its spending, Variety noted, and the company has stated it will spend at least $6 billion in 2017 on content, on a profit-and-loss basis.
The cash infusion comes at a time when competitive pressure on Netflix in the U.S. may be increasing. AT&T’s deal to acquire Time Warner, Inc., gives the wireless carrier ownership of premium network HBO and other content assets, and therefore a possible edge in the OTT streaming market.
Netflix CEO Reed Hastings played it cool during a WSJ.D Live appearance this week, saying that the SVOD provider welcomes “open competition” but offering a caveat about net neutrality. “We want to make sure it doesn’t give an unfair advantage to HBO,” Hastings said, according to Business Insider.
What Hastings is referring to is that AT&T, as both a broadband and wireless provider, could give preferential treatment to the services and channels it owns when it comes to moving data over IP networks. While current net neutrality rules require that data be treated equally across wired broadband networks, wireless carriers in the U.S. are largely exempt from these rules.
That exemption is already being put to use by wireless carriers such as T-Mobile and Verizon, which offer “zero-rated” video streaming of their own mobile-first video services – Binge On and go90 – to their subscribers. Basically, customers using those services don’t see the video data used count toward their plan’s data cap.
Should AT&T decide to offer a similar zero-rated video streaming service, it could add HBO or other Time Warner content to that service – a strategy that may drag eyeballs away from Netflix, at least in the mobile environment, and give AT&T a bigger advantage in the streaming arena.
“The key thing is whether there is going to be net neutrality, which hasn’t been AT&T’s favorite topic,” Hastings said, according to The Wall Street Journal.
Still, AT&T’s new virtual MVPD service, DirecTV Now, may be the bigger competitive threat to Netflix. Slated to launch in November at a base price point of $35 a month, DirecTV Now could grab viewers and provide the kind of competition that Hastings says Netflix loves.
In the meantime, Netflix will continue cranking out globally-licensed original content. “We’re focused on movies and tv shows on a global basis for the next 10 or 15 years, we’re sort of heads down on that space, it’s an enormous space on a global basis. So, no sports, no news,” he said.