On Wednesday, Netflix announced that it plans to raise about $1 billion in debt to beef up original content, a day after the streaming pioneer doubled its own projections for new customers as stuck-at-home users binged on movies and shows.
Shares of the company were down 3 percent at $420 in morning trade after it also forecasts a weaker second half of the year when shelter-in-place orders are lifted.
The company plans to use some of the cash to acquire content and for possible acquisitions, positioning itself as major US studios halt productions and delay film releases due to the coronavirus-led lockdowns.
Most programming for 2020, and much of 2021, has already been filmed and is being finished remotely in post-production. On Tuesday, Chief Content Officer Ted Sarandos said adding that the company was working on over 200 such projects.
As streaming video grows in the United States, space has become more competitive with the debut of Walt Disney’s Disney+ and other upcoming rivals.
Piper Sandler analysts wrote in a client note that “Despite new services on the horizon from HBO and launches of services from Disney and Apple, we expect the minimal long-term impact on Netflix subscriber addition and retention.”
Netflix launched several popular original shows in the first quarter, including action film “Spenser Confidential,” documentary miniseries “Tiger King,” dating show “Love is Blind” and Spanish drama “Money Heist.”
The current quarter slate includes the Chris Hemsworth starred action movie “Extraction,” sitcom “#blackAF,” comedy show “Space Force” and reality dating series “Too Hot to Handle.”
Last year, the company had a $15 billion cash budget for content and BMO Capital Markets had estimated spending on content to top $17 billion this year.
Netflix, which usually funds its spending spree by sporadically tapping the debt market, is selling senior notes this time.
The company, which has around $15 billion in debt, last raised money in October 2019 through a $2 billion offering of senior notes.