Netflix raising $400M in debt to finance original shows

After wowing investors, Netflix kicks it up a notch

Netflix wowed shareholders and analysts alike last week when it beat everyone’s expectations. Wall Street was expecting the worst—a loss of $0.12 per share, based on the pricey cost of acquiring content. Netflix stunned by posting a profit. But…that doesn’t really solve the ongoing problem of content costs. Now, Netflix is addressing that very issue. The company announced Tuesday that it is raising $400 million in debt.

Some $225 million will be used to refinance some existing notes, while the remaining capital will be used for “general corporate purposes, including capital expenditures, investments, working capital and potential acquisitions and strategic transactions.”

But CEO Reed Hastings outlined in a letter to shareholders last week that refinancing outstanding notes “would give us additional reserves as well as increased flexibility to fund future originals.” Low interest rates also make this a prime time to do so.

He also said that Netflix currently has enough cash on hand to finance its current slate of original programing and other ongoing expenses.

The company is gearing up for February 1, when it will release its own original series “House of Cards,” directed by David Fincher and starring Kevin Spacey and Robin Wright. Netflix is rumored to have shelled out $100 million for two whole seasons (26 episodes) before a pilot was even produced. It’s a huge gamble, but it seems virtually impossible to go wrong with David Fincher, Kevin Spacey, and Robin Wright.

On February 1, all 13 episodes of the first season will be released at once—a huge paradigm shift from traditional TV series, in which episodes are released once a week.

“Imagine if books were always released one chapter per week, and were only briefly available to read at 8pm on Thursday,” wrote Hastings. “And then someone flipped a switch, suddenly allowing people to enjoy an entire book, all at their own pace. That is the change we are bringing about. That is the future of television.  That is Internet TV.”

Well played, Sir.

Netflix has a full lineup planned. “House of Cards” will debut in February, which will be followed in April by “Hemlock Grove,” a horror thriller created by slasher porn director Eli Roth (also known as the Bear Jew). That will be followed by an even more widely anticipated debut: a new and fully resurrected season of “Arrested Development” scheduled to be released in May.

Other shows on the lineup include “Orange is the New Black,” a prison dramedy by “Weeds” creator Jenji Kohan, and “Derek” with Ricky Gervais.

So now I take back all the mean things I ever said about you, Netflix. Your 2013 is going to be awesome. 

Netflix shares were up 3% Tuesday afternoon to $167.

Image source: thenosebleeds.com