Netflix raising money to develop content, pay off debt
Netflix (Nasdaq: NFLX), riding the high provided by its fourth quarter earnings last week, has taken steps to raise $400 million. More than half of those funds, $225 million, will be used to refinance some existing debt. The rest, the company said, is going to "general corporate purposes, including capital expenditures, investments, working capital and potential acquisitions and strategic acquisitions."
All Things Digital cut through the jargon and explained what it believes will happen to the money: The company is going to develop more new content, such as the much-anticipated "House of Cards" production and the even-more-anticipated "Arrested Development" planned for May.
The publication based its belief on the quarterly shareholders' letter CEO Reed Hastings sent out along with earnings when he said the money would be used "to fund future originals."
Developing original content is the best, and perhaps only way to stave off multichannel video programming distributors (MVPDs) that are developing their own range of TV Everywhere services to mimic and challenge OTT, concluded KPMG's 2013 Digital Debate survey.
"The problem for over-the-top players is there is not that all-encompassing product that effectively replicates the standard cable or satellite package," wrote Paul Wissmann, partner and head of media and telecommunications for KPMG in the United States. "But when that problem is solved, then the over-the-top players can truly compete with the traditional providers, making it harder [for MVPDs] to hold onto subscribers."