Netflix sinking in to debt

SAN FRANCISCO — Netflix is getting deeper because of its pursuit of audiences into debt, leaving the company margin for error as it tries to build the world’s biggest video subscription service.

The burden that Netflix is shouldering has never been a concern on Wall Street thus much, since CEO Reed Hastings’ strategy has been paying off.

The billions of dollars that Netflix has made to pay for exclusive series such as “House of Cards,”“Stranger Matters,” and “The Crown” has aided its support more than triple its worldwide audience during the previous four years — making it with 109 million subscribers worldwide throughout September.

That figure includes 5.3 million subscribers added through the July-September span, according to Netflix’s quarterly earnings report released Monday. The growth exceeded analyst projections and administration forecasts. Netflix’s stock climbed 1 percent in trading, placing it today to touch new highs. The shares have improved by roughly five-fold during the previous four decades.

In the event the subscribers keep coming in the pace, Netflix may surpass its role model — HBO. HBO began this year with 134 million subscribers.

However, Netflix’s subscriber growth can slow if it can not continue to acquire programming rights to hit TV show and films that there are competitors.

If that happens, there will be more focus on Netflix’s huge programming bills, and ” then we can observe a investor backlash,” CFRA Research analyst Tuna Amobi said. “However, Netflix has been providing great subscriber growth so far.”

Netflix’s long-term debt and other obligations totaled $21.9 billion as of Sept. 30, up from $16.8 billion in the identical period this past year. Including $17 billion for video programming, up from $14.4 billion a year ago.

The Los Gatos, Calif.-based firm has to borrow to pay for most of its own programming expenses since it doesn’t produce enough money on its own. Netflix burned through an additional $465 million in the latest quarter, which will be known as “negative cash flow” in accounting parlance.

For all this year, Netflix has cautioned that its adverse cash flow might be as high as $2.5 billion, a trend that management anticipates will continue for the next few decades as it tries to diversify its video library to appeal to divergent tastes in roughly 190 countries.

Nevertheless, Netflix has stayed prosperous, under U.S. accounting principles. The company earned $130 million about $3 billion in revenue in its most recent quarter.

And direction appears to be attempting to facilitate the fiscal drain with cost increases of 1 and $2 a month for the majority of its 53 million subscribers in the U.S. before the end of the year. The prices are likely to raise Netflix’s revenue by roughly $650 million RBC Capital Markets analyst Mark Mahaney predicted.

However, the cost increases may backfire something Netflix faced when it increased rates if it arouses an unusually significant number of subscribers to offset.

Analysts believe that is unlikely to occur this time, and that thesis was supported by Netflix . Management hopes to add 6.3 million subscribers during the October-December span, according to FactSet.