Earlier this year, we found out for sure what we kind of already figured — Netflix is the most popular streaming service by a wide margin. But, like so many tech companies these days, Netflix put growth before profits in order to attract more early investment, and it’s looking more and more like the company’s day of reckoning is approaching. A new LA Times report takes a look at Netflix’s staggering $20.54 billion of debt, and what it could mean for the future of the company.
Of course, this wasn’t a matter of secret information getting out — Netflix is a publicly traded company, so its financials are made public quarterly. What the LA Times report points out is that, despite Netflix’s success, it might be time to think about whether or not Netflix has gotten in over its head.
Netflix either doesn’t think it’s gotten to that point or doesn’t care. Their near-term strategy is more of the same, as they plan to pour billions more into producing new original series and licensing series from elsewhere — we can only imagine what they’re paying Disney for their Marvel series (five of them, including this month’s crossover series, The Defenders). In fact, Netflix might even be accelerating. When Netflix canceled Sense8 earlier this year, CEO Reed Hastings mentioned that he wanted a higher rate of canceled shows — but not to save money. Hastings wanted to try more new series overall, in an effort to take more risks to find new hits. That’s an even costlier strategy in the long term, and will only add to the debt pile.
Like always with the tech industry, investors are lining up to join up with a high-growth company poised to dominate its market for years to come. They’ve shown no signs that they’re willing to change their minds — Netflix’s stock has been trending upwards and shows no signs of slowing down. But, with Netflix on track to add to the debt pile for years to come, the LA Times report cites a couple analysts that point out that it’s getting increasingly unrealistic to expect Netflix to be as dominant as they have been for that long into the future — no one stays on top in tech forever.
That adage might be what doesn’t have a future, though. With companies like Google, Facebook, Apple, Microsoft, Disney, and Amazon amassing massive fortunes and market dominance (and buying up their share of little companies along the way), we could be headed for a future dominated by just a handful of mega-firms. The real question is whether Netflix will be one of those mega-firms or, perhaps more likely, acquired by one. Some of those huge firms are sitting on hundreds of billions of dollars in cash — enough to dwarf Netflix’s debt load. As Netflix continues to add debt, I wouldn’t be surprised if acquisition rumors start popping up more and more — with this much debt, it could be the only way Netflix’s investors come out on top.