Netflix Accumulates $20 Billion of Debt

Netflix has been growing rapidly, but with that growth comes rapid investment and debt.

The streaming giant has racked up $20.54 billion in long- and short-term debt, which is being funneling into producing and acquiring shows and films from across the globe. Netflix is said to be spending $6 billion in original content this year alone, according to the Los Angeles Times.

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While this may seem like a huge red flag for investors, it’s not. Netflix is gaining subscribers at higher-than-expected rates, and the company sees its original content as the reason for it. They believe if they spend more money in content upfront, it will continue to benefit them for years to come.

“With our content strategy paying off in strong member, revenue and profit growth, we think it’s wise to continue to invest,” Netflix execs told investors at the end of Q2.

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“That’s a lot of capital up front, and then you get a payout over many years,” Chief Executive Reed Hastings told investors. “The irony is the faster that we grow and the faster we grow the owned originals, the more drawn on free cash flow that we’ll be.”

However, industry analysts are a bit less confident in Netflix’s future. They’re predicting that the service will stagnant at some point and they may have so much debt that it will be hard to manage.

“Nobody is ever the dominant player forever,” said media consultant Mike Vorhaus. “I think they’re going to need some luck in not drowning in debt in the ultimate slowdown of growth.”

Netflix isn’t slowing down any time soon. They say they’ll be “free-cash-flow negative for many years” as they continue to invest.

They’re projecting to gain 750,000 U.S. subscribers in Q3 of this year, along with 3.65 million international subs. Those numbers are just over industry predictions, but with Q2 gains crushing expectations, those numbers seem likely to be reached.