What will become of our favourite streaming service?

Published in El Pais, 30 October 2018.

For reasons that are obvious Netflix continues to become a household necessity. Gone are the days of commercials or waiting for your show to come on. Simply watch what you want, when you want. As for original programing? They have that too with many high-quality shows like “Orange is the New Black”, and “Narcos”. All this at a very affordable price. Unfortunately, something will have to change, either the affordability or the quality of the content as financially it does not seem like they can keep this up.  

A few days ago, Netflix announced a plan to secure $2 billion through debt to continue to finance original programing to increase their overall debt to $20.6 billion dollars. The result was a slight dip in price market and Moody’s Investments giving the loan a junk rating, although admitting that they should be able to pay off their debts due to their rising subscription rates. 

The decision to do this may seem shocking but Netflix may not have much of a choice. For one, the increase in competition appears to be picking up as companies like Disney announce their own streaming services to be available soon. This will also make external content harder to come by as Disney will most likely not make their content available while simultaneously drive up the price for others. Netflix producing their own shows would at the very least provide some security as the shows will forever be theirs.  

One must wonder though what all this debt will eventually mean as they cannot keep up this negative cashflow for ever and eventually the increase in subscriptions will slow down leaving Netflix with only two options to increase income, lower costs by decreasing the quality of available content, or raise prices by a significant margin to the point where it’s cost will start to look more like a cable subscription. Neither option sounds appealing. 

This news was a little troubling but for now sit back and enjoy the shows you can. Hopefully I am just worrying for nothing but soon many may be searching for a Netflix alternative if they make many unappealing changes.  

 

About Matthew Glezos 131 Articles
Matthew is Canadian and has a Master in Business Administration. He has international experience in marketing and strategy. He has a strong interest in technology and combines it with the business side.

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