According to a new report by the LA Times, Netflix is over $20 billion in debt.
Sure, they have over 104 million subscribers worldwide and garnered 91 Emmy Award nominations this year, but the streaming service has, “accumulated a hefty $20.54 billion in long-term debt and obligations in its effort to produce more original content.”
The issue is that Netflix is spending more and more money on original content in order to both distract viewers from the competition from Amazon and Hulu and attract more subscribers. Unlike Hulu, Netflix doesn’t run any ads with its content, so they rely on monthly subscriptions in order to make money.
“The result is that Netflix is burning through cash at a growing clip. The company is pouring money into expensive prestige projects and expects to spend at least $6 billion in content this year. Its net cash outflow this year is forecast to grow to as much as $2.5 billion, up from $1.7 billion last year.”
This also provides an explanation as to why they’ve canceled their more expensive shows, such as The Get Down and Sense 8.
Netflix is going to have to rethink its strategy in order to stay afloat. I’ve got a hunch we might see ads making their way to the service within a year or two.
[Via Twitter Moment]