The power of streaming media needs to burn money to maintain Netflix's new $2 billion loan.

The power of streaming media needs to burn money to maintain Netflix's new $2 billion loan.

Author: Gu Tianli

Netflix won almost no competition with the first round of media competition. In order to maintain its current dominance, it has to burn money to provide copyright and original content. On Monday, Netflix announced plans to raise another $2 billion in new loans. With these 2 billion, Netflix's long-term debt has exceeded US $10 billion.

Wall Street is not surprised.

Micheal Pachter, an analyst at Wade Bush Securities, said, "This fits perfectly with the model we built before, and as long as they're still burning money, they're going to have to continue to raise money on content costs... Now it costs about 3 billion dollars a year, probably in the future. I expect this cycle to continue. "

Netflix did well in the third quarter, with 7 million new subscribers ($2 million more than expected) already pushing its global user base to 130 million, and new revenue from the global market will be an important source of funding. Analysts at Moody's said, "Although they are borrowing to maintain cash flow, we expect overall margins to rise and leverage to decrease as authorization is gradually replaced by original content and new international markets begin to profit."

Netflix's strategy of burning money on content will not change in the near future. Their expected content spending this year is $8 billion (last year's investment was $6.3 billion), which some suspect could rise to $13 billion. Of these, 85% of the money will be invested in original content, which will be the core of Netflix's future competition.

More and more companies join the streaming media industry is an important reason for Netflix insisting on original content burning money. In addition to Amazon Prime and Hulu, Disney plans to build its own streaming platform with content from Manway, Lucasfilm, Pixar and Fox in 2019, AT& T plans to bring Time Warner content-based streaming online at the same time, and Comcast will sooner or later, given the popularity of many NBC episodes on Netflix. Enter the market. For viewers, the trouble is that although you can now see movies and TV shows from different companies on Netflix, their broadcast rights are likely to be withdrawn by copyright owners one day and put on their own platforms.

"The more successful we are, the more I worry about copyright's willingness to license content to us," Ted Sarandos, Netflix's chief content officer, told Variety.

Netflix urgently needs to make originality a reason to keep viewers away from being a pillar in the future by gradually replacing authorized content. It's not easy to do this - 7Park Data, a research firm, found that the non-original part still attracts audiences, with about 80% of domestic broadcasts coming from authorized movies such as Office, The Dead Pharmacist, Grey the Intern, and Romantic History of Mom and Dad; 42% viewing authorized movies (authorized). The content reached 95 percent, with only 18 percent of the audience watching the original (house of cards, strange things, etc.).

However, the above data are from the year September 2016 to September 2017. Netflix's original shows have increased by 88% compared with August last year, and investments are increasing: plans to open a production division in New Mexico; signings to renowned TV producers Shonda Rhimes and Ryan Murphy; more than 80 original films, Jade and Rome, the focus of the festival; and more decisive chopping shows. Plays like Iron Fist and Luke Cage that Netflix doesn't have much say in their content apparently have no place in their plans.

Whether Netflix is burning money or other companies are flocking to the streaming market, the impact on viewers may come down to one thing: you spend more each month.

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