Published On: Thu, May 23rd, 2019

Forbes: Netflix needs a miracle to climb out of their debt hole

Investing advisors are already warning Netflix shareholders that the clock may be running down on the streaming giant’s dominance. The new competitor, Disney+, launches in November and personal investor Stephen McBride is warns over at Forbes that Netflix may need a miracle.

Disney is “The Undisputed King of Content,” noting that the Mouse House plans to offer a cheaper streaming service with guaranteed great content: “It’s going to charge $6.99/month—around $6 cheaper than Netflix. And it’s pulling all its content off of Netflix,” McBride wrote. “This is a big deal.”

Netflix, he wrote “is not the future of TV,” even though it is the current king of the streaming services.

“It currently owes creditors $10.4 billion, which is 59% more than it owed this time last year,” he wrote.

In 2018, half of Americans aged 22 to 45 watched zero hours of cable TV with almost 35 million households quitting cable completely in the past decade (i.e. “cutting the cord”)

McBride goes on: “Netflix changed how we watch TV, but it didn’t really change what we watch…Netflix has achieved its incredible growth by taking distribution away from cable companies. Instead of watching The Office on cable, people now watch The Office on Netflix.

“This edge isn’t sustainable.”

photo/ Jorge Gryntysz

Nothing here is a surprise, in 2018 Yahoo warned “investors should be terrified” about the company’s growing debt.

“That yawning debt load could come at the expense of the bottom line, something Netflix can ill afford to have happen in a market obsessed with its profit growth potential.”

That was just over six months before the big Disney announcement.

Wall Street doesn’t see Netflix turning cash flow positive within the next four years, according to Bloomberg data (again, in 2018).

What happens if the predictions are correct and folks walk away from Netflix for awhile?

“Netflix is approaching a point where the growth in operating profit is going to grow faster than our growth in content cash spend, and that’s really going to drive the free cash flow towards improvement – it will eventually break even,” said Netflix chief financial officer David Wells on the third-quarter earnings call with analysts.


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About the Author

- Writer and Co-Founder of The Global Dispatch, Brandon has been covering news, offering commentary for years, beginning professionally in 2003 on Crazed Fanboy before expanding into other blogs and sites. Appearing on several radio shows, Brandon has hosted Dispatch Radio, written his first novel (The Rise of the Templar) and completed the three years Global University program in Ministerial Studies to be a pastor. To Contact Brandon email [email protected] ATTN: BRANDON

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