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The impressive deal includes three projects, according to “Variety.” The first of three specials, “Homecoming,” debuted on April 17. Read more…
Netflix is raising another $2 billion in debt to fund its content spending and other expenses, the company announced this morning. The news comes ahead of the launches of new streaming service competitors from Disney, Apple, and AT&T’s WarnerMedia. It also follows Netflix’s offer of another $2 billion in debt back in October 2018.
The streaming service says it plans to use the debt funding for general purposes, including “content acquisitions, production and development, capital expenditures, investments, working capital and potential acquisitions and strategic transactions.”
The funds will be raised through unsecured notes that will be issued in two series in both U.S. dollars and euros, it says.
Netflix spends a lot of cash to stay ahead of the competition and acquire subscribers. It believes that its investment in original content — shows and movies that users can’t find anywhere else, and that it owns the rights to — will help the company to generate revenues in the years ahead.
In January, Netflix said its cash burn would peak in 2019, and its free cash flow deficit for 2019 will end up around $3.5 billion, CNBC notes.
This year, its content budget is expected to reach $15 billion, Variety reported earlier.
The additional $2 billion in debt will bring Netflix’s long-term debt to around $12.3 billion, Variety now points out. It also says Netflix hasn’t paid down any significant amount of that debt to date. Instead, its interest on that debt is increasing — $135.5 million in interest expense in Q1 2019, or around 3% of revenue. That’s up 67% from the $81.2 million a year ago, the report adds.
In a letter to shareholders earlier this year, Netflix warned investors it would continue to raise debt.
“As long as we judge our marginal after-tax cost of debt to be lower than our marginal cost of equity, we’ll continue to finance our working capital needs through the high yield market,” it read.
The additional funds come just ahead of several notable streaming service launches, including Apple TV+ which is smaller on the content side but will tap into Apple’s massive iPhone user base; AT&T’s WarnerMedia service; and perhaps most significantly, Disney+.
The latter could even end up being a low-cost alternative to Netflix for families, who are looking for more kid-friendly content as well as programming that parents and kids can watch together. There’s not as much of that out there today, as so many shows are now either adult-oriented or only for children, with no middle ground. Disney+, however, will include a range of family fare from Star Wars, Marvel, National Geographic, and Pixar, in addition to its Disney animation. And at $6.99 per month, Disney+ is a big step down in price from Netflix’s entry-level plan, $12.99 per month.
Netflix just released the first trailer for See You Yesterday, a sci-fi drama backed by producer Spike Lee that is set to drop on the streaming service on May 17th. The film follows high school science prodigies C.J. and Sebastian, who have invented backpacks that allow them to travel back in time. The two need their creation to reverse the fate of C.J.’s older brother Calvin, who is shot and killed during an encounter with police officers. The duo has to put to use their untested technology to go back in time, alter the events of the past and prevent the shooting from taking place.
While Spike Lee is a big name to have attached to the project, See You Yesterday is helmed almost entirely by newcomers. The two stars, Eden Duncan-Smith as C.J. and Dante Crichlow as Sebastian, have just a few acting credits to their name. The film will also be the first full-length feature for director Stefon Bristol. See You Yesterday will debut at the Tribeca Film Festival on May 3rd before making its way to Netflix.
Lots of news has surfaced from China’s gaming industry in recent weeks as the government hastens to approve a massive backlog of titles in the world’s largest market for video games.
Last Friday, the country’s State Administration of Press and Publication, the freshly minted gaming authority born from a months-long reshuffle last year that led to an approval blackout, enshrined a new set of guidelines for publication that are set to move some to joy and others to sorrow.
On April 22, China finally resumed the approval process to license new games for monetization. Licensing got back on track in December but Reuters reported in February that the government stopped accepting new submissions due to a mounting pile of applications.
The bad news: The number of games allowed onto the market annually will be capped, and some genres of games will no longer be eligible. Mahjong and poker games are taken off the approval list following a wave of earlier government crackdown over concerns that such titles may channel illegal gambling. These digital forms of traditional leisure activities are immensely popular for studios for they are relatively cheap to make and bear lucrative fruit. According to video game researcher Niko Partners, 37 percent of the 8,561 games approved in 2017 were poker and mahjong titles.
While the new rule is set to wipe out hundreds of small developers focused on the genre, it may only have a limited impact on the entrenched players as the restriction applies only to new applicants.
“It won’t affect us much because we are early to the market and have accumulated a big collection of licenses,” a marketing manager at one of China’s biggest online poker and mahjong games publishers told TechCrunch.
China will also stop approving certain games inspired by its imperial past, including “gongdou”, which directly translates to harem scheming, as well as “guandou”, the word for palace official competition. The life inside palaces has inspired blockbuster TV series such as the Story of Yanxi Palace, an in-house production from China’s Netflix equivalent iQiyi . But these plots also touch a nerve with Chinese officials who worry about “obscene contents and the risk of political metaphors,” Daniel Ahmad, senior analyst at Nikos Partners, suggested to TechCrunch.
Games that contain images of corpses and blood will also be rejected. Developers previously modified blood color to green to circumvent restrictions, but the renewed guidelines have effectively ruled out any color variations of blood.
“Chinese games developers are used to arbitrary regulations. They are quick at devising methods to circumvent requirements,” a Guangzhou-based indie games developer told TechCrunch.
That may only work out for companies armed with sufficient developing capabilities and resources to counter new policies. For instance, Tencent was quick to implement an anti-addiction system for underage users before the practice became an industry-wide norm as of late.
“Many smaller publishers will have a harder time under this new set of regulations, which will require them to spend extra time and money to ensure games are up to code,” suggested Ahmad. “We’ve already seen that many smaller publishers were unable to survive the temporary game license approval freeze last year and we expect to see further consolidation of the market this year.”
China has over the past year taken aim at the gaming industry over concerns related to gaming addiction among minors and illegal content, such as those that promote violence or deviate from the government’s ideologies. To enforce the growing list of requirements, an Online Game Ethics Committee launched in December under the guidance of the Publicity Department of the Chinese Communist Party to help the new gaming regulator in vetting title submissions.
More than 1,000 games have been approved since China ended the gaming freeze in December, though Tencent, the dominant player in the market, has yet to receive the coveted license required for monetizing its hugely popular mobile title PlayerUnknown’s Battlegrounds.
Uncertain waters in the gaming industry have wiped billions of dollars off the giant’s market cap and prompted it to initiate a bigger push in such non-game segments as cloud computing and financial technologies. NetEase, the runner-up in China’s gaming market, reacted by trimming its staff to cut costs.
Homecoming, Beyoncé’s behind-the-scenes Coachella documentary, might be just the beginning of a series of Queen Bey projects on Netflix. According to Variety, the streaming giant has inked a $60 million three-project deal with the singer. It’s a huge amount, but Netflix is known for dropping tens to hundreds of millions of dollars to secure rights to specials like Springsteen on Broadway and clinch exclusive deals with showrunners (like Shonda Rhimes), artists and comedians.
A Vulture report says HBO was also interested in Homecoming, but backed down after Netflix offered Beyoncé a lot of money for a multi-project agreement. We might have to wait a bit to see the star’s other two programs if they’re anything as big as her Coachella documentary, though. She dropped a 40-track accompanying album when Homecoming became available for streaming, and it’s very much possible that the other two upcoming specials will come with musical companions, as well.