Netflix to sell another $2 billion of junk bonds as it braces for onslaught from Apple TV+, Disney+, and more

The cast of “For All Mankind” celebrate the launch of the new show coming to Apple TV+ on November 1. Left to right: Jodi Balfour, Joel Kinnaman, Sarah Jones, Michael Dorman, Wrenn Schmidt, Shantel VanSanten.
The cast of “For All Mankind” celebrate the launch of the new show coming to Apple TV+ on November 1. Left to right: Jodi Balfour, Joel Kinnaman, Sarah Jones, Michael Dorman, Wrenn Schmidt, Shantel VanSanten.

As the battle for streaming customers heats up, Netflix plans to raise another $2 billion in debt in order to finance new original content.

Ciara Linnane for MarketWatch:

Netflix said it plans to issue junk-rated bonds denominated in dollars and euros. It did not specify maturities but said it would use the proceeds for a range of purposes, including content, production and development and potential acquisitions.

The company is facing highly competitive offerings from deep-pocketed rivals Walt Disney Co. and Apple Inc. that will launch in November. Disney-plus is priced at just $6.99 a month compared with the $8.99 Netflix charges for its basic plan… The Apple TV+ offering is priced at $4.99 a month and will be free for one year with the purchase of a new Apple device.

Those services will be followed by offerings from Comcast Corp.’s NBCUniversal service and AT&T Inc.’s HBO Max are due in spring 2020. Netflix is already competing with services from Amazon.com and Hulu.

MacDailyNews Take: Apple TV+, at just $4.99 per month, doesn’t have to disrupt Netflix by taking subscribers; it’s additive. Most people who already subscribe to Netflix will simply add Apple TV+, not drop Netflix for it. Many, tens of millions in the first year alone, will get Apple TV+ for free with the purchase of any iPhone, iPad, Apple TV, iPod touch, or Mac!

7 Comments

  1. It’s another one of Wall Street’s weird anomalies I can’t quite wrap my head around. How does a company with so much debt and little cash-flow carry such a high valuation simply based on subscriber growth? Obviously, the growth can’t last forever and when it stops, shareholders are stuck with an unsustainable business model. Netflix is going up against competition with deep pockets and the ability to obtain content the same way Netflix is doing. I never had a Netflix subscription so I can’t say how great the content is but I do have Amazon Prime Video and it’s more than what i can watch. Older TV shows, original content, foreign films, documentaries, etc. is plenty to watch and that’s just part of my Prime value. There is also music, magazines and books to enjoy. I just don’t see what’s so great about Netflix to have such an insanely high value. Netflix has a P/E of 90 with an EPS of 3.xx. Why such a high P/E? There doesn’t seem to be much of a moat around Netflix considering it’s just taking monthly subscriptions.

    Apple is doomed, but Netflix isn’t. C’mon. I would think any company with deep pockets could do what Netflix is doing as long as they can obtain plenty of content and keep the subscription price low. I honestly don’t see what Netflix investors are willing to pay so much for. I’m going to stay tuned over the next six months and see if Netflix can maintain such a high valuation with plenty of competition with deep pockets. I don’t think it’s possible. I wouldn’t think the returns are there for Netflix even with selling junk bonds. Apple can provide content to sell hardware and that hardware revenue can purchase more content. That’s a solid business model. Netflix’s business model seems flaky, at best.

    1. NetFlix does not have the greatest content. Where they excel at is in production of independent content like DareDevil. But, alas, those contents are drying up fast too.

  2. Apple TV+ alone will not take down Netflix, and it may be an adder service – to start. But over time, as more shows are added and it takes more eyeball time away from – well, anything – including Netflix, the “lightbulb” phenomena will occur.

    “You know, I haven’t watched Netflix in a few months.” When that happens, and people are enjoying Disney+ and Apple TV+, then watch out. Netflix won’t be growing subscription services to meet their churn.

    NOTE: Negative churn (more unsubscribes than subscribers) happened last quarter in the US. Disney+ and Apple TV+ are likely to accelerate that negative churn over time.

    Even though Netflix comes “Free” with T-Mobile, a basic version, I’d rather can it and save a few bucks difference and spend it on Disney+ and milk my 1yr free Apple TV+ over and over again as long as Apple gives it with product purchases.

    Netflix is a one-hit wonder. They have nothing but their network to fall back on. Never developed an Apple TV device or TV’s or anything divergent. They will be absorbed within 3-5 years, or left to die as they hold no value for anyone to acquire.

    1. “limited time” and only one per household, regardless of how many devices:

      Customers who purchase any new iPhone, iPad, Apple TV, Mac or iPod touch starting September 10 can enjoy one year of Apple TV+ for free. Beginning November 1, customers can initiate the one-year free offer in the Apple TV app on the device running the latest software. Customers have three months after device activation to claim the offer, or if the device was purchased and activated before the launch of Apple TV+, they will have three months starting November 1. The subscription will automatically renew at $4.99 per month after one year. Customers can cancel at any time in Settings at least one day before each renewal date. Customers who cancel during the offer period will forfeit the remainder of their offer. This limited time offer applies to both new and refurbished models, including devices from the iPhone Upgrade Program, is not restricted to any specific sales channel (e.g., Apple Store, resellers) and will be available in all countries where Apple TV+ will launch. Up to six family members can share one Apple TV+ subscription and watch using their own Apple ID and password. Only one one-year offer is available per family, regardless of the number of devices purchased.

  3. Does anyone know if the free year of tv+ with product purchase is limited to one year or if the offer can be stacked with multiple purchases?

    For instance, if I upgrade two of the four of my household’s iPhones in a given year, do I get two years of tv+ for free?

    If that’s the case, I see tv+ as more of a reward for existing customers and one designed to keep users in the Apple ecosystem rather than a money-making venture. With 4 iPhones, 1 iPad, 1 tv, 2 MacBook Pros and 2 iMacs, I’ll always be upgrading at least one Apple device per year. And I’m sure many others are in the same position.

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