In order to assist in giving the films it produces more exposure in the course of the Oscar season, Netflix is reportedly working on plans to acquire movie theaters located in New York and Los Angeles. Since it launched its first original film, Beast of No Nation, three years ago Netflix has been making efforts aimed at bagging Oscar nominations. But for the streaming service to get a nomination the film needs to be released in cinemas in major markets instead of being shown exclusively online.
At the moment Netflix has instituted a policy which sees its films shown in a couple of select theaters on the same day they are launched online. So far Netflix has bagged four Oscar nominations. Recently Netflix withdrew its films from this year’s Cannes Film Festival after a rule was reinstated requiring that all competing films must have shown in French theaters.
This comes in the wake of Netflix selling senior bonds worth $1.9 billion with a view to financing the streaming service’s new shows. Earlier in the month the credit rating of Netflix was upgraded by Moody’s Investors Service on expectations that the streaming service will continue to enjoy growth and that its cash flows will eventually turn positive.
Despite the improved credit rating the streaming service is still rated as a junk issuer as its operations are burning through cash. Debt investors have however not been bothered by that fact and have consistently lent to the firm as it makes investments in original programming aimed at fueling subscriber growth.
“Of course there’s the massive cash burn, just ignore that for a second. The rest of the story is doing something that’s quite unique — subscriber growth and ASP (Average Selling Price) growth. Netflix is essentially in its own league,” said Invesco Ltd’s senior analyst, Rahim Shad.
S&P Global Ratings
The bonds were graded B+ by S&P Global Ratings which also stated that as the streaming service continued to invest free cash flow deficits would exceed $3 billion this year.
In a statement Netflix said the proceeds from the bond issuance will be directed to general corporate purposes and this may include original programming.
Not all investors were enthusiastic about the bonds though. This is because their maturity is 10.5 years and are thus heavily exposed to interest rate increases. In its most recent reported quarter the amount of long-term debt that Netflix held totaled $6.5 billion.