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31 July 2017

Netflix debt hits $25 billion, streaming giant is ‘bleeding money’

Netflix has made a string of hit shows, such as Stranger Things, but it is bleeding money and has more than $25 billion in debt. Picture: Netflix

DESPITE boasting 100 million global subscribers and a stack of award-winning series, Netflix is in big trouble.

The streaming giant is haemorrhaging money at an alarming rate, according to fresh reports about its business strategy, with debts totalling a staggering US$20 billion (AU$25 billion).

Its pursuit of more and more paying customers, coupled with spending a small fortune annually on producing new content, is adding up.

How did one of the most talked-about tech company’s prospects get so grim so quickly?

The LA Times reports today that Netflix has almost doubled its spending this year and expects to splash more than US$6 billion (AU$7.5 billion) on its slate of programming in 2017.

How did one of the most talked-about tech company’s prospects get so grim so quickly?

How did one of the most talked-about tech company’s prospects get so grim so quickly?Source:istock

So far, most of its investors aren’t showing too much concern given the company’s share value is up 50 per cent on last year.

“They are betting that debt financing in the near term will create growth and yield big results down the road on the theory that you have to spend money to make money,” the article reported.

However a growing pool of analysts are concerned the Netflix bubble is at risk of bursting.

With 104 million subscribers worldwide, experts fear growth could stagnate sooner rather than later.

Even Netflix itself isn’t expecting to turn a profit for a while yet, recently admitting that it expects “to be free-cash-flow negative for many years”.

RELATED: Here is everything you need to know about the ‘Netflix tax’

Despite an impressive list of hits, Netflix itself doesn’t expect to turn a profit anytime soon. Picture: AP

Despite an impressive list of hits, Netflix itself doesn’t expect to turn a profit anytime soon. Picture: APSource:AP

Famous for its original content, the streaming service has also suffered a number of unexpected duds in recent times.

Expensive shows that failed to hit the mark with viewers and critics are starting to pile up, with Girlboss and The Get Down among the list of axed projects.

Its latest costly endeavour, the star-studded comedy Friends From College, has been panned.

And even those that have been well-received have struggled to make back the money required to fund them.

The first of six seasons of the historical series The Crown, chronicling the life of Queen Elizabeth II, cost a staggering US$130 million (AU$163 million) to make, making it the most expensive TV show ever.

The first season of The Crown was a huge success but with a price tag of AU$163 million, it had little chance of making back its huge budget. Picture: Netflix

The first season of The Crown was a huge success but with a price tag of AU$163 million, it had little chance of making back its huge budget. Picture: NetflixSource:AP

And smash hit series like Orange Is The New Black and House of Cards are ‘original’ in the sense that Netflix commissioned them, but are owned and produced by others.

So essentially Netflix pays licensing fees — it won’t say how much — for its own content.

As the analysis by the LA Times points out, Netflix hasn’t yet figured out a business model that provides “ample cash flow”.

There are no clear signs that such a strategy is on the horizon either.

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