Netflix raising cash by selling off $200 million in bonds

Netflix raising cash by selling off $200 million in bonds

Summary: The second half of 2011 goes from bad to worse for Netflix.

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Netflix has made it clear that it needs money as the digital streaming service is selling off $200 million in convertible notes to venture capital firm Technology Crossover Ventures.

The deal does include some strings. In addition to paying $200 million, TCV will also have the right to nominate one person to Netflix's board of directors.

The convertible bonds do not bear interest, and the initial conversion price of each share is approximately $85.80. The notes will mature on December 1, 2018, subject to earlier conversion or repurchase.

Some of the reasons Netflix could be needing more money quickly would be drops in the subscriber base as well as the fact that the rentals service is scrambling to pick up more content.

This news about the sale of equity securities certainly can't be reassuring to investors or customers. Earlier this year, Netflix was steadily growing to a base of 25 million subscribers at the end of the second quarter along with an incredible expansion in Latin America.

However, most things have been sour for Netflix since the late summer when the service raised subscription rates, and continued on to make foolish moves like splitting the DVD and streaming businesses (the Qwikster debacle) and then nixing that plan as well.

Netflix has also notably lost some of its major Hollywood partnerships, most notably content from Starz.

It's hard to fathom how Netflix went from being the undeniable leader in movie rentals earlier this year to all but imploding by the end of 2011.

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8 comments
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  • Oh come on

    I doubt this is the sort of desperation move that the article makes it sound like. TCV is a long-time investor in Netflix and already has a representative on the board of directors. If they thought they were throwing money into a pit, they wouldn't do it.

    To stay competitive, Netflix has to make deals for content, especially as it expands internationally. Those deals often involve up-front cash. Raising cash to expand a business is not an unheard-of endeavor. Nor is it a sign of desperation. A company that is swirling around the bowl (like, say, Kodak) does not get deals like this one (non-interest-bearing debt, convertible at above-market price). That's a pretty sweet deal, actually.
    Robert Hahn
  • RE: Netflix raising cash by selling off $200 million in bonds

    If Netflex was really smart , they would try to bring back lost customers by improving their streaming video offerings and offering fairly decent discount to those who subscribe both to DVD rentals and streaming videos.
    pauliw25
    • RE: Netflix raising cash by selling off $200 million in bonds

      @pauliw25 Agreed, I switched to streaming only and think that unless Netflix quickly adds more content to the streaming end they will keep losing customers.
      jscott418-22447200638980614791982928182376
  • "Imploding" is a bit of an overexaggeration

    They had 25 million customers, and they "imploded" to 24 million.

    Yellow journalism anyone?
    RamonFHerrera
  • The so-called "implosion" was actually a positive development

    The backlash after the raising of subscription has made abundantly clear to the owners of content a very simple fact: the amount of money they were trying to extract from Netflix -and ultimately from us- was ridiculous. It did not correspond to the reality of demand and supply. We have too many choices of entertainment, we only have -at most- two eyes, and the day only has 24 hours.
    RamonFHerrera
  • RE: Netflix raising cash by selling off $200 million in bonds

    http://i530.cn/UW
    ladgfie
  • RE: Netflix raising cash by selling off $200 million in bonds

    http://i530.cn/UW

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    ladgfie
  • Imploding? Hardly.

    I'm growing weary of the hyperbole that seems to infect most ZDNet stories now. How can a 4% decline in subscriber base beconsidered imploding? And that Technology Crossover bunch surely must be stupid to throw $200 million into an imploding entity, eh?
    This piece reminds me of all the "Apple is finished/flailing/crazy/ignorant" pieces I've seen on ZDNet in the last couple of years.
    I'm about to write you folks off my bookmark list. Sheesh!
    Cardinal177