Source: https://stratechery.com/2023/netflixs-new-chapter/The fact that Netflix is now profitable — and, more importantly, generating positive free cash flow — wasn’t the only reason for optimism: Netflix had the good fortune of funding its expansion into content production in the most favorable interest rate environment imaginable; Netflix noted in this past quarter’s Letter to Shareholders:We don’t have any scheduled debt maturities in FY23 and only $400M of debt maturities in FY24. All of our debt is fixed rate.That debt totals $14 billion; Warner Bros. Discovery, meanwhile, has $50.4 billion in debt, Disney has $45 billion, Paramount has $15.6 billion, and Comcast, the owner of Peacock, has $90 billion. None of them — again, in contrast to Netflix — are making money on streaming, and cash flow is negative. Moreover, like Blockbuster and renting DVDs from stores, the actual profitable parts of their businesses are shrinking, thanks to the streaming revolution that Netflix pioneered.Warner Bros. Discovery and Disney are almost certainly pot-committed to streaming, but Warner Bros. Discovery in particular has talked about the importance of profitability, and Disney just brought back Bob Iger after massive streaming losses helped doom his predecessor née successor; it seems likely their competitive threat will decrease, either because of higher prices, less aggressive bidding for content, or both. Meanwhile, it’s still not clear to me why Paramount+ and Peacock exist; perhaps they will not, sooner rather than later.When and if that happens Netflix will be ready to stream their content, at a price that makes sense for Netflix, and not a penny more.
