Netflix (NASDAQ:NFLX) isn’t shy about discussing how much cash it burns. It’s been free cash flow negative for a few years now, and management wrote, “[W]e expect to be FCF negative for many years” in its second-quarter letter to shareholders. In a recent interview at the Goldman Sachs Communicopia Conference, CFO David Wells reiterated that statement. He added that the more successful Netflix is, the longer it plans to burn cash.
Netflix’s ongoing cash burn means it will continue to pile up debt. And it’s paying a premium on that debt, since it’s already carrying a relatively high debt-to-EBITDA ratio. Considering Netflix doesn’t plan to increase EBITDA anytime in the near future, it’s going to continue racking up interest expenses to fund its growth.
Original content is to blame
Wells said the company could produce positive free cash flow, or at least be close to it, if it licensed its original programming instead of financing it. Indeed, before Netflix dove headlong into original content, it occasionally produced positive free cash flow. Even its quarters of cash burn were relatively modest — $50 million here, $20 million there. Now it’s burning $2 billion to $2.5 billion per year.
But Wells says there are a couple of major advantages to producing content in-house despite the fact that it costs the company more upfront. First, it allows for better long-term economics by removing the profits of the production company. That may be why Netflix claims originals are some of its most efficient content spend. Second, Netflix obtains better control over the content and intellectual property rights, allowing it to distribute the productions globally.
So even with Netflix’s high interest rates on its bond issues, it might be saving money in the long run by financing productions itself and removing the middleman.
Spending won’t slow down until user growth does
Wells told the audience at Communicopia, “The faster we grow, the more we’re going to reinvest in content.” And that only makes sense. Netflix’s originals are perhaps the biggest driving factor behind its subscriber growth. As the company expands globally, producing originals in-house is the most efficient way to secure global rights.
Right now, the incremental cost of adding another subscriber is less than the previous one, as Wells put it. Netflix is still benefiting from increased scale as subscriber growth outpaces content spend. The company had its biggest second quarter this year, adding 5.2 million global subscribers.
Eventually that won’t be the case anymore. If Netflix wants to reach another subscriber it’ll have to invest more than it’s worth in content. But management believes it still has a long way to go before it reaches that point. It maintains the addressable market in the U.S. is 60 million to 90 million subscribers. It currently has 50 million. Globally, the opportunity is even bigger, and Netflix has yet to surpass the subscriber count of the U.S. in its international markets.
Raising debt and burning cash
Netflix says it will continue tapping the debt market to fund the capital needs of its original productions. Despite its poor ratings from credit agencies, Wells says he’s fine with the company’s position. Management isn’t going to sacrifice the company’s growth to get its bonds to investment grade, he said.
The important thing for investors to remember, though, is that Netflix is completely in control of how much it spends on content. If the growth isn’t there, it’s not going to spend more. Even with a bunch of new content buyers in the market, Wells says it won’t impact the company’s budget. Netflix will just produce fewer shows if it has to.
That said, he likened the content market to the professional athlete market. Top-notch performers are seeing bigger and bigger contracts, but replacement-level players might see their average salary go down. If anyone is capable of finding diamonds in the rough, it’s Netflix and its troves of data.
Better buys than Netflix are out there
Two renowned investors think the 10 stocks on this exclusive list are better buys than Netflix — and they have a track record that can’t be ignored.
Driver with head full of racist tattoos gets into car accident with deliveryman on bike
A man with a head full of racist tattoos — including one that reads “AM A PSYCHOTIC NEO NAZI SERIAL KILLER SKIN HEAD FOREVER FOREVER” — got into a car accident with an Asian deliveryman on a bicycle in Brooklyn on Monday night, authorities said.
The heavily inked motorist was behind the wheel of a U-Haul cargo van when he collided with the rider aboard an electric bike on Broadway near Gerry Street, in front of the Food Bazaar Supermarket in Williamsburg, at about 9:30 p.m., authorities said.
Despite the man’s tats — which also included one that reads in all caps “I hate s–cs n—ers Indians Lebians women” — police said the crash appeared to be an accident and no charges were filed.
“I saw them take the guy (bicyclist) away. I think he was bleeding — middle-aged,” a witness said. “I think he was really injured.”
The bicyclist was rushed to Bellevue Hospital in Manhattan in critical condition. He’s expected to survive.
The driver remained at the scene of the accident and answered questions from police.
The man — who declined to comment — passed a field sobriety test and has a clean criminal and driving record, law enforcement sources said. Neither his identity nor that of the victim was released.
by William Lopez
Trump criticism supports far-right Germans against Angela Merkel
Trump criticism supports far-right Germans against Angela Merkel
Trump is pushing away such an ally as Germany. His attacks on immigration policy of this country have put the US in a very strange position in front of many countries.
Residents of the United States are in bewilderment, for at the moment, the question of thousands of children who were separated from their parents at the border without documents is very actual, and Trump seems to be more focused on the immigration policy of a completely different continent.
The people of Germany are turning against their leadership as migration is rocking the already tenuous Berlin coalition. Crime in Germany is way up. Big mistake made all over Europe in allowing millions of people in who have so strongly and violently changed their culture!
— Donald J. Trump (@realDonaldTrump) June 18, 2018
“We don’t want what is happening with immigration in Europe to happen with us!” said Trump.
But the media around the world reacted sharply to these words, pointing out that according to the report of the German Interior Ministry, the criminal situation in the country is at the lowest level since 1990.
The Ministry is now headed by Horst Seehofer (born July 4, 1949, Ingolstadt) – German state and political figure, Minister President of Bavaria (2008-2018); President of the Bundesrat (from November 1, 2011 to 1 November 2012); Federal Minister for Health and Social Security from 1992 to 1998 in the cabinet of Chancellor Helmut Kohl; Federal Minister of Food, Agriculture and Consumer Protection in the cabinet of Angela Merkel from 2005 to 2008; Chairman of the CSU since 2008. Since the CSU was unable to form a one-party government for the first time in many years, the office of Seehofer was formed thanks to a coalition with the FDP. After the victory of CSU in the elections to the Landtag in 2013, Seehofer headed the one-party government of Bavaria. Since March 14, 2018, he is the German Minister of the Interior. Horst Seehofer is currently an ally of Merkel.
Seehofer’s CSU, based in conservative Bavaria, is threatened this autumn by the rise of the Alternative for Deutschland, AfD, a far-right party deeply opposed to refugees from Muslim countries that Merkel has brought in as a Western response to the continuing violence in Syria.
Trump himself is not popular in Germany. And although he said that he had “excellent” relations with Merkel, his sharp attacks towards the Chancellor were not ignored. Deputy Armin Paul commented on this situation “He is a businessman”.
XXXTENTACION DEAD AT 20 … SHOT IN S. FLORIDA
DEERFIELD BEACH, Fla. (AP) — Troubled rapper-singer XXXTentacion was shot and killed Monday in Florida in what police called an apparent robbery attempt. Investigators don’t have a motive, and no arrests have been made.
The 20-year-old rising star, whose real name is Jahseh Dwayne Onfroy, was pronounced dead Monday evening at a Fort Lauderdale-area hospital, the Broward Sheriff’s Office said. He was shot earlier outside a Deerfield Beach motorcycle dealership.
XXXTentacion had been at RIVA Motorsports checking out inventory, sheriff’s public information officer Keyla Concepcion said. He was in a black BMW i8 and preparing to leave before 4 p.m. when two armed suspects approached him. At least one of them fired, and then both suspects fled the scene in a dark SUV, Concepcion said.
Stephanie Martinez, a 29-year-old mother who lives in the neighborhood, was just coming back from the pool with her kids when she heard three shots. She drove to the end of the street and saw the rapper’s body in the car.
“He has his mouth open and his hand out. Two people went over and checked his pulse,” said Martinez, who also saw blood. “It’s just weird because he should’ve had security and stuff with him.”
On Twitter, his peers expressed shock and sadness.
Kanye West said: “rest in peace … I never told you how much you inspired me when you were here thank you for existing.” Producer Diplo posted a photo of the two together and said, “Thanks for inspiring me.” Travis Barker tweeted: “I’m at a loss for words… speechless #RIPXXXTentacion Loved collaborating with you. You were a true artist …”
And J. Cole said, in part: “RIP X. Enormous talent and limitless potential and a strong desire to be a better person. God bless his family, friends and fans.”
The entertainer, who sported dreadlocks and a number of facial tattoos, was a rising star and notched a No. 1 album in March with his sophomore effort “?” and had a top 10 hit with “Sad!” but was facing trial on charges that he beat up his pregnant girlfriend.
XXXTentacion racked up huge streaming numbers — on Spotify, his “Sad!” had more than 270 million streams and was on its Top 50 chart this week in the United States and globally. He also has several songs that have been declared platinum, including “Changes,” ”Roll in Peace” with fellow rapper Kodak Black and “Look at Me!”
In interview with XXL magazine, which named him an up-and-coming artist last year, the rapper cited Nirvana, the Notorious B.I.G. and Tupac Shakur among his musical influences.
“Obviously, I’m one of the greatest of this generation, the upcoming generation, as far as artistry. … And I say that humbly,” he said in a video interview with the outlet last year.
But much of his brief career had been mired in controversy. In 2016, he was arrested on charges including home invasion for a 2015 incident, and less than a month later was arrested on charges that he attacked his girlfriend, who was pregnant at the time, and was jailed, and later faced more charges including witness tampering.
Regarding a June 2017 attack at a San Diego concert, the following messages were posted on XXXTentacion’s Twitter account: “security and venue set me up, I got sucker punched and knocked out, it is what it is.”
A subsequent tweet said,” ”next time make sure you kill me so I can’t talk (expletive).”
He was released from jail on house arrest late last year and was released from house arrest earlier this year to allow him to tour.
Fan Wyatt Rubin, 21, jumped in his car and headed to the scene shooting Monday as soon as he heard, playing the rapper’s songs like “Jocelyn Flores” and “King” on the drive over.
“He was just maturing as a person and as an artist … it couldn’t have come at a worse time,” Rubin said. “A lot of it was really beautiful music, progressive music.'”
In an interview earlier this month with the Miami New Times, XXXTentacion described his upbringing, which included seeing his mother infrequently and being raised by friends, other family and babysitters. His mother would buy him clothes, phones and other gifts. He told the paper he used violence so she would engage with him.
“I used to beat kids at school just to get her to talk to me, yell at me,” he said.
XXXTentacion was initially one of two artists Spotify removed from its promoted playlists in May in accordance with its new policy on hateful music and conduct. But after a backlash in the music industry, Spotify backpedaled and said it would no longer attempt to police conduct and restored XXXTentacion to its playlists (although they did not do the same for R. Kelly).
While he made headlines for his legal woes, he connected to millions of fans musically. Among the topics he spoke about was depression and addressed it in his music.
In one video posted to social media, he said: “If worse things come to worse, I (expletive) die a tragic death or some (expletive), and I’m not able to see out my dreams, I at least want to know that the kids perceive my message and were able to make something of themselves.”
He continued later: “I appreciate and love all of you and I believe in you all; do not let your depression make you, do not let your body define your soul, let your soul define your body. Your mind is limitless ….you are worth more than you can believe.”
from fox35 website
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