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UPDATE 3-Netflix says borrowing to end as global membership tops 200 million

20 Jan 2021 / 07:00 H.

    (Adds analyst comment, details on debt level)

    By Lisa Richwine and Eva Mathews

    Jan 19 (Reuters) - Netflix Inc said on Tuesday its global subscriber rolls crossed 200 million at the end of 2020 and projected it will no longer need to borrow billions to finance its broad slate of TV shows and movies.

    Shares of Netflix rose 12% to $564 in extended trading as the financial milestone validated the company's strategy of going into debt to take on big Hollywood studios with a flood of its own programming in multiple languages.

    The world's largest streaming service had raised $15 billion through debt since 2011. On Tuesday, the company said it expected to break even on free cash flow in 2021, adding in a letter to shareholders, "We believe we no longer have a need to raise external financing for our day-to-day operations."

    Netflix said it will explore returning excess cash to shareholders via share buybacks. It plans to maintain $10 billion to $15 billion in gross debt.

    "This is in sharp contrast to Disney and many other new entrants into the streaming market who expect to lose money on streaming for the next few years," said eMarketer analyst Eric Haggstrom.

    From October to December, Netflix signed up 8.5 million new paying streaming customers as it debuted widely praised series "The Queen's Gambit" and "Bridgerton," a new season of "The Crown" and the George Clooney film "The Midnight Sky."

    The additions topped Wall Street estimates of 6.1 million, according to Refinitiv data, despite increased competition and a price increase in the United States. Fourth-quarter earnings per share of $1.19 missed Wall Street expectations of $1.39.

    With the new customers, Netflix's worldwide membership reached 203.7 million. The company that pioneered streaming in 2007 added more subscribers in 2020 than in any other year, boosted by viewers who stayed home to help curb the coronavirus pandemic.

    Now, Netflix is working to build its customer base around the globe as big media companies amp up competition. Walt Disney Co in December unveiled a hefty slate of new programming for Disney+, while AT&T Inc's Warner Bros scrapped the traditional Hollywood playbook by announcing it would send all 2021 movies straight to HBO Max alongside theaters.

    "The big growth in streaming entertainment has led legacy competitors like Disney, WarnerMedia and Discovery to compete with us in new ways," Netflix said in its letter. "This is, in part, why we have been moving so quickly to grow and further strengthen our original content library across a wide range of genres and nations."

    For January through March, Netflix projected it would sign up 6 million more subscribers, behind analyst expectations of roughly 8 million.

    Revenue rose to $6.64 billion during the quarter compared with $5.47 billion a year ago, edging past estimates of $6.63 billion.

    Net income fell to $542.2 million, or $1.19 per share, from $587 million, or $1.30 per share, a year earlier.

    (Reporting by Eva Mathews in Bengaluru and Lisa Richwine in Los Angeles Editing by Sriraj Kalluvila and Matthew Lewis)

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