Netflix Is Creating Content at a Cost

Netflix’s free cash flow deficit is expected to peak this year at $3.5 billion, with the company already operating at $460 million loss in the first quarter of this year. Free cash flow is the amount of money a company has at its disposal after it pays for its operating and capital expenses. At the end of last year, CEO Reed Hastings warned investors that Netflix is going to be burning through more cash this year before making improvements in 2020 by expanding its base, revenues, and operating margins.

Stocks were still jolty despite the forewarned findings, with Netflix stock dropping after the release of its Q1 earnings by five percent. Much of this cash is being spent on content creation, which usually ignites growth in new subscribers. While Netflix’s domestic subscriptions have been down, the company has been successfully growing its international base.