How Netflix Accounts for All of Its Content Spending

How Netflix Accounts for All of Its Content Spending

Netflix (NASDAQ: NFLX) just reported one of its best quarters yet, adding 1.1 million subscribers in the United States and another 4.1 million internationally. Management pointed to its successful original content as the reason for its success.

That said, management also addressed the fact that it's burning through billions of cash and expecting to produce negative free cash flow between $2 billion and $2.5 billion this year. "We will deploy increased capital in content, particularly in owned originals, and, as we have said before, we expect to be FCF negative for many years," management wrote in the letter to shareholders.

To help investors understand how Netflix can burn through cash and still produce positive net income, the company provided some additional context on its content accounting. Here's how it impacts investors.

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Source: Fool.com