Short Note: Care for a Netflix Bond?

Netflix recently raised 1.3 billion euros in a massively oversubscribed bond offering. It was priced to yield all of 3.625%. And the company promised to pay that generous annual rate — one percent more than the corresponding U.S. Treasury note — for the next decade. To summarize the calculus, a buyer of the Netflix bonds will earn something between negative 100% and positive 3.625%.

Netflix only burnt through $1.8 billion in cash in the 12 months ended 3/31. It only has $20 billion in contractual obligations — $5 billion in debt and $15 billion in “streaming content obligations.” Eight of the $15 billion in streaming content obligations are found nowhere on the company’s balance sheet because they “do not meet the criteria for liability recognition.” There is also a bit of competition on the way.

What could go wrong?