Think about what happens when a fast-growing business needs a massive pile of cash to scale up. Usually, they have to sell off pieces of the company to big investors or the public. But back in 2015, Netflix decided to try a much bolder move. Instead of giving away their stock, they decided to go on a massive borrowing spree, using corporate debt to turn themselves from a movie-rental site into the world’s biggest streaming empire.
The Netflix Engine: Growth via Debt
Why the rush? Around 2015, traditional media giants like Disney and WarnerMedia were getting ready to launch their own streaming apps. They were going to pull popular shows off Netflix, which meant Netflix had to start making its own hits—and fast. Creating mega-shows like Stranger Things or Squid Game takes an insane amount of upfront cash. Since subscription money wasn’t coming in fast enough to cover these massive budgets, Netflix turned to the bond market to borrow billions, funding their projects while keeping $100\%$ of their stock to themselves.
Why Debt? Avoiding Equity Dilution
The real beauty of choosing debt over selling stock comes down to ownership. If Netflix had issued new shares to raise those billions, they would have diluted their founders’ and early investors’ stakes. Every new share issued is a piece of future profits and voting power given away forever. By borrowing the money instead, Netflix agreed to pay a fixed interest rate to lenders. Once those loans were paid off, every single dollar of future profit went straight back to the original owners, not new shareholders.
Enterprise Bonds vs. Corporate Bonds
If you’re looking at bonds as an investor, it helps to understand what you’re actually buying. People often mix up “enterprise bonds” and “corporate bonds,” but they aren’t quite the same. Enterprise bonds are usually issued by state-owned companies or government-backed entities to fund public projects like subways or power grids. Corporate bonds, on the other hand, are issued by private or public companies like Netflix to fund everyday business, R&D, or expansions. When you buy a corporate bond, you are betting directly on that specific company’s ability to survive and make money.
Risk vs. Reward: The Junk Bond Strategy
Because Netflix was burning through cash to build its library, credit rating agencies labeled their debt as “junk bonds” (or high-yield bonds). To get investors to take a chance on them, Netflix had to offer pretty high interest rates—usually between $5\%$ and $6.5\%$. It was a massive, calculated gamble: borrow at high rates, pour that cash straight into making hit shows, use those hits to get millions of new subscribers, and then use that new subscription cash to pay off the interest.
Where to Buy Bonds
If you want to get into the bond market today, you’ve got a couple of easy options. You can buy individual corporate bonds directly through major online stock brokers, though they often require a pretty large minimum investment. An easier route for most regular investors is buying Bond ETFs. For example, an ETF like LQD bundles together high-quality, safe corporate bonds from stable giants like Apple and Microsoft, while an ETF like HYG focuses on high-yield “junk bonds” that pay more interest but come with a higher risk of the companies going bust.
Leverage Requires Capability
At the end of the day, Netflix’s massive success proves a major point in business: using “other people’s money” is a fantastic multiplier, but it only works if you actually know how to run a profitable business. Netflix pulled it off because their digital streaming model is incredibly scalable—it costs the same to stream a show to 100 million people as it does to 1 million. Once they hit over 200 million subscribers, their cash flow turned positive, they stopped borrowing, and they started buying back their own stock. Without a rock-solid business model and the ability to execute, borrowing this much money doesn’t build an empire—it just leads straight to bankruptcy.