Netflix has made it clear that it needs money as the digital streaming service is selling off $200 million in convertible notes to venture capital firm Technology Crossover Ventures.
The deal does include some strings. In addition to paying $200 million, TCV will also have the right to nominate one person to Netflix's board of directors.
The convertible bonds do not bear interest, and the initial conversion price of each share is approximately $85.80. The notes will mature on December 1, 2018, subject to earlier conversion or repurchase.
Some of the reasons Netflix could need more money quickly would be drops in the subscriber base as well as the fact that the rentals service is scrambling to pick up more content.
This news about the sale of equity securities certainly can't be reassuring to investors or customers. Earlier this year, Netflix was steadily growing to a base of 25 million subscribers at the end of the second quarter along with an incredible expansion in Latin America.
However, most things have been sour for Netflix since the late summer when the service raised subscription rates, and continued on to make foolish moves like splitting the DVD and streaming businesses (the Qwikster debacle) and then nixing that plan as well.
Netflix has also lost some of its major Hollywood partnerships, most notably content from Starz.
It's hard to fathom how Netflix went from being the undeniable leader in movie rentals earlier this year to all but imploding by the end of 2011.