THB #123: Netflix Day, 3 of 4: Earnings Call
That call was like a piñata. Doug Anmuth (from JP Morgan) wasn’t trying to kill anyone, but he wasn’t taking lazy swings. And every time he hit the Netflix piñata, more candy.
Then 16 minutes and 42 seconds into the “call,” the sweetest candy leapt from the piñata without a question even being on the table. Reed Hastings interrupts Spencer Neumann to offer up the potential - really, likelihood - that Netflix will be adding an advertising- based tier. And not just for the rest of the world, where pricing is a big problem… for the United States.
“Greg’s done a great job with price spread. And one way to increase the price spread is advertising on low-end plans. And to have lower prices with advertising. And those who have followed Netflix know that I’ve been against the complexity of advertising and a big fan of the simplicity of subscription. But as much as a fan I am of that, I am a big fan of consumer choice. And allowing consumers who would like to have a lower price and are advertising tolerant get what they want makes a lot of sense. So that’s something we’re looking at now… we’re trying to figure out over the next year or two… but think of us as quite open to offering even lower prices with advertising. Consumer choice.”
And that was it.
Spencer Neumann then explains that they were not negatively surprised by the response to their price increase.
Hastings dropped another Jolly Rancher by talking about how Netflix would outsource advertising to companies “We can be a straight publisher and have other people do all of the fancy ad matching and integrate all the data about people so we can stay out of that and really be focused on our members, creating that great experience. And then, again, getting monetized in a first class way by a range of different companies who offer that service.”
And then the self-deluded part of the interview took up most of the next 20+ minutes.
Everything’s great. We were always fighting competition from the legacy companies. Our context is game-changing. We’re going to keep increasing spending… once we start increasing revenue again… whenever that happens. People want a new Adam Project every month.
I don’t want to be mean about this… but after a 2 quarter slide, the illusion that Netflix have been masters of programming is a little bit sad.
They have pushed out a lot of really good stuff. But they have spent more money more widely than any content-creating single-celled organization in history. The conversation for companies that distribute large amounts of content is - and always has been - between 5% really good content and 15% really good content.
HBO has a better track record because they have always done less. Same with A24. Marvel is really a brilliant single-focus production company. Pixar only made one film a year for a long time. And on down the line. Every genius studio and studio head trying to push out a lot of content makes mostly crap.
Ted Sarandos wins some kind of new award for this bon mot: “The new season of Stranger Things is a super-sized season… that’s why we cut it in half. Each episode of the new season feels like a big feature film.”
Uh, no. You cut it in half - as you did Ozark - to create consumer value over 2 distinct quarters. And no, it each episode is like a really long TV episode. I know there is a lot of confusion about what a big feature film is… but it is a film intended to be consumed by a theatrical audience, fully separate from the other films in what can be a franchise.
Again… none of these choices bother me. It’s the Orwellian thinking… that just because Netflix says it, everyone must embrace an idea that is not all it appears to be. Black is White. TV is Movies.
God bless anyone trying to sell their TV shows. Says Uncle Ted, “The upcoming slate in ‘22, we’re confident is better and more impactful than ‘21. And we think ‘23 will be better and better and more impactful than ‘22.”
Mind you that according to Netflix, their #1, #2, and #5 in-house films of all time rolled out in the last year. So screw 2021!!!! We’re just getting better and better at making mediocre films with big names that no one can remember.
Spencer Neumann and Greg Peters looked like goalies trying to block shots on net by their own team.
Spencer laid out the Big 3: Password Enforcement, Ads, and The Same Old Same Old.
Anmuth brought up India, where cable averages about $3 a month (see: Disney’s $1 ARPU there). They are excited by the slate that has come and will keep coming. Didn’t really answer the question, in terms of money, only “the flywheel of sign-ups.” Oy.
I can’t really getting into the Games thing. It’s a distraction. I hope they don’t lose too much money on it.
I appreciate that these guys are now openly talking about the issues slowing expansion that have nothing to do with the product or the pricing… like a lack of quality internet access.
Sports came up… Ted talked about documentaries. Thanks. Zzzzzzz….
I’m not saying that Netflix needs to get into sports. But they aren’t going there anytime soon.
Spencer Neumann stopped the end of the call to let people know that the entire year of 2022 won’t suck… only the first half... but it’s not guidance… just sayin’… cause we don’t want to read about it in the (digital) papers tomorrow.
I have to say, I feel like an idiot taking swings at these men, who have built a truly remarkable company. I have never built a remarkable company. I have no intentions to do so before I am dirt once more.
But man… I’m not throwing a single sucker punch here. It’s all completely earned… as their success has been.
Until later this evening…