All Eyes on Netflix Satellite As It Orbits Fiscal Sun

Netflix Oct. 20 will release fiscal third-quarter (ended Sept. 30) results after the market closes. While a traditional flag bearer among media/tech companies during financials, this 90-day period brings added scrutiny. Netflix has been on a tear. Its stock has catapulted 75% since mid-March when the pandemic started — reaching a near all-time high Oct. 16.

But can the SVOD pioneer sustain its skyrocketing subscriber growth during the pandemic, and, secondarily, can it overcome the media/legal fallout from criminal charges alleging the service streamed “lewd material of children” in the French-language movie Cuties?

To be sure, Netflix has tempered its own fiscal expectations, projecting 2.5 million total sub additions worldwide. That’s less than the market consensus of 3.26 million subs. Wedbush Securities media analyst Michael Pachter said he believes the SVOD giant added just 250,000 domestic subs and 2.3 million internationally in the quarter. Netflix added a record 25.9 million subs in the first six months of the year — more than it did for the entire 2019.

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Analysts expect operating income of $1.29 billion, while Netflix is projecting $1.24 billion. Over the past 2 years, Netflix has topped earnings-per-share estimates 75% of the time, while trumping revenue projections 75% of the time.

While industry scuttlebutt suggests Netflix lost millions of subs in the quarter due to the controversy over Cuties — a fictional movie about an 11-year-old Senegalese girl coming of age in 21st century Paris against the backdrop of a religious mother and peer pressure from a young female dance troupe — Pachter thinks increased content demands from housebound subs drove churn higher.Follow us HERE on Twitter!The analyst contends that with the increased numbers of consumers still largely confined to home entertainment due to COVID-19, the lack of new original content on Netflix will increase service dissatisfaction.“The extraordinary level of consumption of Netflix content multiplied by its large subscriber base suggests to us that some meaningful percentage of subscribers will ‘finish’ Netflix before a large quantity of new content can be produced,” Pachter wrote in a note.The analyst said Netflix is facing a potential loss of 2 million subs per quarter going forward without a significant increase in original content. Indeed, recent data from Nielsen found that among Netflix’s most-popular shows, 50% were network reruns.“The law of large numbers suggests to us that if the rate of subscriber churn grows by ‘only’ 1%, Netflix could face an uptick loss of subscribers per quarter beginning later this year or early next year,” Pachter wrote. “We suspect that this phenomenon has already begun and led to the company’s lackluster guidance for Q3 net additions.”

Ted Sarandos: ‘Cuties’ Is a ‘Very Misunderstood’ Film

Netflix is facing a criminal indictment in the state of Texas regarding allegations of “lewd visual material” involving underage girls in the French indie film Cuties. Speaking Oct. 12 at the French virtual MIPCOM confab, co-CEO Ted Sarandos defended the movie about an 11-year-old Senegalese girl coming of age in 21st century Paris against the backdrop of a religious mother and peer pressure from a group of young female dancers.

“It’s a little surprising in 2020 America that we’re having a discussion about censoring storytelling,” Sarandos told the confab. “It’s a film that is very misunderstood with some audiences, uniquely within the United States.”

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Sarandos, who shares CEO duties with Netflix co-founder Reed Hastings, said the streamer has no plans to alter the movie to appease critics. He said the film, which Netflix acquired at the Sundance Film Festival, amounts to an autobiography of sorts for director Maïmouna Doucouré.

“The film speaks for itself,” he said. “It’s a very personal coming of age film, it’s the director’s story and the film has obviously played very well at Sundance without any of this controversy and played in theatres throughout Europe without any of this controversy.”

Tyler County, Texas, D.A. Doubles Down on Netflix Indictment Over ‘Cuties’ Movie

With news spreading about a Texas grand jury indicting Netflix for allegedly promoting “lewd visual material” of a child in the French-language movie, Cuties, the district attorney of Tyler County is doubling down on the criminal charge.

A summons was served on Netflix’s corporate headquarters by Texas Rangers on Oct. 1. Conviction on the felony charge requires a mandatory jail sentence, according to Texas state law.

The movie, about an 11-year-old girl from Senegal who joins a dance troupe to escape an overbearing mother, has generated a firestorm of controversy for the SVOD pioneer regarding the film’s initial marketing and content that critics say overtly sexualizes underage girls.

Tyler County DA Lucas Babin Oct. 6 issued a press release stating that his job is to keep communities in the county safe. Babin said that in his office it is not uncommon to confront cases involving underage children, adding that after watching Cuties, he knew there was “probable cause” to pursue the matter under Section 43.262 of the Texas Penal Code.

“The legislators of this state believe promoting certain lewd material of children has destructive consequences,” Babin said. “If such material is promoted on a grand scale, isn’t the need to prosecute more, not less?”

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In a prior statement, Netflix, which acquired streaming rights to the award-winning Cuties at the Sundance Film Festival, said the film is a social commentary against the sexualization of young children — a point of view shared by the film’s director Maïmouna Doucoure.

“This charge is without merit and we stand by the film,” said the streamer.

The Tyler County DA Office declined further comment on the case, citing rules about making statements on pending criminal prosecutions and the defendants involved.

“All defendants are presumed innocent until proven guilty,” concluded the DA’s statement.

Netflix shares were up slightly in early Nov. 7 trading.

Netflix Indicted by Texas Grand Jury for ‘Cuties’ Movie

A Texas grand jury has indicted Netflix on a single felony charge: “promotion of lewd visual material depicting a child” regarding the French-language coming-of-age movie Cuties.

The movie, about an 11-year-old girl from Senegal who joins a dance troupe to escape an overbearing mother, has generated a firestorm of controversy for the SVOD pioneer regarding the film’s initial marketing and content that critics say overtly sexualizes underage girls.

The criminal complaint, filed Sept. 23 in the 1A District Court of Tyler County in the state of Texas, was posted on the social media page of Matt Schaefer, a Republican member of the Texas House of Representatives.

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The complaint, which calls out co-CEOs Ted Sarandos and Reed Hastings, alleges Netflix and management “knowingly promote visual material, which depicts the lewd exhibition of the genitals or pubic area of a clothed or partially clothed child who was younger than 18 years of age at the time the visual material was created, which appeals to the prurient interest in sex, and has no serious literary, artistic, political or scientific value.”

The complaint alleges the movie’s values act against “the peace and dignity of the state” of Texas.

In a statement, Netflix said Cuties is a social commentary against the sexualization of young children — a point of view shared by the film’s director Maïmouna Doucoure.

“This charge is without merit and we stand by the film,” said the streamer.

Analysts: Netflix Eyeing Flat Q3 Sub Growth, Near-Term Price Hike

In the rollercoaster COVID-19 era, few media companies have shined as brightly as Netflix. The SVOD pioneer has defied odds and naysayers, adding more subscribers (26 million) in the first six months of the year than it did in all of 2019. It ended June with 193 million subs worldwide.

As the third quarter closes on Sept. 30, the SVOD pioneer is facing challenges, not the least of which is a probable near-term subscription price hike. Netflix hasn’t raised its domestic fee since May 2019 when the most-popular plan increased $2 to $13 monthly.

“After a change in language regarding pricing on the [Q2] call, we believe a potential hike is probable in the near to midterm,” Alex Giaimo, analyst at Jeffries, wrote in a note. “In Q1, Netflix said that they were ‘not even thinking about price increases,’ while the Q2 language was more open-ended.”

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Jeffries contends price hikes from $1 to $2 monthly in North America and Europe could see Netflix add near $1 billion in fiscal 2021 revenue. A similar price hike in Europe, the Middle East and Africa (EMEA) could add $700 million.

“We have confidence that Netflix can raise prices in international markets, given its deepening content library and outsized consumer value proposition,” Giaimo wrote.

On the domestic front, Netflix is facing blowback from politicians and public action committees regarding a small French movie, Cuties, critics say exploits young girls. The streamer also received a letter from GOP senators questioning its motives behind greenlighting an original series based on a book by a Chinese author accused of being pro-Beijing government and anti-ethnic Uyghur Muslims. Both situations have seen increased calls on social media to cancel Netflix subscriptions.

Wells Fargo analysts contend Netflix will add 2.5 million subs globally in Q3 — down from a previously projected 5 million due to increases in subscriber churn. The culprit: a fivefold churn increase to 4.7% in one-week subscriber defections due to Cuties. The analysts said that could result in a sub loss of 28 million. Netflix is projecting a global sub gain of 2.5 million.

Meanwhile, Michael Pachter, media analyst with Wedbush Securities in Los Angeles, said he would surprised if the Cuties controversy extended beyond the United States. The analyst said that with one-third of households considering themselves religious, it’s possible Netflix saw a spike of 1% to 2% over its normal churn.

“Combine that with the pull-forward of new subscribers from shelter-in-place. and they could deliver disappointing domestic subscriber growth,” Pachter said in an email.

The analyst said he would be “shocked” if Netflix raised prices in the face of new competitors such as Disney+, Peacock, Apple TV+ and HBO Max.

“They had no competition before and now they have [competition] priced lower, Amazon content is getting better, and HBO Max will someday figure out how to get their product on Roku-powered TVs,” Pachter said.

“Yes, I think that they can raise the price and that the brand is super strong, but the cult [Netflix bulls] values them at ridiculous levels because the cult believes in unfettered growth, and any shift in that narrative will disappoint them,” he said. “I still don’t expect a price hike.”

Netflix reports third-quarter results Oct. 20.

‘#CancelNetflix’ Move Short-Lived Says Data Firm

Social media calls to boycott or cancel Netflix over allegations of a sexualized storyline for its French-language original movie about underage girls in a dance troupe was apparently short-lived.

New statistics from 7Park Data claim the furor over the English-dubbed Cuties, about an 11-year-old girl from Senegal living in Paris with her single mom who tries to expedite her transition into adulthood, lasted about seven days, causing an uptick in subscriber cancelations. Separate stats from YipitData suggested Netflix churn skyrocketed more than 800% on Sept. 12. Netflix, per policy, does not report the number of subscribers canceling service, or churn.

Cuties is a social commentary against the sexualization of young children,” Netflix said in a statement earlier this month. “It’s an award-winning film and a powerful story about the pressure young girls face on social media and from society more generally growing up — and we’d encourage anyone who cares about these important issues to watch the movie.”

Indeed, Cuties has ranked among the streamer’s Top 10 most-popular shows, with the film’s writer-director, Maïmouna Doucouré, telling a French media event last week that the movie is a call to educate people on the dangers of oversexualizing children.

“We need to protect our children. What I want … is to open people’s eyes on this issue and try to fix it,” Doucouré said. “We have the same fight.”

With an election year in full swing, Netflix has become a target among some politicians and groups (Parents Television Council, National Center on Sexual Exploitation and the Council on American-Islamic Relations) pushing agendas via red button topics such as child trafficking and U.S.-China-Muslim relations. Not surprisingly, Netflix cancellations from Sept. 10-13 increased most significantly in politically conservatives states such as Alaska, Idaho, Utah, Wyoming and Nebraska.

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House Rep. Tulsi Gabbard (D-Hawaii) and Sen. Ted Cruz (R-Texas) both called Cuties “child porn,” with Cruz firing off a letter to the Department of Justice asking for an investigation of Netflix executives.

This week five GOP senators sent a separate letter directly to Netflix co-CEO Ted Sarandos with questions about the streamer’s decision to greenlight an original series based on a story (The Three-Body Problem) by award-winning Chinese science-fiction writer Cixin Liu, whose comments in support of government policies toward ethnic Uyghur Muslims, have drawn criticism.

American Muslim Group Calls on Netflix to Remove ‘Cuties’ Movie, Citing Offensive Depictions of Islam

The Council on American-Islamic Relations (CAIR), the nation’s largest Muslim civil rights and advocacy organization, Sept. 15 called on Netflix to remove the French film Cuties from its platform due to what it claims is the “disturbing sexualization” of children as well as its offensive and stereotypical depiction of Islam and Muslims.

The movie, about an 11-year-old girl from Senegal who joins a dance troupe to escape an overbearing mother, has generated a firestorm of controversy for Netflix regarding the film’s initial marketing and content that critics say overtly sexualizes underage girls.

CAIR now says the movie also demeans the Islamic religion. Specifically, the group says the film depicts the girl’s father as a polygamist, her mother as oppressed, and features a scene in which her family conducts an exorcism, leading the young girl to gyrate and “twerk” while wearing revealing clothing, all as an Arabic recitation plays in the background.

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“We join other Americans in calling on Netflix to remove this disturbing film from its platform,” Nihad Awad, national executive director of CAIR, said in a statement. “Although the filmmakers behind Cuties have argued that the film is meant to criticize the hyper-sexualization of children, a film cannot criticize the abuse of children while abusing children.”

The group says the film makes matters worse with its depictions of Islam and Muslims that range from the stereotypical to the offensive, including a scene in which a barely-clothed Muslim preteen gyrates during a forced exorcism. 

“None of this should be acceptable in American society, especially the sexual objectification of children,” Awad said. “Netflix should immediately remove the film and apologize to the public.”

Netflix and filmmaker Maimouna Doucouré, who claims she has received death threats, say the film is a critical look on pressure society puts on young girls to act sexual.

Cuties is a social commentary against the sexualization of young children,” Netflix said in a statement. “We’d encourage anyone who cares about these important issues to watch the movie.”

The service wasn’t immediately available for comment regarding CAIR’s concerns.

‘Cuties’ Director Responds to Media, Political Backlash

NEWS ANALYSIS — In an era of hyper-partisan politics during an election year, Netflix’s French-language film Cuties, about an 11-year-old girl from Senegal who joins a dance troupe to escape an overbearing mother, has found a perfect storm.

No issue riles people more than child endangerment and/or exploitation. Throw in the Internet and social media, and incendiary charges of sexualization of underage girls quickly morph into child pornography and worse.

That’s the reality Netflix and Cuties director Maimouna Doucouré find themselves in as national politicians, parent groups and right-wing media jump on the bandwagon of condemnation — with pitched calls to boycott the film and cancel Netflix subscriptions across social media (#CancelNetflix).

Former presidential candidate Rep. Tulsi Gabbard (D-Hawaii) called Cuties “child porn” on Twitter, claiming the movie would “certainly whet the appetite of pedophiles [and] help fuel the child sex trafficking trade.”

Netflix says the movie projects the opposite message.

Cuties is a social commentary against the sexualization of young children,” the service said in a statement. “It’s an award-winning film [Sundance Film Festival] and a powerful story about the pressure young girls face on social media and from society more generally growing up — and we’d encourage anyone who cares about these important issues to watch the movie.”

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Regardless, Netflix has no less than three petitions circulating on Change.org totaling almost 1 million supporters seeking to either remove the movie or drop the service. The platform is undermined in part by its own content tracking metric that registers a viewer after just two minutes. As a result, Cuties — despite requiring English-language captions for most American viewers — is trending as the 7th most-popular program on the platform after launching on Sept. 9.

Then a Sept. 14 report from research firm YipitData suggested Netflix was experiencing record churn, or subscribers not renewing service, with eight times more subs dropping the service on Sept. 12 than did in August, according to Fox Business. Netflix, per policy, does not report churn data. It ended the most-recent fiscal period with 193 million subscribers.

When Netflix tried to soften the movie’s marketing by replacing images of the young female characters in suggestive dance poses, critics only amplified their response.

“By removing the offensive poster and replacing it with a more innocuous one, Netflix might actually have made the situation worse by suggesting that Cuties is nothing more than a cute, coming-of-age movie,” Melissa Henson, program director for the Parents Television Council, a non-partisan education organization advocating responsible entertainment, said in a statement.

In a virtual interview hosted by French cinema’s UniFrance, director Doucouré appeared taken aback by the media criticism and social backlash.

“The most import thing is to watch the film and understand we have the same fight [against child exploitation],” Doucouré said, adding she thought the film would be accepted in the U.S. despite differences between French and American culture.

“It played to Sundance and was watched by American people there; I met the public there and they really saw that the film is about a universal issue,” Doucouré said. “It’s not about French society — the hyper-sexualization of children happens through social media and social media is everywhere. People [at Sundance] agreed with that.”

Netflix reports third-quarter fiscal earnings (ending Sept. 30) on Oct. 15.

Texas Senator Calls for DOJ Investigation of Netflix Regarding ‘Cuties’ Movie

Netflix, a longtime target of right-wing boycotts, is now facing new pressure from some lawmakers looking to score political points in an election year.

Sen. Ted Cruz (R-Tex.) on Sept. 11 sent a letter to U.S. Attorney General Bill Barr asking the Department of Justice to investigate Netflix regarding its marketing and distribution of French film Cuties, a fictional story about an 11-year-old girl from Senegal living in Paris who joins a “twerking dance squad,” upsetting her conservative single mom. Cruz wonders whether distribution of the movie violated any federal laws against the alleged production and distribution of child pornography.

Sen. Ted Cruz (R-Tex.)

“I urge the DOJ to investigate … whether Netflix, its executives, or the individuals involved in the production and distribution of the film violated any federal laws,” Cruz wrote.

Specifically, Cruz alleges the film “routinely fetishizes and sexualizes” pre-adolescent girls performing dance sequences in provocative outfits simulating sexual conduct.

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“These scenes in and of themselves are harmful,” Cruz wrote, suggesting the images could encourage pedophiles globally to imitate “this film in abusive ways.”

Sen. Tom Cotton (R-Ark.) joined the dispute, calling on the DOJ to take “swift” action.

“Like any parent, I find ⁦@Netflix⁩ decision to peddle child pornography disgusting,” Cotton tweeted Sept. 12. “And it’s criminal.”

Rep. Tulsi Gabbard (D-HI) is the lone Democrat criticizing the movie’s release, claiming it would “whet the appetite of pedophiles” and help “fuel” child sex trafficking.

“Netflix, you are now complicit,” Gabbard tweeted.

Netflix, which began streaming Cuties on Sept. 9, changed the film’s initial marketing after receiving criticism on social media. The service contends the movie criticizes — not endorses — the sexualization of minor girls in the media.

“Cuties is an award-winning film and a powerful story about the pressure young girls face on social media and from society more generally growing up — and we’d encourage anyone who cares about these important issues to watch the movie,” Netflix said in a media statement.

The Parents Television Council, a non-partisan education organization advocating responsible entertainment, this week said it stands by its earlier criticism that the TV-MA-rated Cuties sexualizes children.

“By removing the offensive poster and replacing it with a more innocuous one, Netflix might actually have made the situation worse by suggesting that Cuties is nothing more than a cute, coming-of-age movie,” Melissa Henson, program director for the Parents Television Council, said in a statement.

Netflix Apologizes for ‘Inappropriate’ Pre-Teen Movie Marketing

Netflix has moved quickly to change marketing images for upcoming French movie Cuties, about preteen girls involved in a hip-hop dance group.

The streaming giant found itself in hot water after releasing a movie poster that many observers alleged sexualized underage girls.

The movie, titled Mignonnes in France, revolves around an 11-year-old Senegal girl named Amy who lives with her mother in a Paris ghetto. Amy befriends a neighbor, Angelica, and her dance group called the “Cuties.”

The French poster for the movie depicts young girls having fun, while the Netflix poster showcased preteen cheerleaders in skimpy, midriff-baring costumes.

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“We’re sorry for the inappropriate artwork that we used for this film,” Netflix said in a statement. “This was not an accurate representation of the film so the image and description has been updated.”

Cuties streams on Netflix Sept. 9, after releasing theatrically in France Aug. 19. The movie was originally slated to bow in cinemas on April 1, but shelved following the onset of the coronavirus pandemic.