Netflix Opening Italian Office in Rome

Netflix continues its European charm offensive, reportedly setting up Italian operations (with 30 employees) in Rome — a week after doing the same in Paris. Both regional headquarters include increased investment in local content production, in addition to paying taxes.

“Since the launch of the service in Italy in 2015 we have been welcomed with enthusiasm by many Italian subscribers and have had the good fortune of working with a wide range of talents, some well-established while others emerging,” Kelly Luegenbiehl, VP international originals, told Variety in a statement.

Netflix co-founder/CEO Reed Hastings last October suggested the streaming pioneer would be expanding regional operations from its main European headquarters in Amsterdam.

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The office relocations also amount to an effort by Netflix to curry favor with local politicians who have accused the service of not paying taxes. With the establishment of localized workforces, Netflix will now be paying all appropriate taxes.

Prosecutors in Milan last October said Netflix should pay local taxes despite the fact the service had no physical presence streaming content to 1.4 million Italian subscribers in the country.

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Netflix Italian originals include “Suburra: The Series” and “Baby,” pending witchcraft series “Luna Nera,” all helmed by female directors.

Netflix CFO: Disney+ Not More Popular Outside the U.S.

With Netflix citing increased fourth-quarter (ended Dec. 31, 2019) domestic churn among existing subscribers as a response to new SVOD service launches from Disney and Apple, concern is growing about the impact of Disney’s accelerated SVOD launch plans in Europe in March.

Indeed, Netflix added 420,000 subscribers in the U.S. in the quarter, which was down from 600,000 projected. Outside the U.S., Netflix said it has seen a more “muted impact” from competitive launches in Canada, Australia and Holland.

“As always, we are working hard to improve our service to combat these factors and push net adds higher over time,” executive wrote in the shareholder letter.

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Speaking Jan. 21 on the pre-recorded fiscal interview, CFO Spencer Neumann said that while Disney remains a global brand, its streaming service remains largely focused on catalog programming with a few original shows other than the “Star Wars” spinoff “The Mandalorian.”

“[Disney is] not more popular than they are in the U.S. anywhere else in the world,” Neumann said.

CEO Reed Hastings contends the rise of rival SVOD services is having more of an impact on pay-TV than Netflix in particular.

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“Remember that we compete a lot for time with YouTube,” Hastings said. “And it’s not dollars because that’s ad supported. But we compete very broadly for viewing and as [previously] mentioned our viewing on a per-member basis is up. And that’s because our content is getting better. Our service is getting better. And that’s all coming out of linear TV.”

Streaming, Consolidation Dominate Top 10 Home Entertainment Stories of 2019

Streaming and consolidation dominated the home entertainment headlines in 2019, with the Walt Disney Co. leading the way. Netflix got some subscription streaming competition, and free streaming through advertising, or AVOD, emerged as a new star. It was also a year that saw the home entertainment industry lose a venerable studio player that had helped birth the business more than 40 years prior — 20th Century Fox Home Entertainment. Meanwhile, physical disc sales and rentals continued a structural decline, while electronic sellthrough, the digital sale of content, was a solid performer in the transactional business.

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Here are the top 10 home entertainment stories of 2019, as chosen by Media Play News staff:

  1. Disney Acquires Fox: Disney closed its $71.3 billion purchase of 20th Century Fox Film Corp. The deal included myriad Fox properties, including Fox’s interest in Hulu and 20th Century Fox Home Entertainment, which helped birth the home video industry in 1979. The merger also saw the departure of several executives, including Mike Dunn and James Finn at Fox and Janice Marinelli, president of global content sales & distribution for Disney’s direct-to-consumer & international unit.
  2. Disney + Bows: Calling it the company’s most-important consumer product ever, Disney CEO Bob Iger announced the launch of Disney+, a standalone SVOD service aimed at taking on segment pioneer Netflix and Amazon Prime Video. The service launched Nov. 12 at $6.99 a month offering a trove of catalog movies, including its venerable animated classics and Marvel hits, and catalog TV shows, in addition to original “Star Wars” series “The Mandalorian,” an instant fan hit from director Jon Favreau. Disney also unveiled the bundle offer of ESPN+, Hulu (now controlled by Disney) and Disney+ at $12.99 a month.
  3. AVOD in the Spotlight: Advertising-supported video-on-demand, or AVOD, emerged from the SVOD shadows, gaining traction among subscription-weary consumers looking for free content. Mega-media companies Comcast, Viacom (through the acquisition of Pluto TV) and Amazon (through IMDb) acknowledged the growing market. Reports surfaced that Comcast is eyeing acquiring AVOD player Xumo TV to go along with 2020’s Peacock streaming service debut.
  4. Apple TV+ Launches: Apple Nov. 1 launched a standalone branded subscription streaming service at $4.99 a month, Apple TV+, in more than 100 countries and regions through the Apple TV app. Original content included Golden Globe-nominated “The Morning Show,” “See,” “For All Mankind” and “Dickinson.”
  5. Electronic Sellthrough Continues to Grow: Outside of subscription streaming video, the only home entertainment category to post an increase in consumer spending during much of 2019 was electronic sellthrough, the digital purchase of movies and other content. The segment generated an estimated $1.9 billion in consumer spending through the third quarter of 2019, up 6.7% from the previous-year period, according to DEG: The Digital Entertainment Group.
  6. Redbox Gets Into Content, Out of Disney Movie Code Sales: Redbox launched Redbox Entertainment, a new label to acquire and produce content exclusive for Redbox’s 50 million kiosk consumers. The company tapped Broad Green Pictures and Lionsgate veteran Marc Danon to head content acquisition. The kiosk vendor also settled 2-year-old litigation with Disney, agreeing not to sell the studio’s digital movie codes.
  7. Filmmakers Tweak UHD: The UHD Alliance, along with leaders in consumer electronics, Hollywood studios and members of the filmmaking community, announced collaboration on a new viewing mode for watching movies and episodic TV called “Filmmaker Mode,” designed to reproduce the content in the way the creator intended.
  8. Netflix Takes a U.S. Sub Hit: Disaster struck Wall Street favorite Netflix after the streaming behemoth posted a 126,000 domestic subscriber loss in Q2 after projecting growth of 300,000 subs. It was Netflix’s first domestic sub loss since 2011 when co-founder/CEO Reed Hastings announced the short-lived separation of the company’s DVD rental business from its subscription streaming business. Regardless, stock plummet nearly 20% (or $26 billion) in value after the disappointing numbers.
  9. Changes Afoot at Vudu: Vudu — rumored to be up for sale by owner Walmart, which executives told The Information considers it a non-core business — quietly downsized support for its Vudu To Go/In-Home Disc to Digital app, effective Jan. 1, 2020. The digital movie transactional service will still allow users to convert DVD and Blu-ray movies for digital access by scanning UPC codes on the Vudu app via select portable devices such as a mobile phone and tablet.
  10. Netflix Hails Discs: Taking its eye off its dominant streaming business for a moment, Netflix acknowledged a milestone: Delivery of 5 billion discs since the launch of its legacy disc-by-mail rental service more than two decades ago. The disc rental: Paramount’s Rocketman.

Despite Indifference, Netflix Reigns Supreme in By-Mail Disc Rental

Netflix has all the luck.

The erstwhile by-mail disc rental pioneer’s brand name ushered in the ability for consumers to rent DVD or Blu-ray Disc movies online and receive the disc by mail 24 hours later.

Disc rental has been an unrelenting cash cow for Netflix, generating operating income and crazy margins most companies would call out in an earnings report.

Not Netflix.

The unit reported a $44 million profit on revenue of $71.8 million in the most-recent fiscal period. That revenue represented 98.9% of all by-mail disc rental revenue in Q3 in the United States, according to DEG: The Digital Entertainment Group.

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Instead, Netflix has largely turned a cold shoulder to packaged media for about as long as it has been streaming video — 10 years. In fact, co-founder/CEO Reed Hastings in 2011 infamously tried to spin-off the disc business into the short-lived Qwikster brand — a move that sent Netflix shares freefalling 75%.

Hastings was forced to retract the decision — initially announced in a Sunday blog post from his home — as a corporate misstep.

“It is clear that for many of our members two Web sites would make things more difficult, so we are going to keep Netflix as one place to go for streaming and DVDs,” Hastings wrote at the time.

To be sure, the number of Netflix subscribers renting movies and TV shows by mail is dwindling. Subscribers are down nearly 18% to 2.3 million from 2.8 million last year. Revenue through nine months of the fiscal year is off about 15% from the previous-year period at $136.6 million.

One day, by-mail disc rentals from Netflix will be history, quietly removed from “consolidated statements of cash flows” on the balance sheet without so much as a thought. That day might be marked by some in the media as transformational, the end of an era, or just ignored.

Indeed, when Netflix shipped out its 5 billionth disc rental in August, it tweeted the milestone — from a separate corporate account.

Hastings: Netflix Sub Numbers Not as Important as Time Spent Streaming

It’s no secret Netflix subscriber growth is slowing as the SVOD pioneer reaches market saturation. The service is projected to reach 165 million subs worldwide at the end of the current fiscal quarter, ending Dec. 31.

That reality at a time when high-profile competitors such as Apple, Disney, WarnerMedia and NBC Universal enter the streaming video wars underscores why Netflix co-founder/CEO Reed Hastings is hoping Wall Street and others will shift their focus from sub growth to viewing hours.

Speaking Dec. 6 at The New York Times DealBook confab in New York, Hastings said time spent streaming content should become the new metric underscoring a service’s success.

“You’ll hear some subscriber numbers but you can just bundle things so that’s not going to be that relevant,” Hastings said. “So the real measurement will be time — how do consumers vote with their evenings? What mix of all the services do they end up watching?”

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Earlier this year Streaming Observer concluded Netflix subs worldwide spent 164.8 million combined hours a day watching content — and in the process used nearly 500 million GB of data on a daily basis.

Indeed, Hastings’ comment may ring true as nascent competitors such as Apple TV+, Disney+ and HBO Max offer free service to in-house and third-party platforms such as Verizon and AT&T. Apple is offering its service free for one year with any Apple hardware purchase.

Netflix itself has a promotional free year of service with select T-Mobile service plans.

Hastings contends most consumers will subscribe to multiple services, reiterating that he will personally subscribe to Disney+ (“They have great shows!” he said) upon its Nov. 12 launch.

At the end of the day, Hastings is betting consumers will lean toward established brands with proven track records in the SVOD space.

“When you think, ‘Do I turn on cable, do I turn on YouTube, do I turn on Netflix?’ we want you to choose Netflix,” he said.

Reed Hastings Defends Netflix Censoring Content in Saudi Arabia

Netflix is the biggest subscription streaming video service in the world with more than 158 million subscribers, including about 1 million in Saudi Arabia.

Speaking Nov. 6 at The New York Times DealBook confab in New York, co-founder/CEO Reed Hastings was asked about the streamer’s decision earlier this year to delete an episode of “Patriot Act,” the comedy starring Hasan Minhaj, within Saudi Arabia. In the episode, Minhaj (formerly with “The Daily Show”) criticizes Saudi leader Mohammed Bin Salman, characterizing the crown prince as an impediment toward social progress in the Muslim country.

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“There are people in Saudi Arabia fighting for true reform, but [Bin Salman] is not one of them,” Minhaj says in the episode, which is still available in other countries.

Saudi officials contacted Netflix requesting the episode be cut, which the service agreed to do, citing a “valid legal request” from the government.

“We strongly support artistic freedom worldwide and removed this episode only in Saudi Arabia … to comply with local law,” Netflix said in a media statement earlier this year.

Hastings defended the decision, arguing Netflix remains in the entertainment business.

“Well, we’re not in the news business. We’re not trying to do ‘truth to power,'” Hastings told attendees. “We’re trying to entertain. And we can pick fights with governments about newsy topics, or we can say, because the Saudi government lets us have us shows like ‘Sex Education,’ that show a very liberal lifestyle, and show very provocative and important topics.”

Separately, Hastings, as expected, said Netflix would spend $15 billion on original content in 2019, with plans to significantly increase spending going forward.

“We plan on taking spend up quite a bit,” Hastings said. “We’re growing and investing around the world. We’ve been strong in series. Now we’re getting really strong in movies.”

Netflix plans to increase spending on animation and unscripted content in 2020.

“We’re investing heavily there,” Hastings said. “We’ll continue to push the envelope.”

Netflix Brass Doubles Down on Indifference to Pending SVOD Competition

With Disney and Apple just weeks away from launching branded subscription streaming video services, Netflix remains defiant to the pending competition, which includes service launches from WarnerMedia (HBO Max) and NBCUniversal (Peacock) early next year.

Speaking on the company’s Oct. 16 fiscal earnings webcast, CCO Ted Sarandos walked back any apparent corporate weakness regarding comments CEO Reed Hastings made in the United Kingdom last month about a whole new world in over-the-top video awaiting come November.

“I think I got the subtlety of the brave — the whole new world Aladdin reference,” Sarandos quipped. “Everyone else took it pretty literal.”

Many on Wall Street had taken Hastings’ comment to suggest Netflix was concerned, especially after HBO Max and Peacock took away Netflix streaming rights to popular reruns of “Seinfeld” and “The Office,” respectively.

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“From when we began in [2007] streaming, Hulu and YouTube and Amazon Prime Video were all in the market,” Hastings said. “All four of us have been competing heavily, including with linear TV, for the last 12 years. So fundamentally, there’s not a big change here.”

Hastings said he found it “interesting” to see both Apple and Disney launching services in the same week after 12 years of not showing much interest in SVOD.

“I was being a little playful with a whole new world in the sense of the drama of it coming,” Hastings added. “But fundamentally, it’s more of the same, and Disney is going to be a great competitor. Apple is just beginning, but they’ll probably have some great shows, too.”

Indeed, until just recently, Disney exclusively licensed original movies and rights to create original Marvel TV series to Netflix.

The Netflix co-founder reiterated that the SVOD market remains more in competition with linear TV than within its market. He said OTT video is still a relatively small player compared to broadcast TV.

“So, just like in the [shareholder] letter … [writing about] multiple cable networks over the last 30 years not really competing with each other fundamentally but competing with broadcast TV, I think it’s the same kind of dynamic here [with streaming video],” Hastings said.

 

Grandi Notizie: Netflix Expands Italian Presence

Italy in 2020 will begin imposing a 3% tax on digital services generating at least €5.5 million ($6 million) in annual revenue.

While the political move targets American streaming giants such as Netflix, Amazon Prime Video and the pending Disney+ platform, Netflix is hardly scaling back its Italian operations.

The SVOD pioneer, which reportedly has 1.5 million subscribers in Italy, has inked a deal with Comcast-owned satellite TV operator Sky Italia offering subscribers direct access to the service.

Netflix will be available to Entertainment Plus and Sky Q Platinum subscribers.

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Netflix began its partnership with Sky in 2018 in the United Kingdom, followed by Sky Deutschland.

“We [want to] make it easier for Sky customers and Italian families to access the complete Netflix experience,” Filippo Zuffada, EMEA partner marketing director at Netflix, said in a statement.

Indeed, Netflix CEO Reed Hastings was Italy this week to announce the opening of an office in the country as well as plans to invest €200 million ($220 million) in original Italian content production.

Establishing an office in Italy would also mitigate efforts by lawmakers seeking taxes from foreign online companies (notably Netflix) doing business within the country’s borders without a physical presence.

Netflix’s investment follows a previously-announced pact with Italian broadcaster Mediaset for the co-production of original Italian movies.

 

Netflix Partnering with Italian Broadcaster Mediaset for Movie Productions

Netflix has reportedly signed a co-production movie deal with Italian broadcaster Mediaset for seven titles to be distributed in the country and worldwide.

Mediaset Italia claims to target more than 60 million Italians living around the world. The company’s domestic TV channels include Canale 5, Rete 4 and Italia 1.

Italian daily Il Sole 24 Ore reports Netflix will majority fund the movies in exchange for first-run distribution rights. CEO Reed Hastings is scheduled to appear Oct. 8 for a public presentation of the deal.

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Mediaset CEO Piersilvio Berlusconi earlier this year disclosed the broadcaster was in negotiations with Netflix and Amazon regarding original content production.

The pact with Mediaset comes as Italian prosecutors have reportedly opened an inquiry involving Netflix’s tax status in the country.

Netflix reports third-quarter (ended Sept. 30) results on Oct. 16.

Hastings: Netflix Girding for ‘Whole New World in November’

With a slew of new subscription streaming video services launching soon, including Apple TV+ and Disney+ in November, and NBC Universal’s Peacock and WarnerMedia’s HBO Max early next year, market behemoth Netflix is preparing for battle.

Speaking Sept. 20 at the Royal Television Society confab in Cambridge, in the United Kingdom, Netflix CEO Reed Hastings told attendees the SVOD pioneer has spent $500 million (£400 million) on original content production in the region this year with plans to increase the amount next year.

Over the summer, Netflix leased Pinewood Studios’ Shepperton facility — a move later emulated by Disney for Pinewood’s Buckinghamshire facility near London.

Reed Hastings

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Netflix’s forthcoming comic book-based action movie, The Old Guard, starring Oscar winners Charlize Theron, Chiwetel Ejiofor and KiKi Layne, among others, was filmed at Shepperton.

“While we’ve been competing with many people in the last decade, it’s a whole new world starting in November,” Hastings said, as first reported by Variety. “It’ll be tough competition. Direct-to-consumer will have a lot of choice.”

Hastings said Netflix was not interested in acquiring production facilities globally, preferring to rent as market conditions dictate.

He said the increased SVOD competition worldwide (Disney+, Hulu, Apple TV+ all have global aspirations), including Amazon Prime Video have upped production costs exponentially.

“Someday ‘The Crown’ will look like a [fiscal] bargain,” he said.

Hastings added that as SVOD and ad-supported streaming proliferate worldwide, traditional pay-TV still dominates consumer viewing habits.

“We win only about 5% of television viewing hours, so we’re nowhere near a concentration risk [to pay-TV],” he said.