Reed Hastings: Linear TV, YouTube Biggest Netflix Competitors — Not Disney+

Following a quarter in which global subscriber growth failed to meet internal and market projections, Netflix executives found themselves on the defensive explaining why 43% fewer subs signed up for the service than expected.

Speaking on the investor webcast, CFO Spencer Neumann said COVID-19 skewed the playing field as the record subscription growth from a year ago could not be replicated — also due in part to production of new content coming to a halt for much of 2020.

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“The combination of those two things does create some noise,” Neumann said, adding that when removing the pandemic from the equation, Netflix sub growth over the past two years has increased more than 20%.

“So, the business remains healthy and that’s because the long-term drivers, this big transition from linear-TV to streaming entertainment, remains as healthy as ever,” he said.

Co-founder/co-CEO Reed Hastings said Netflix’s biggest competitors for viewing time remain linear TV and YouTube — with the latter considerably larger than Netflix in viewing time.

“Disney [viewing time] is considerably smaller,” Hastings said.

He said Netflix remains preoccupied with subscriber satisfaction, retention, and word of mouth, which Hastings said drives sub growth.

The executive said Netflix’s goal remains finding stories subscribers can connect with, improving content selections, the best recommendations, and then ultimately, stories that are incredibly compelling.

“We are just quarter-by-quarter, learning more lessons on each one of those which is what improves the member satisfaction, which is what really drives the growth,” he said.

“We have been competing with Amazon Prime Video for 13 years, with Hulu for 14 years,” he said. “It’s always been very competitive with linear TV, too. So there is no real change that we can detect in the competitive environment. It’s always been high and remains high.”

Separately, COO/CPO Greg Peters said the streamer remains upbeat on video games, which is rolling out with interactive children’s programming and the 2018 original movie Bandersnatch.

“We’re going to continue working in that space for sure,” Peters said. “We’ve actually launched games themselves. It’s part of our licensing and merchandising effort, and we’re happy with what we’ve seen so far. And there is no doubt that games are going to be an important form of entertainment and an important sort of modality to deepen that fan experience. So we’re going to keep going, and we will continue to learn and figure it out as we go.”

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.”

Netflix Posts Record Q4 Subscriber Growth

Netflix Jan. 17 reported it added 7.3 million net new paid subscribers internationally in the fourth quarter (ended Dec. 31, 2018) — which was above company projections of 6.1 million. In the United States, Netflix added 1.53 million paid subs, compared to projections of 1.5 million.

Netflix no longer combines new subs on trial basis with paid additions. As a result, Netflix said it had 2.07 million new trial subs in the U.S., in addition to 7.13 million internationally.

The service ended the period with 139 million paid subscribers, up 9 million paid members from the start of the quarter and 29 million from Jan. 1, 2018. Netflix added 22 million subs in 2017.

The SVOD pioneer grew quarterly revenue 35% to $16 billion, nearly doubling operating income to $1.6 billion.

Netflix said that through its first four weeks, original movie Bird Box, starring Sandra Bullock, was streamed by more than 80 million household worldwide.

The service said its original feature films continue to generate audiences in the home and in theaters. Five weeks after its debut, Roma from director Alfonso Cuaron is still playing on 900 screens worldwide — including some 70mm format projections.

Netflix said it service commands about 10% of all TV screen time in the U.S., and about half as much on mobile devices.

“There are thousands of competitors in this highly fragmented market vying to entertain consumers,” wrote CEO Reed Hastings and CFO Spencer Neumann in the investor letter. “Our growth is based on how good our experience is to subscribers … not on Disney+, Amazon Prime Video or others.”

Finally, Netflix ended the period with 2.7 million disc renters — down from 3.3 million during the previous-year period. The legacy segment generated $51.4 million operating profit on revenue of $85.1 million. That compared to operating profit of $62.6 million and revenue $105.1 million last year

Activision Blizzard’s Spencer Neumann Expected to Become New Netflix CFO

Netflix is reportedly set to announce the hiring of Spencer Neumann as its new CFO, replacing long-time chief executive David Wells, who is leaving the company, according to Reuters, which cited sources familiar with the situation.

Neumann, who has been CFO of Activision Blizzard for less than two years, was put on paid leave Dec. 31 by the Los Angeles-based video game publisher, according to a regulatory filing.

Prior to Activision, Neumann held management positions at Disney’s theme park and television units.

A Netflix spokesperson wasn’t immediately available for comment.