April 21, 2020
Michael Morris, an analyst with Guggenheim Securities, was in a no-win position. As the Wall Street expert on tap April 21 to question Netflix executives on strong quarterly results (more than double projected sub growth) favorably impacted by the coronavirus, Morris was met with what appeared to be a collective air of guilt and concern. It was not a time to gloat or high-five success.
Indeed, Netflix added nearly 16 million subscribers worldwide in the first three months of the year — about 7 million more than revised Wall Street estimates and 9 million more than what Netflix had expected.
At a time when many media companies are scrambling to find funds, and some movie theaters are facing bankruptcy, Netflix has seen its stock reach record highs — briefly valuing the company higher than The Walt Disney Co.
CEO Reed Hastings, CFO Spenser Neumann, CCO Ted Sarandos, chief product officer Greg Peters, and Spencer Wang, VP, finance & investor relations, seemed to be in no mood to discuss the robust quarter, pricing, sub growth or balance sheet at a time when an ongoing pandemic devastates many of its markets globally.
“It’s an incredible tragedy for the world,” Hastings said about COVID-19. “Everyone is wrestling with the implications, both on health, on hunger, poverty. And we, too, are really unsure of what the future brings.”
“It’s been humbling to be a place that people around the world in a time like this turn to for some entertainment for escape,” Peters said.
Neumann said Netflix was fortunate to be running smoothly during industry-wide shutdowns and quarantined employees, while doing the “best we can” to keep employees and production crews safe, healthy and taken care of.
“That’s been our primary focus,” he said.
Hastings said he and the rest of the company remained as uncertain about the business future in a COVID-19 universe, adding that distributing entertainment through the Internet wasn’t slowing.
“People want entertainment,” he said. “They want to be able to escape and connect, whether times are difficult or joyous. Will Internet entertainment be more and more important over the next five years? Nothing has changed in that.”
When Morris attempted to ask a question about subscription pricing and how it might be implemented in a non-virus environment, Peters wasn’t biting.
“At this point, we’re not even thinking about price increases,” he said. “What’s going on around the world is dominating our thoughts and our considerations. So, we’re really just focused on that for this period.”
When Morris flipped from asking about a price hike to a price cut with so many people out of work or furloughed, Peters deferred to Neumann, who reiterated that it “really [wasn’t the] time for us to be thinking about price changes. We haven’t lived through anything like this. So it’s so hard to tell.”
Sarandos said Netflix was deep into production for its 2021 original content slate, underscoring the fact the service has no content shortages while production is shutdown.
Indeed, Netflix’s original true crime documentary “Tiger King” has proven to be major hit, tracking 65 million subscriber households since its March 20 launch.
“We don’t anticipate moving the schedule around much and certainly not in 2020,” Sarandos said. When asked whether Netflix would incorporate “episode spacing” rather than making all episodes of an original series available at launch, Sarandos said release strategies are being tweaked all the time.
He said the “Love is Blind” dating show featured staggered episodes while the competition series “Too Hot to Handle” was released all at once.
“Customers have spoken loud and clear that they really like the option of the all-at-once model,” Sarandos said. “So, I don’t see us moving away from that meaningfully.”
The executive lauded Netflix’s partnership with Disney-owned ESPN on the just-launched Chicago Bulls/Michael Jordan NBA basketball documentary The Last Dance, which the two companies have worked together on for several years. Netflix and ESPN streamed and aired the first two of 10 episodes beginning April 19.
“It’s been a win-win for us and ESPN, and a great win for basketball fans who’ve been very hungry for new programming,” Sarandos said.
Hastings said Netflix has resumed production in Iceland and South Korea, using those situations to learn how best to implement production in other parts of the world as shelter-in-place restrictions are lifted.
“We’re taking some of those key learnings about how we run those productions today and applying that to our plans to re-start our productions around the world,” Hastings said.