Netflix CFO Spencer Neumann addressed the decision to pull out of Russia and pushed back a bit less firmly on the notion of advertising being introduced to the service than other top execs have historically.
“Never say never,” the executive said about the idea of a cheaper, ad-supported tier, “but it’s not in our plans right now.” Previously, top brass have responded with disdain when asked whether Netflix will need to have an advertising layer in order to maintain subscriber growth. Co-founder and Co-CEO Reed Hastings has cited an eagerness to avoid the privacy tangles that have ensnared Big Tech companies focused on harvesting consumer data.
Neumann’s comments came during an appearance at Morgan Stanley’s Technology, Media & Telecom Conference in San Francisco. The annual event is being held in person after two years of virtual footing due to Covid.
Related Story
'One Piece': Morgan Davies, Ilia Isorelýs Paulino & Aidan Scott Among 6 Cast In Netflix Live-Action Series
Taking advantage of being in front of an actual crowd, Neumann took a beat before answering moderator and Morgan Stanley media analyst Ben Swinburne, who referenced Disney’s move to add ads to Disney+. “I would love to get a show of hands of people who liked that decision by Disney, but I don’t think I’ll get it,” Neumann joked. “It’s not like we have religion against advertising, to be clear,” he continued, on a more sincere note. In building the company’s financial stature, he added, “we lean into consumer experience, consumer choice, and what’s great for our creators and storytellers.” Down the line, an advertising element could confirm with those objectives, but “that’s not something that’s in our plans right now. We have a great model in the subscription business, it scales globally.”
As to Russia, where the company made the decisions first to pause production and eventually to suspend service there entirely over the past week, Neumann described the territory as untenable. After addressing the “horrible tragedy” of the invasion of Ukraine by Russia, Neumann said, “it’s just a complex business operating dynamic right now” due to economic sanctions, challenges with payments, on top of an already-tricky regulatory environment. “It became just too difficult to, we thought, operate relative to the opportunity. And obviously there’s the moral and other overlay.”
Russia represents less than 1% of overall company revenue, the CFO noted, though he maintained that the decision was made for more than just financial reasons.
Netflix in January reported having about 222 million global subscribers as of the end of 2021. The fact that the subscriber number missed Wall Street and company forecasts, plus the company’s projection for softness in the current quarter, walloped Netflix stock, sending it down more than 20% to a level from which it has not yet recovered. Neumann sought to reinforce the company’s recent message that it should not be judged merely on subscriber growth.
He pointed to what the company considers to be vast room for growth, with Netflix currently accounting for less than 10% of viewing on TV sets. Plus, he noted, there are 700 million pay-TV households and 1 billion broadband households outside of China, where Netflix does not operate. “We still think we’re in early days,” he said.
In North America, the most mature of all territories, Neumann said being profitable despite a plateau in subscriptions should be seen as a harbinger. “I think it would be great if it’s a leading indicator” for the global business, he said, noting the company has penetration of roughly 60% in the U.S., with an industry-low churn rate. If the U.S. were to be used as a basis for projections, it “very quickly gets us to a business with about a half-billion members,” he said.
The competition faced by Netflix in the U.S. “just reinforces our conviction in the long-term opportunity,” Neumann said. “The competitive intensity here is as strong or stronger than anywhere else in the world. And to be clear, competition has always been a part of our business. From the founding of Netflix, there have been competitors.” While direct-to-consumer outlets like Disney+, HBO Max and Peacock are just a couple of years old, Netflix has battled them in the past but is now simply “competing with them in new ways.”
While many streaming rivals have eschewed the binge-release model, Neumann said the company’s decision to release Season 4 of Stranger Things in two installments does not signal a paradigm shift. “We’re trying to improve our content offering to our members a little bit every day,” he explained. “There are certain returning seasons of content where we think it can improve the member experience to give them two batches of the content. We’re experimenting all the time and learning.”
Given his role overseeing the financials of the company, Neumann hastened to add that those experiments with release patterns are not designed to “smooth quarters” or minimize volatility on the balance sheet.
Must Read Stories
‘Dune’ & ‘Encanto’ Lead VES Awards With Four Wins Each; ‘Foundation’ Tops TV: Full List
‘Bridgerton’ Creator Chris Van Dusen Boards ‘They Both Die At the End’ Series Adaptation At eOne
MCU Actress & Oscar Nominee Florence Pugh Eyed For Princess Irulan Role In ‘Dune’ Sequel
Paramount Players Merged Under Studio Co-Heads Mike Ireland & Daria Cercek; Jeremy Kramer Out
Read More About:
Source: Read Full Article