Reed Hastings and Ted Sarandos’ message was clear: don’t expect Netflix to jump into the M&A media frenzy just because everyone else is.
The Netflix co-CEOs showed their usual confidence on Tuesday in a 41-minute video interview to discuss the company’s second-quarter results. Figures showed Netflix lost 430,000 subscribers in the United States and Canada for the quarter. Its near-term global growth projections are slowing somewhat amid the turmoil caused by the pandemic. But this is nothing to worry about in Los Gatos, reassured the leaders.
“Our company’s long-term growth models are remarkably consistent and stable,” said Spencer Neuman, Chief Financial Officer of Netflix.
Netflix is responding to the changing competitive landscape of streaming by making a big leap into video games. The plan is to offer its 207 million+ global subscribers access to games and related content as an add-on, which means no additional charges on subscribers’ monthly bills.
Lest this be portrayed by Wall Street or rivals or media reporters, Hastings expressed his vision to add new layers to Netflix’s global business. The company has grown into consumer products, an ecommerce site, and now games, but none of these are designed to be a profit center on their own. This is to support the main mission of attracting and retaining subscribers to the basic subscription product.
“We are a single product company with a bunch of supporting elements that help this product deliver incredible satisfaction to consumers and a monetization engine for investors,” Hastings said.
The focus on improving the core product without expanding too much into other areas has been key to Netflix’s meteoric growth. Asked by Fidelity Investments analyst Nihdi Gupta to know if he was considering a merger and acquisition activity given the market conditions, Neumann did not hesitate to answer: “He must accelerate our strategy with a low cost of distraction. . We’re pretty picky.
Sarandos added: “It has to be right at the strategic heart of what we do.” Plus, Netflix knows what it does well and what it doesn’t do at all. This is one of the factors that has kept them from going too far in the area of sports rights.
“Our core product is on-demand and ad-free,” Sarandos said. “Sport tends to be live and full of publicity.”
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Buying a studio with a large IP vault, like Amazon does with its $ 8.5 billion pending purchase from MGM, would fit that description. But Sarandos doesn’t look like an executive buying a transformational deal – despite heated speculation that more Hollywood brands will change hands in the near future.
Referring to media mergers and acquisitions, Sarandos reflected, “When are they one plus one equals four, versus what most of them tend to be, which is one plus one equals two.”
Hastings pointed out that Disney’s acquisition of 21st Century Fox in 2019 was a groundbreaking event that made Disney more competitive as a general streaming entertainment player beyond its children and family. But the surprise mega-merger of WarnerMedia and AT & T’s Discovery? Not so much, according to Hastings.
“Time Warner-Discovery, if it passes, it helps [them compete] some but not as important as Disney-Fox, ”Hastings said. As he’s said many times before, Hastings pointed out that streaming, just like television in the past, is not by definition a zero-sum game. “There is a lot of room to grow without harming other streamers,” he said.
Sarandos was enthusiastic that even with a hectic quarter affected by issues related to the ongoing pandemic, the upcoming leak is long and lucrative.
“We are only scratching the surface of the potential of the business,” he said. The Netflix team has the advantage of being able to focus on improving their core product “while everyone else is trying to figure out how to unwind companies and restructure companies and bring together huge populations of employees,” he said. declared Sarandos.
(Pictured: Ted Sarandos)