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Netflix executives offered some of their most detailed commentary yet on Disney’s stepped-up streaming efforts during their interview with fourth quarter earnings.
They spoke during the company’s earnings video interview, which is hosted by a single Wall Street analyst and posted on YouTube, after the company reported strong financial results for the fourth quarter. Despite growing competition, Netflix added 8.5 million subscribers over the period and 37 million in 2020, well ahead of expectations. That brings it to 203.7 million, well ahead of Disney +’s 86.8 million, but executives were nonetheless a little more open than usual to seeing mouse ears in the rearview mirror.
“It’s super impressive what Disney has done,” said founder and co-CEO Reed Hastings. “It’s an incredible execution for a pivoting holder… so it’s great. And it shows that members are interested and willing to pay more for more content because they crave good stories. And Disney has great stories. “
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Inside the company, he continued, “It motivates us to increase our membership, increase our content budget and it will be great for the world that Disney and Netflix compete show by show, movie by movie. movie. We’re very excited to catch them in family entertainment – maybe overtake them, we’ll see, a long way to go just to catch them – and keep our lead in general entertainment which is so empowering. An example, he added, is the one created by Shonda Rhimes Bridgerton, “That I don’t think you’re going to see on Disney anytime soon.”
Hastings ‘reference to Rhimes’ escape had a little more mustard on it since Rhimes decamped from Disney-owned ABC, his home for Grey’s Anatomy and other series, to sign a successful contract on Netflix. The show appears to be on the cusp of a makeover and would have been watched by 63 million homes in its first 28 days, ranking fifth in the all-time original series launch on Netflix.
Moderator Kannan Venkateshwar, an analyst at Barclays, elicited strong reactions from four of the five executives attending the results interview when he asked about Disney. The nature of the answer has a lot to do with how he phrased the question. “It almost feels like Netflix is underperforming its potential and has to work a lot harder to reach a comparable scale,” the analyst said. “Are there reasons the Disney numbers aren’t a benchmark for Netflix and why the company can’t make it happen?”
Founder and co-CEO Reed Hastings, although he was smiling, repeated the word “underperforming” with false astonishment and showed some of his well-developed backbone as a tech founder. He referred to the dashboard figuratively, noting the 40% annual rate of return to Netflix shareholders since the company went public in 2002. “If it’s an underperformance, we’ll do more.” , he said with a tight smile.
“When you talk about it in competitive terms, you think of Christmas Day 2020,” co-CEO Ted Sarandos said of the streaming landscape. On vacation, due to the closure of the Covid-19 theater, Wonder Woman 1984 and Soul debuted on the HBO Max and Disney + streaming services, respectively, with WW84 also receiving a small amount of theatrical play. Viewing both was healthy, on top of Netflix’s heavy consumption during the holidays, Sarandos said, proving that supplementing Netflix with additional subscriptions is a “super healthy dynamic.”
Spencer Wang, who heads investor relations and also participates in quarterly earnings talks, added his own perspective. “Don’t take anything away from what Disney did because it’s amazing and I’m a happy customer myself, but 30% of their 87 million paying subscribers were Hotstar (in India), which I think we all recognize is different, ”he said. He went on to highlight other competitive advantages for Netflix, including its higher global penetration and revenue per user that is more than double that of Disney, based on recent quarterly figures.
Interrupting with a chatty laugh, Sarandos teased Wang as a way to diplomatically redirect the conversation. Along with COO and Product Director Greg Peters, who also noted the “virtuous circle” created by Netflix’s income, Wang notably left Hastings’ “super impressive” start for the Disney part of the interview. “You took the bait!” chided the co-CEO. “Kannan was trying to make our chest pound even harder.”
Before the interview, it had been striking to see the company’s position on competing services in its quarterly letter to shareholders. Historically, the document has made devious references to Netflix’s main competitors being video games. Fortnite or even sleep. This time, he recognized the media contestants by name and even highlighted Disney’s progress with an exclamation mark. “Now is the perfect time to consume entertainment,” the letter said.
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