Netflix isn’t interested in presenting sports matches, but news is a different story, executives said in a wide-ranging conference call with Wall Street that seemed to allay some investor concerns about today’s weaker-than-expected Q3 report. The stock price, which initially fell more than 7% in post-market trading, recovered to -1.2% after the call.
The likelihood that Netflix will offer news programming to rival Vice — more on the features side than breaking news — is “probably high,” Chief Content Officer Ted Sarandos said, when prodded by CEO Reed Hastings.
It’s still unclear whether Disney’s upcoming Star Wars: The Force Awakens will run on Netflix in 2016 when its streaming deal with the studio kicks in. “It’s up to Disney. … It’s an ongoing discussion,” Sarandos says. As of now, the film — which premieres domestically in theaters on December 18 — would be the last still covered by Disney’s expiring deal with Starz.
Broadly speaking, execs say studios aren’t souring on Netflix despite high-profile programming deals that Fox, Sony, Turner and AMC Networks recently made with rivals including Amazon and Hulu. There’s “a lot of caution,” Sarandos says, but it’s “roughly business as usual.”
He also urged investors not to read too much into the recent decision to cut ties with Epix, which is owned by Viacom, Lionsgate and MGM. The premium channel “dramatically increased their cable distribution,” Sarandos says, while Netflix wants exclusive content. “Our strategic initiative and their’s were diverging. … This isn’t a studio problem.”
Hastings says he isn’t concerned that two of his biggest broadband distributors — Comcast and Verizon — recently launched their own streaming services. “What is known as channels will become apps, and all of these providers need great apps,” he says. As long as Netflix’ programming is strong, “it doesn’t matter that there are also shows on Verizon or Comcast.”
He also professes to be indifferent to intensifying competition from Amazon, Hulu, HBO and Showtime. “Sure, there are competitors, but there’ve always been,” the CEO says. “Netflix keeps growing because we keep improving.”
The company appears to be no closer to providing performance metrics for its original shows — which execs always seem to describe as successes. “When we say a show is successful it’s because, relative to the investment, it’s successful,” Sarandos says. “We have not had content write-downs. When we’ve been wrong, it’s more to the upside.”
That’s also true overseas, where Netflix also won’t discuss its performance in specific countries. “Some are doing better than others, as you would expect,” Hastings says. He broke his own rule when it comes to Brazil, which he described as a “rocket ship.” The reason: “In a tough economy, a value product like Netflix is appreciated.”
As for the recent price increase in the U.S. — where the Standard service rate was raised $1 a month to $8.99 — execs say that mostly reflects their desire to offer more distinct price tiers depending on video quality. Hastings says he makes “no prognostication for the future on pricing.”
CFO David Wells amplified Netflix’s claim that its lower-than-expected domestic subscription growth in Q3 was due to banks’ shift to chip-based credit cards. In some cases people had to change their credit card numbers, and that “means there’s more noise introduced.” The country is about a third of the way through that transition.
He acknowledges that “there may be other things going on here, but the transition to chip cards is not helping.”