With its growing investments in original programs, Netflix expects to burn about $2 billion of its cash flow this year — up from $1.7 billion last year — execs said in a quarterly conference call with Wall Street.
But they insist that it’s money well spent because it helps the company control its destiny.
“It’s a good thing for the shareholder,” CFO David Wells says. “We control more of the rights and the global advantages.”
Chief Creative Officer Ted Sarandos adds that “we need to have great content for our members, and sometimes we don’t have that.” By ordering originals, Netflix removes what he calls “the studio mark up” enabling it to put “more of that [investment] on the screen.”
The strategy has particularly helped in comedy: It was “a category that we primarily bought second window from other people just a few years ago,” he says. Now he calls Netflix’s original productions “a subscriber-acquisition driver” for the company.
Netflix Shares Rise On Surprisingly Strong Q4 Sub Growth
This quarter the service will have stand-up shows featuring Amy Schumer, Dave Chappelle, Trevor Noah and Jim Norton — with Chris Rock and Jerry Seinfeld coming in later.
He’s also upbeat about unscripted programs including Ultimate Beast Master and Abstract, which is “a variant on Chef’s Table but about design.”
Execs talked up productions that succeeded in appealing to global audiences including The Crown.
“There’s enormous interest in the royal family around the world,” Sarandos said. “In the UK it was celebrated as something that only the BBC could do just a couple of years ago. But also in countries throughout Asia and Europe, where people obviously love that story — and, more importantly, how it was told.”
CEO Reed Hastings said the company’s “big picture is remarkably steady.” But after a reporting what he calls a “huge quarter in Q4” in subscriber growth, he warned that the current three-month period will offer “a little bit less.”
In the last three months of 2016 many subscribers who canceled after Netflix phased in a rate hike returned. “We tend to look less at a specific quarter’s performance than over a six- or 12-month period in terms of what are the real trends here,” Wells sai9d.
Hastings also believes in “the steady discipline of staying on our game. … There’s no real step function.”
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