They spoke during the company’s discussion of results, which is moderated each quarter by a single Wall Street analyst and posted to YouTube, after the company reported strong figures for the fourth quarter. Despite mounting competition, Netflix added 8.5 million subscribers in the period and 37 million in 2020, well ahead of forecasts. That brings it to 203.7 million, well ahead of the 86.8 million for Disney+, but nevertheless executives were a bit more forthcoming than usual about seeing mouse ears in the rear-view mirror.
“It’s super-impressive what Disney has done,” founder and co-CEO Reed Hastings said. “It’s incredible execution for an incumbent to pivot … so that’s great. And it shows that members are interested and willing to pay more for more content because they’re hungry for great stories. And Disney does have some great stories.”
Inside the company, he continued, “It gets us fired up about increasing our membership, increasing our content budget and it’s going to be great for the world that Disney and Netflix are competing show by show, movie by movie. We’re very fired up about catching them in family animation — maybe eventually passing them, we’ll see, a long way to go just to catch them — and maintaining our lead in general entertainment that’s so stimulating.” An example, he added, is the Shonda Rhimes-created Bridgerton, “which I don’t think you’re going to see on Disney anytime soon.”
Hastings’ reference to the Rhimes breakout had a little extra mustard on it since Rhimes decamped from Disney-owned ABC, her home for Grey’s Anatomy and other series, to sign a blockbuster deal at Netflix. The show appears to be on the verge of a renewal and was reportedly watched by 63M households in its first 28 days, ranking as the No. 5 all-time original series launch on Netflix.
Moderator Kannan Venkateshwar, an analyst with Barclays, drew sustained reactions from four of the five executives participating in the earnings interview when he asked about Disney. The nature of the response had plenty to do with the way he framed the question. “It almost feels like Netflix is underachieving versus its potential and has to work a lot harder to get to comparable scale,” the analyst asserted. “Are there any reasons why the Disney numbers are not a benchmark for Netflix and why the company can’t get there?”
Founder and co-CEO Reed Hastings, though he was smiling, repeated the word “underachieving” with mock-astonishment and displayed a bit of his well-developed tech-founder backbone. He figuratively pointed to the scoreboard, noting the 40% annual rate of return to Netflix shareholders since the company went public in 2002. “If that’s underperformance, we’ll do more of that,” he said with a tight-lipped smile.
“When you talk about it in competitive terms, you think about Christmas Day 2020,” co-CEO Ted Sarandos said of the increasingly crowded streaming scene. On the holiday, due to Covid-19 theater closures, Wonder Woman 1984 and Soul debuted on streaming services HBO Max and Disney+, respectively, with WW84 also getting a small amount of theatrical play. Viewing for both films was healthy, on top of strong Netflix consumption through the holiday, Sarandos said, proving that customers’ supplementing Netflix with extra subscriptions is a “super-healthy dynamic.”
Spencer Wang, who heads investor relations and also takes part in the quarterly earnings interviews, added his own perspective. “Not to take anything away at all from what Disney’s done because it’s been amazing and I’m a happy customer myself, but 30% of their 87 million paid subscribers were Hotstar [in India], which I think we all recognize is a different service,” he said. He went on to stress other competitive edges for Netflix, including its higher penetration globally and revenue per user that is more than twice Disney’s, based on recent quarterly numbers.
Breaking in with a garrulous laugh, Sarandos teased Wang as a way of diplomatically redirecting the conversation. Along with COO and chief product officer Greg Peters, who also noted the “virtuous cycle” created by Netflix revenue, Wang had notably departed from Hastings’ “super-impressive” start to the Disney portion of the interview. “You took the bait!” the co-CEO chided. “Kannan was trying to get us to chest-pound some more.”
Prior to the interview, it had been striking to see the company’s stance on rival services in its quarterly letter to shareholders. Historically, the document has made sly references to Netflix’s main competitors being the video game Fortnite or even sleep. This time, it acknowledged media competitors by name and even accentuated Disney’s progress with an exclamation mark. “It’s a great time to be a consumer of entertainment,” the letter raved.
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