People love a good fight, and Netflix CEO Reed Hastings says he believes the looming streaming wars will be a major net positive for every player entering the space.
It’s a positive sentiment — one that comes just a couple of hours after Netflix posted a troublesome earnings report. The company lost subscribers in its American market for the first time since 2011, seeing a drop of roughly 130,000 paid accounts. Although the company added 2.7 million subscribers globally, that’s only half of what executives predicted they would see. The concerning earnings report led to conversations among analysts and reporters about whether Netflix executives could put investors’ concerns to bed as the streaming wars — a term that refers to incoming competition for direct-to-consumer TV products from companies like Disney, WarnerMedia, Apple, and NBC Universal — kick off.
Hastings acknowledged the streaming wars phenomenon on tonight’s investors call. Despite what people might think, he says, it’s an overall positive for the industry.
“It’s never been a better time for talent,” Hastings said. “They get to bid themselves off between us, Disney, Amazon, etc. But it’s not a zero-sum competition. I think everybody gets that. People will subscribe to multiple shows. It’s a great competition that helps build the industry, and the advantage of having something catchy like the ‘streaming wars’ is it draws more attention. And because of that, consumers shift more quickly from the linear TV to the streaming TV.”
As companies look to lock down large-scale deals for original content, bidding over individual showrunners, directors, producers, and writers for exclusivity deals has become increasingly heated. Creators Ryan Murphy, Shonda Rhimes, Greg Berlanti, and J.J. Abrams have signed nine-figure deals with streaming companies. There’s also a fight over top-notch licensed content, like Friends and The Office. Both are leaving Netflix soon, and heading to WarnerMedia and NBC Universal’s respective streaming platforms. The shows reportedly cost WarnerMedia and NBC Universal north of $400 million to keep for several years. The company saw part of this coming years ago, Netflix’s chief content officer Ted Sarandos said on the same call, and started planning.
“Over six years ago we got into original programming, betting that the licensed program would be more difficult to come by, and that maybe the sources of content to license from would be under different levels of strain,” he said. “That has paid off. It’s been very important to the business to continue pushing down that road. More international, more global, more original film. We think we’re betting in all the areas of content that consumers love.”
Hastings isn’t concerned either. When asked about how big he sees Netflix becoming globally, especially as the company hits a saturation point in the States and expands into international markets, he had one competitor in mind. It wasn’t WarnerMedia, NBC Universal, or even Disney.
“We do wonder in the fullness of time, ‘Can we be as big as YouTube?,’” Hastings said. “YouTube is seven times larger than us, roughly, in viewing hours, and a phenomenal service. Of course, it’s free. So the real question is, can we produce enough content that people are willing to pay for?”
While YouTube may be Netflix’s top competition — it used to be sleep, and then it was Fortnite — other companies are looking to compete with Netflix directly. Disney is poised to be one of the bigger threats, especially since it owns Hulu, but will take years to match Netflix’s subscriber base, either in or outside of the United States. WarnerMedia and NBC Universal haven’t spoken much about international growth, and overseas markets have become a primary focus for Netflix. Chief content officer Ted Sarandos, said original Netflix series from Germany, Denmark, and Sweden “12 to 15 million global watchers.”
The key word is patience. Investors may be a little skittish after the recent earnings report, but Hastings says Netflix is in an excellent spot.
“In the beginning, there was Hulu, Amazon, YouTube, and Netflix, and we’ve all been growing at tremendous rates over the last 12 years,” Hastings said. “And we’re having a lot of new competitors enter over the next year. I think our position is excellent. If investors believe in internet television, then our position in that market is very strong.”
Source: Netflix CEO Reed Hastings calls Netflix’s position ‘excellent’ after a poor Q2
By Julia Alexander
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