Netflix Mocks NBC Exec’s ‘TV Like God Intended’ Line
You may love Netflix for Making a Murderer or Orange is the New Black, but the company knows how to do more than make original TV shows. It also knows how to drop some serious shade.
Netflix released a letter to shareholders this afternoon as part of its fourth quarter earnings announcement. In it, the company discussed its growing international business, shared its latest revenue numbers, and said users watched 42.5 billion (yes, billion) hours of Netflix in 2015. But the best part of the letter wasn’t in the numbers.
“(A)n NBC executive recently said Internet TV is overblown and that linear TV is ‘TV like God intended,’” Netflix’s executives wrote in the letter.
“Our investors are not as sure of God’s intentions for TV, and instead think that Internet TV is a fundamentally better entertainment experience that will gain share for many years.”
The quip was a sly reference to NBC’s president of research and development, Alan Wurtzel, who defended the broadcast model of TV (yes, by citing God) at the Television Critics Association press tour last week. Wurtzel also shared data claiming to shed light on viewer numbers for some of Netflix’s original shows.
Needless to say, Netflix wasn’t happy about the numbers nor the comments.
So… mic drop? Netflix is aware, of course, that the competition is heating up to serve up shows and films via subscription streaming services. “The challenge for traditional media companies, most of whom see the future pretty clearly, is to use the revenue from Netflix and other SVOD (streaming video on demand) services to fund both great content and their own evolution into Internet TV networks,” the letter continued. “Seeso, BBC iPlayer, Hulu, CanalPlay, HBO Now, and CBS All Access are the beginnings of these efforts.”
But the company remains convinced that the future looks more like streaming than traditional TV. Either way, probably a good idea to keep God out of this.
Netflix is now available in every major country in the world—well, that is, except for China. And that may not change anytime soon.
In a call with investors today to discuss the company’s fourth quarter earnings, Netflix CEO Reed Hastings said that the company is not in a hurry to expand into China. “We have a very long term look. It could be a many years discussion or it could happen faster than that,” Hastings said. “We’re going to take our time.”
Hastings compared Netflix’s entrance into the Chinese market to Apple’s iPhone. “The clearest example is the iPhone, which took many years for Apple to get approval for that,” he said. “And now it’s a very large business for Apple.
“And so, our view is, if we’re looking out for the business a decade from now, we should be very patient and continue to build those relationships, and listen and learn.”
Hastings also said that, if Netflix were to enter China, it would have to abide by the same government-mandated content rules as other Chinese and Western entertainment companies. “We’d be on a level playing field as all other services,” he said.
For now, Hastings adds, Netflix has more than enough on its plate. The company expanded to 130 new countries earlier this month, which means it has plenty of other places to where it can work to build audiences.
Netflix users outside the US have not been afraid to speak their minds after the company said it would be cracking down on “unblockers” that circumvent restrictions on where movies and shows can be streamed. In a call with analysts today after the company released its fourth-quarter earnings, CEO Reed Hastings said that he doesn’t think the move will hurt the growth of its worldwide subscriber base, which currently numbers 75 million.
“I don’t think we’ll see any impact,” Hastings told investors during a call today. “We’ve always enforced proxies with a blacklist, now we’ve got an expanded and enhanced blacklist.” Along with the blacklist, he said the company would be using other unspecified techniques to block virtual private networks, better known as VPNs, that allow overseas subscribers to, for example, view Netflix as if they were in the US, where licensing deals often mean a wider selection of content.
But if blocking VPNs won’t affect subscriber numbers one way or another, why do it? “You can call it placating—you can call it catering to their desires. You know, they have legitimate desires,” Hastings said of content owners. “If we license content in Canada, it’s not fair for us or for our customers [who are outside of Canada] to be getting that if we’ve only paid for Canada.”
Suffice to say, not all Netflix users are terribly sympathetic to that argument. Even as the service has expanded to nearly every country in the world (with the notable exception of China), Netflix remains vastly different in different countries. Users in South Korea, Portugal, Israel, and the UK, for example, have all told WIRED they don’t have the same wide selection of shows and films as Americans.
While Netflix seems hopeful that its original series and movies will be enough to keep (and bring) users to its service, international users have long complained that in the past not all Netflix originals, such as House of Cards, were even offered internationally. (House of Cards was not originally released in certain European companies due to licensing agreements with local distributors that were made when the company first ventured into originals.)
Hastings did say the company was working to address disparities by hatching global licensing deals. In the meantime, however, Netflix isn’t too worried that blocking VPNs will drive more users to pirate the content they will no longer be able to get.
“Geo-filter hacking and piracy are maybe distant cousins at best,” Netflix chief content officer Ted Sarandos said. “I think of geo-filter hacking as people hacking to pay whereas piracy is people hacking not to pay.”
Netflix is gunning for, well, pretty much everyone.
On the company’s third quarter earnings call today, Chief Content Officer Ted Sarandos said that Netflix is “being more adventurous in the genres that we’re going into” when asked if the company would consider news. Already the company is moving beyond standard scripted fare with, for example, plans to stream Chelsea Handler’s weekly talk show early next year.
“What’s the likelihood that we compete with VICE in the next two years?” Netflix co-founder and CEO Reed Hastings interjected.
“Probably high,” Sarandos said.
But, don’t worry ESPN, Netflix isn’t planning to get into sports. (Yet.)
Netflix is blaming its lower-than-expected US subscriber growth to changes to Americans’ credit cards.
In a letter to shareholders, the company said its over-optimisitic estimates for its third-quarter results were “driven in part by the ongoing transition to chip-based credit and debit cards.” In other words, the company is claiming that the number of US subscribers to Netflix didn’t meet what the company had expected for the third quarter in part because, well, fewer people than expected paid up.
“I read this Netflix quote and I scratched my head and thought, ‘What?’” says Ken Oros, a senior associate at The Strawhecker Group, which focuses on the electronics payments industry.
In the past few months, credit card issuers have been transitioning from cards without chips to ones with them, known as EMV technology, to help curtail credit card fraud, which you may have noticed. Card users have been receiving these new cards in the mail as banks rushed to meet the October 1 deadline. Since then, new liability rules have taken effect that now hold merchants who don’t switch over to the new technology liable for credit card fraud.
To industry experts watching the country’s shift to EMV, Netflix’s statement is somewhat surprising. After all, while brick-and-mortar businesses have had to update their processing systems to account for the new cards, the way we pay at digital businesses remains pretty much unchanged.
“It sounds like a bunch of customers received new cards at once and their old cards on file were inactive,” says Forrester analyst Sucharita Mupuru-Kodali. “Most people may not even realize all the things they need to change for autobilling and they forget until the next time they use Netflix.”
Regular users, however, would likely soon realize if they weren’t able to sign into their accounts because they hadn’t paid their bill or if their cards were no longer active. “I can’t imagine it’s meaningful and, even if it is sizable for one quarter, I’m sure people will realize soon enough,” she says. “Anyone who churns out probably wasn’t using the service much in the first place.”
Don’t Give ‘Em A Chance to Think
The statement is especially perplexing because credit card companies have been sending users new cards for quite some time, and many users won’t actually have their numbers changed. Even if users do get new cards, some old cards remain active in the interim, meaning that the information they gave to Netflix wouldn’t necessarily automatically be void.
“Right now the larger issuers are leading the way with card reissuance, and many of these have the ability to tie old card numbers to reissued cards,” says Aite Group’s retail banking research director Julie Conroy. Many issuers will also continue to approve recurring charges for a period of time, she adds, because they know that card holders may forget to update their credit card information with merchants.
“I don’t think a significant customer churn could be blamed on the chip migration,” she says.
When pressed on the issue during the earnings call, Netflix chief financial officer David Wells clarified the statement from its letter about why US subscriber growth may not have met expectations. “We think it’s a contributor,” Wells said of the chip-card transition. “It’s likely multi-factored, there may be other things going on here, but certainly the transition to the chip cards is not helping and that has to be a factor.”
He went on, “Any interaction where you have to update your payment method and are presented an opportunity not to do that, it just means there’s more noise introduced.” In other words, Netflix doesn’t want to give subscribers any opportunity to even briefly reconsider continuing to pay their monthly bill. Especially not after that third season of House of Cards.
Netflix appears to be killing it.
The video streaming giant reported today that it has added more subscribers than expected around the world during its most recent quarter, generating more than $1.6 billion in revenue. And Netflix says the good news is in large part thanks to its popular original content.
“Nearly ninety percent of Netflix members have engaged with Netflix original content,” the company’s executives say in a letter to shareholders explaining that its own shows have helped fuel subscriber growth.
In the past few months, Netflix has launched an increasing number of high-profile original series, including Marvel’s Daredevil, Sense8, and Grace and Frankie. And it plans to keep on going, expanding to launch its first original feature films later this year.
“It’s been working,” Netflix Chief Content Officer Ted Sarandos said in a call with analysts after the company released its earnings numbers this afternoon. “It’s been helping grow the brand. More importantly, it’s been driving viewing hours. Relative to how else we’d spend the money, it’s been a very efficient investment.”
Notably, as Netflix continues to grow internationally—launching in Japan, Spain, Italy, and Portugal later this year—the company has made clear that it’s investing in originals that have cross-cultural appeal, including the upcoming Club de Cuervos, the company’s first non-English language original, as well as Narcos, a series about the drug trade set in Colombia and featuring a Latin American cast. Next step? World domination.
Netflix’s co-founder and CEO Reed Hastings really doesn’t care what you think. You might even say he DGAF—at least judging by this sweater.
During a video conference call today to discuss his company’s quarterly earnings, Hastings wore a lime-green knit sweater in the middle of July featuring BoJack Horseman, Netflix’s animated Hollywood satire about a talking horse. This stood out in, um, contrast to Hastings’ fellow executives. Chief Financial Officer David Wells and Chief Content Officer Ted Sarandos wore more traditional work-appropriate button downs and blazers.
Netflix shares were up nearly ten percent in after-hours trading.