A lot of tidbits from Netflix‘s quarterly conference call with analysts — including the fact that the final season of Breaking Bad won’t be available on the service until 2014. But one of the most interesting disclosures is that the execs want to back movies — which they would transmit to living rooms faster than conventional Hollywood productions do. The company is “actively looking at documentaries,” Chief Content Officer Ted Sarandos says, though he adds that he’ll “keep my mind wide open” for other genres. The company’s intrigued in part because it wouldn’t have to wait for its titles to sell on home video before it can stream them to subscribers. “Even though that window is moving, it isn’t moving aggressively enough,” he says. A more aggressive timetable “would be good for our members.” But he squashed a recent report in The Wall Street Journal that said Netflix might be interested in cutting a deal to offer NFL games. “We’re still not interested in sports,” he says, calling matches “primarily a linear experience.”
The online streaming and DVD rental service can take one putative securities class action out of its instant queue. A federal judge Tuesday dismissed the amended suit by investors claiming that Netflix played fast and …
Netflix shares are down about 3.6% this morning as investors digest its better-than-expected Q2 earnings, and slightly disappointing subscriber growth numbers. But CEO Reed Hastings remains sanguine, telling CNBC that with a sub fee of $7.99 a month “our model works great as is.” …
“We’re fundamentally in the membership happiness business as opposed to the TV business,” is the way CEO Reed Hastings described his view in Netflix’s first video conference call for analysts. CNBC’s Julia Boorstin and BTIG analyst Rich Greenfield pitched the questions, on a Google Hangout, synthesizing contributions from analysts. …
Investors rarely reject management’s views on such matters, especially at a time when a company’s stock is soaring. Yet despite the 250% increase in Netflix‘s price during the past 12 months, shareholders today resoundingly supported several changes to democratize the way the company is run. A motion to repeal the classified board — where the seven directors serve multiyear terms, and only a few are up for re-election each year — won with 88.4% support. More than 80% said that uncontested board candidates should only be elected if they win a majority of the vote. A similar number want shareholder motions to pass with a majority vote — ending requirements for a supermajority. And 73% want Netflix’s chairman to be an independent director, which would mean that Reed Hastings couldn’t be both CEO and chairman.
CNBC sat down with Netflix CEO Reed Hastings on the sidelines of the AllThingsD conference in Rancho Palos Verdes, CA this morning. Hastings was of course mum on providing ratings data for its new original series Arrested Development, which premiered this week, saying the company was more interested in …
UPDATE, 3:10 PM: Clarifying statements from the involved parties have been flooding in since last night’s news about Netflix losing hundreds of movies from its streaming service beginning today. Reports originally said the vacating titles were from Warner Bros, but it turns out the majority were “older features that were aggregated by Epix,” a Netflix spokesman said this afternoon. Epix’s two-year exclusive deal with the streaming service expired in September; content from Epix — owned by Paramount, Lionsgate and MGM — also streams on Amazon Prime Instant Video. A source tells Deadline that that the number of expiring titles is closer to 1,000, rather than the 2,000 figure floating around online. “This ebb and flow happens all the time”, Netflix said. The company also said it is adding 500 more titles starting today, including Mission: Impossible 2.
CEO Reed Hastings says the original series “met all of (our) expectations” in becoming “a great success”, although he offered no concrete data to analysts today at the Morgan Stanley Technology, Media and Telecommunications Conference. House Of Cards, the political drama from Media Rights Capital, should be seen as “confirmation of the thesis that we can build something really important.” Its full value in leading people to subscribe to Netflix will become evident when the next season is available. “In the beginning you’re developing a foundation,” Hastings says. Still, he urged investors not to focus too much on House Of Cards‘ performance. “It’s our most viewed content today, but it’s not the center of the company. It may be the center of the PR for a while. That’s OK.” While he doesn’t want people to “think of us as the original content company,” Hastings made it clear that originals will be key to its growth. He talked up Hemlock Grove, a horror show that Netflix will offer in April. “It’s completely different” than House Of Cards, he says. “For many people in this audience, you’ll be grossed out. We’re going to push the boundaries.”
“There’s still an echo and a bruise” from summer 2011 when Netflix infuriated customers by splitting the streaming and DVD rental operations — dramatically raising the price for those who wanted to continue to receive both services — CEO Reed Hastings told analysts this evening. The strong subscription numbers from the last three months of 2012 show that “we’re out of jail” in consumers’ eyes. He adds, though that “we still have a year and a half of probation.” That may be one reason he didn’t want to touch a question about whether Netflix might raise its price — something that would please investors. “We’re happy at $7.99 [a month] and not speculating about the future,” Hastings says. He’s upbeat about general trends, though. For example consumers’ growing interest in tablets and Internet-connected TVs is “very helpful to us.”
Shares are up more than 30% in after-market trading following the company’s report of a Q4 profit — in contrast to the Street’s expectation for a loss. Netflix reported net income of $7.9M, down 77.6% vs the period last year, on revenues of $945.2M, +8%. Analysts expected revenues to come in lower at $934.1M. But the profit number was the big surprise: It amounts to 13 cents a share — a contrast to forecasts for a 13 cent loss. Investors also will be surprised by the subscription numbers. Netflix ended 2012 with 27.15M domestic streaming customers, an increase of 2.05M vs the previous quarter. That’s well ahead of company guidance, and analyst predictions for a 1.7M increase. International also was strong with 6.12M subscribers, +1.81M — beating the company’s most optimistic forecast for +1.44M. The good news extended to domestic DVD rentals. Netflix says 8.22M people subscribe, a loss of 380,000; the company had said it might lose at least 458,000. “The fact that our growth remains this strong despite intensifying competition, and our already substantial U.S. market penetration, underlines the large opportunity ahead,” CEO Reed Hastings and CFO David Wells say in their quarterly note to shareholders.
Netflix CEO Reed Hastings sometimes deals with investors in quirky ways — and one instance involving a Facebook posting may prove to be too quirky for regulators who oversee the securities markets. The streaming company just disclosed that SEC staff sent a “Wells Notice,” a warning that they will recommend to the commission that it institute a cease and desist proceeding or bring a civil action against Hastings for violating fair disclosure rules. Hastings says (yes, in a Facebook post) that the matter involves a message in July that Netflix subscribers streamed 1B hours of content in June. When Hastings made the comment on Facebook, he didn’t also communicate with the Street in a more formal, and conventional, way — with a public filing at the SEC. The filings are supposed to guarantee that companies disclose material information to all investors equally, not selectively to a few. Hastings says he believes that his posting to more than 200,000 Facebook fans “is very public, especially because many of my subscribers are reporters and bloggers.” In addition he says that “we think the fact of 1 billion hours of viewing in June was not ‘material’ to investors, and we had blogged a few weeks before that we were serving nearly 1 billion hours per month.” Although Netflix shares rose the day of his disclosure, Hastings says that the movement began earlier in the day and was “likely driven by the positive Citigroup research report the evening before.” He adds that he’s “optimistic this can be cleared up quickly through the SEC’s review process.”
Lots of Netflix investors seem to believe that the corporate raider has enough ideas and juice to revive the video rental company, which is struggling to secure its place in the media ecosystem. Shares only retreated 3% since Wednesday, when they popped 13.8% on the startling news that Icahn bought stock and call options that could give him 9.98% of the company. That resulted in widespread speculation that the legendary crusader for shareholder value has a plan to force Netflix to take a new direction following nearly a year and a half period during which Netflix lost 74% of its market value.
Well, if he does, then it will be interesting to see what it is — and how he might prevail if he crosses swords with CEO Reed Hastings. Icahn has fewer options than people think.
Potent anti-takeover provisions in Netflix’s by-laws would make it difficult to wage a hostile effort to take over the board. The company’s staggered elections mean that only a third of the directors are replaced each year. What’s more, Netflix doesn’t allow shareholders to call a special election to pick new directors. If Icahn continues to buy stock, the company can exercise what’s known as a poison pill — a provision that gives the board the right to flood the market with up to 10M preferred shares, diluting the value of his holdings. Corporate law in Delaware, where Netflix is incorporated, also bars companies from combining with a holder of more than 15% of its stock unless the holder has had the shares for at least three years — unless the board approves the transaction.
Investors see Netflix‘s disappointing subscriber growth as a glass half empty, and today CEO Reed Hastings apparently wants to persuade the public that it’s more than half full. That’s the only reason I can think of for announcing that the company has more than 30M subs globally including more than 25M in the U.S. It’s no surprise. The number is just a tad higher than the figures Netflix reported two days ago for the end of Q3: It said that it had 25.1M domestic streaming subscribers and an additional 4.3M abroad. That irked Wall Street because it meant the company had to cut its forecast for domestic sub growth in 2012 to about 5M from 7M. “We own it in terms of a bad forecast,” Hastings said on Tuesday. “But in terms of actual performance of the business, to grow 5 million net adds domestic is substantial and we feel good about that and about the growth next year.” That’s the theme he’s reinforcing today in a Facebook posting thanking Netflix customers.
Time Warner CEO Jeff Bewkes just threw a bucket of ice water on the idea that Netflix chief Reed Hastings raised last week in his quarterly letter to shareholders. “While we compete for content and viewing time with HBO, it is also possible we will find opportunities to work together – just as we do with other networks,” Hastings said. “Consumers who are passionate about movies and TV shows are quite willing to subscribe to multiple services.” Perhaps. But Bewkes isn’t interested in seeing HBO programming appear on Netflix just yet. “There are not talks going on between HBO and Netflix,” he said in his quarterly call with analysts. Although he acknowledges that “sometimes other relationships emerge over time” between competitors, when it comes to Netflix he added: “Not now.”