All public companies try to put a good spin on their quarterly earnings, no matter how dubious. Netflix spins with the best of them.
For years, as it binged on debt to acquire and create content, it worked hard to keep Wall Street focused on its growing subscriber count, making it the headline number in its earnings report even though it has no direct correlation with GAAP reporting.
Now, as its domestic subscriber growth slows in the face of increased competition from the likes of Disney and Apple, it’s trying to shift the focus to other metrics, like the number of Academy Award nominations it’s original feature films are earning.
In an earnings interview this week behind its Q4 results, in which domestic subscriber adds came in below Wall Street’s expectations, CEO Reed Hastings and content chief Ted Sarandos, trumpeted Netflix’s industry-leading 24 Oscar noms, paced by Martin Scorsese’s “The Irishman,” with 10, and Noah Baumbach’s “Marriage Story.”
“It’s exciting that we ended up being the most-nominated studio at the Oscars with those films. The most exciting thing is those films are all incredibly popular with our members as well,” Sarandos said.
Award nominations, of course, like subscriber counts, have no direct correspondence to earnings. But Hastings insisted there is a business logic to pursuing them:
[Y]ou'll see that if we further our reputation for doing well for content -- sorry, for talent by being one of the best in the world at winning awards for our talent, then the business benefit is that we will win deals that we wouldn't have otherwise won for incredibly entertaining content. So think of all of our awards work as a really smart way to make us the best home for talents in the world.
There is certainly an element of puffery to Netflix’s touting of its Oscar prowess. But Hastings is not wrong in emphasizing its significance to the competition Netflix now finds itself in.
Unlike music streaming, where every DSP has essentially the same library of content and must find other ways to differentiate themselves, video streaming is built on exclusive programming. As the number of video streaming services increases, further stretching consumers’ entertainment budgets, having high-quality exclusive content is essential to remaining competitive.
The best way to ensure a steady flow of high-quality exclusive content is to attract high-quality talent to create it. While a big checkbook can get you some deals, award nominations is how the creative community in Hollywood keeps score.
Keeping its growing reputation as a place to do Oscar-, Emmy- and Golden Globe-caliber work in an artist-friendly environment has real strategic value to Netflix.
That’s especially the case today in light of the competitive weight class it is now coming up against. In addition to their ability to create high-quality content, Disney, WarnerMedia and NBCUniversal all have formidable built-in marketing and promotion platforms from which to launch their streaming services.
Netflix has been an effective marketer over the years, both in terms of its use of paid media (mostly online) and in garnering earned media. You don’t see Reed Hastings pouring any cold water on the Netflix-and-chill meme.
But it isn’t going to out-market Disney. Polishing its reputation as the new Tiffany Network isn’t just about bragging points.
Notable
Booby prizes
Speaking of awards, the Grammys are teed up for this weekend but there is now a giant cloud hanging over the festivities. Recently ousted head of the Recording Academy, Deborah Dugan has filed a lawsuit against the organization, and boy, howdy is it a lawsuit. Perhaps the most damaging charge Dugan levels, at least as far as the Grammys themselves are concerned, his her claim that the nomination and voting process is ripe with corruption. That could make for some awkward acceptance speeches.
More musical mishegas
After being rebuffed by the RIAA, FCC commissioner Michael O’Reilly sent letters this week directly to Warner Music, Sony Music, and Universal Music demanding information about their payola-prevention efforts. “Even the most cursory review of consumer complaints and assertions provides cause for concern regarding the persistence of payola,” O’Rielly wrote. “And, in recent months, some artists have responded forcefully against accusations of payola, which speaks to the seriousness of the issue.”
Full houses
Mark Cuban, for owner of Landmark Theaters, has a different take from my previous post on the future of movie theaters. Speaking at the NATPE convention in Miami this week, Cuban said, “There’s going to be a segment of movies that aren’t going to be there and that’s going to make it a little more challenging…I think the number of theaters will decline, but that will improve the business for those that remain.”
‘A very naughty boy’
Sad news for Monty Python fans: Terry Jones passed away this week at 77. In addition to writing and performing with the troupe, Jones directed or co-directed several of their films, including his masterpiece, “Life of Brian,” in which he also starred as accidental messiah’s cantankerous mum. Blessed are the Greeks indeed.