Netflix CEO ‘Surprised as Anyone’ That Fox Was Willing to Sell Assets to Disney
Netflix CEO Reed Hastings “was as surprised as anyone else that Fox is willing to sell” many of its assets to Disney (see 1712140038), he said told investors. “To have all those cable networks together in one bundle gives them tremendous pricing power against MVPDs,” Hastings said of Disney. “So I could see the attractiveness of it, and then they’re also putting together a Disney direct-to-consumer service which we think will be very successful because Disney has super-strong brands.” Netflix reported Monday that it beat its October forecast on Q4 net subscriber additions (see 1801220049). The stock closed 10 percent higher Tuesday at $250.29.
Sign up for a free preview to unlock the rest of this article
Timely, relevant coverage of court proceedings and agency rulings involving tariffs, classification, valuation, origin and antidumping and countervailing duties. Each day, Trade Law Daily subscribers receive a daily headline email, in-depth PDF edition and access to all relevant documents via our trade law source document library and website.
Hastings doesn’t see Disney/Fox “as a threat to us any more than Hulu has been, but it’s a great opportunity for them,” he said Monday. "It's possible" Disney/Fox will trigger a wave of consolidation, he said. “But honestly, we try as much as possible to focus on our own consumers, how do we do the shows that we can do and grow our business and these kind of big U.S. media company mergers are pretty peripheral to us.”
Chief Content Officer Ted Sarandos sees no “risk” that Disney- or Fox-owned content will be pulled from Netflix after the deal. “We have strategically and they have strategically been moving in this direction for a long time,” said Sarandos of Netflix and Disney. “One of the reasons we entered into original programming was that if we got to the place where networks didn’t want to sell us their content in second windows, that we would be replacing that with our own.” That’s “playing out in that direction,” he said. Disney announced plans in September to pull Disney, Lucasfilm and Marvel films from Netflix in 2019 in preparation for the launch that year of the Disney direct-to-consumer streaming service (see 1709080027).
Netflix executives conceded their October Q4 forecasts on net subscriber additions were conservative because no one knew what the impact would be from newly imposed price increases on the company's HD and 4K content tiers. That the company had 8.3 million global net subscriber additions in Q4, significantly beating its October forecast of 6.3 million, showed the 10 percent price hikes had “very little effect on signups and growth,” said Hastings. “Our content is just making us be really a primary focus for consumers’ entertainment,” said Hastings. “Our responsibility is then to take that increased revenue and turn that into even better content. That’s the fundamental deal.”
Hastings thinks “consumers are tolerant” of price hikes “as long as something’s improving” on the service, he said. The company needs to “push ourselves” to “continue to earn the trust and affection of consumers,” he said. As long as the company is able “to continue to improve our content and our whole experience at a remarkable rate, which we can measure in viewing hours and things like that, then asking our customers to help us fund that at higher levels is reasonable,” he said.