Netflix offered positive news to investors in its Q2 earnings report Thursday. It added 26 million subscribers in the first half of the year — a record-breaking doubling of new subscriptions compared to the same period last year — along with a 25 percent revenue increased compared to Q2 2019.
Despite slower growth forecasted for the rest of the year, another piece of news offered promise of the company’s long-term outlook as the force to be reckoned with in the streaming wars: The obvious and long overdue promotion of content chief Ted Sarandos to co-CEO alongside Reed Hastings.
Sarandos, who joined Netflix 20 years ago when it was a burgeoning mail-order DVD rental service, led the company’s push into original streaming programming and served as the company’s public face as it disrupted Hollywood. Now a member of the MPA and winner of dozens of Oscars and Emmys, Netflix under Sarandos’ co-leadership is fending off competition from legacy studios that seek to get a piece of the streaming market Netflix created.
Sarandos will continue to oversee Netflix’s content operations, while Chief Product Officer Greg Peters, who spearheaded the company’s move into streaming, added the title of COO.
Executives discussed the earnings report in a video posted Thursday afternoon, where they frequently honed in on the company’s 10-year outlook, which they define as growth largely outside the US, a better user experience, and offering more of what people want to watch.
“The three of us have been working together so long, there’s essentially no difference next quarter. Ted’s got some increased external stature and he can put bigger deals together for us,” Hastings said. “Think of it as much more consistent with the past than different.
He continued: “The beautiful thing about the next 10 years is we’ve got a good model — we just need to make it better.”
Indeed, while these title changes are new on paper, they speak to a company that sees no need to mess with what has served it so well since 2013, when “House of Cards” premiered as Netflix’s first original series.
As Netflix became one of the entertainment industry’s major players, legacy companies took years to catch up, with Disney, NBCUniversal, and WarnerMedia all launching formidable Netflix competitors for the first time in the last nine months.
Then, the pandemic hit, causing enormous pain to those companies whose theme-park ticket sales, TV ad sales, and theatrical grosses — large pieces of their revenue stream — have all suffered, while streaming-dominated Netflix is reporting record numbers.
With millions of peoples’ activity largely restricted, the reopening of theaters continually in question, and production still largely on hold, the pandemic will continue to shake up the industry for months to come. While these factors mean that, in many ways, there’s never been a better time to be in the streaming business, they also represent burdens for the media conglomerates that own the major studios that are now in the streaming business — ones that have, by comparison, left Netflix unfazed.
“We’ve learned the internet … is a more important part of our lives, and that’s here to stay and also people love film and television shows. our strategy is just to get better and better every day with that content, that product,” CFO Spencer Neumann said. “Frankly our strategy really hasn’t fundamentally changed.”
But like any distributor, Netflix is faced with the challenges of production stoppage. But Sarandos said outside of North America, Brazil, and parts of India, production is largely back to a pre-pandemic state.
Netflix’s established presence in international markets gives it another leg up against its competitors, who are just beginning to expand outside the US, according to a recent report by MoffetNathanson.
“The once expected competition from new entrants like Apple TV+, HBO Max, Peacock and even Disney+ has been mitigated by a clear absence of fresh new content,” the report reads. “As production opens up outside the U.S., only entities with significant global presence like Netflix will be able to add original titles.”