Why Netflix can focus on content in a way other streamers can't

Wed, Jan 24, 2024, 9:38 AM

Netflix CFO Spencer Neumann (NFLX) spoke on Netflix's fourth-quarter conference call stating "we are not interested in some of the bigger linear assets that may or may not be available." The company recently announced a massive deal with TKO (TKO) to become the streaming home of WWE RAW, showing continued investment in content over companies.

Brightcove CEO Marc DeBevoise joins Yahoo Finance to discuss the comments made by the Netflix CFO and give insight into the company's strategies moving forward.

DeBevoise states: "The other streamers have pulled back on content and marketing spend. They're having to rationalize their technology spend... Netflix doesn't have those issues. They've built that technology stack. It's in the right place. It's at the right cost level. They are profitable... They can go after those subs and those shows, and they can find the right ways to invest and really drive subscribers. "

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Nicholas Jacobino

Video Transcript

[AUDIO LOGO]

BRAD SMITH: Netflix posting a big jump in subscribers for the fourth quarter, proving that it's still the big winner amidst stiffer competition. So what is next? Consolidation has been a trending topic within the industry over the last several months, after reports of talks between Paramount and Warner Brothers-Discovery. When asked about M&A in their earnings call, Netflix's CFO made it clear about a space that they are not interested in.

SPENCER NEUMANN: We're not interested in some of the big linear assets that may or may not be available. We also noticed that-- noted that in the letter. And so I think that's how you should think about our-- what's out there to go after.

BRAD SMITH: So for more on the future of streaming and the entire space, we've got Marc DeBevoise, who is the Brightcove CEO joining us here in studio. Marc, great to see you. I mean, when you hear comments like that on the call, does it mean that Netflix perhaps is prioritizing its attention elsewhere in order to deploy capital, make strategic, maybe not acquisitions of linear, but elsewhere, whether that be content or some smaller player?

MARC DEBEVOISE: I think they realize that they can-- not effectively run the table, but run a tremendously successful and still growing business by really just acquiring content and content rights in the right bundles and the right packages. You saw the deal yesterday that they announced with the WWE.

That's a really big, broad bet on how they can amplify their ad business, in my opinion. They're going after a much larger audience per event in that regard. And that's going to help them drive sponsorships, drive bigger reach for their ad business, rather than so much frequency that they get from delivering sort of series and scripted series.

And you saw them peel back their investment in scripted series last year a bit. Interestingly, you saw their traffic go down a little bit, but subscribers go up, right? And you saw that strong finish to the year. I think that's tremendous for them, and gives them a lot of confidence that this strategy of going after content rather than full companies is probably the right answer for them.

SEANA SMITH: So it sounds like you think we could see more similar deals to what was just announced in this week with WWE?

MARC DEBEVOISE: Yeah, I mean, I think, look, the other streamers have pulled back on content and marketing spend. They're having to rationalize their technology spend. That's effectively what Brightcove does for many of these companies. We help them solve that technology cost problem.

And Netflix doesn't have those issues, right? They don't-- they've built that technology stack. It's in the right place. It's at the right cost level. They are profitable. So they can now swing for those pullbacks that the other companies are having in content and marketing. They can go after those subs, they can go after those shows, and they can find the right ways to invest and really drive subscribers.

BRAD SMITH: How dependent is Netflix on advertisers continuing to spend and even ramp up the amount of campaigns that they're running?

MARC DEBEVOISE: Yeah, I mean, I think it's really interesting. You saw it subtly in there in their earnings call that they're going to raise price on the more premium subs with no ads, and keep that price low for the ad tier. When I was running Paramount Plus or CBS All Access, we had a significant lift from that ad-- you know, that ad supported tier. You could get dollars and dollars per sub by delivering those ads.

So when you see that $5, $9, $10 lower price point, it should be adding 50%, 60% of that in ad dollars on a typical basis. So you start to see like-- they may be agnostic as to where the subscriber goes, because they're making just as much money on that ad tier as they are effectively on some of those lower end premium tiers.

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