Netflix chief content officer Ted Sarandos (left) and then-Walt Disney Company CEO Bob Iger in 2015 in Los Angeles.
Charley Gallay | Getty Images for LACMA
There used to be a debate about Netflix: is it a tech or media company?
That debate has failed in recent years and clearly ended on Thursday, with Netflix’s announcement that Ted Sarandos would join Reed Hastings as co-CEO. Sarandos, who lives in Los Angeles, has spent two decades on Netflix, leading the company’s giant move towards original content.
“It is a unique company where they actually have almost two headquarters,” said Gil Simon, chief investment officer at San Francisco-based SoMa Equity Partners, which has nearly 10% of its nearly $ 3 billion in assets in Netflix shares. “Clearly, the company’s core competence is to acquire and produce content.”
Netflix said Thursday that it added more than 10 million global subscribers in the second quarter, for a total of 192 million. BMO Capital Markets estimated that Netflix would spend more than $ 17 billion on content this year and more than $ 26 billion by 2028. Only Disney’s movie and television budget significantly exceeds Netflix.
Sarandos is the person responsible for putting Netflix money to work. From last year’s Martin Scorsese hit “The Irishman” to Netflix’s new action movie “Extraction”, Sarandos has been making the deals, including with Hastings as CEO, operating out of the company’s official Silicon Valley headquarters. .
“While Reed was the visionary, Ted is the future,” said Simon. “He is networked within the creative community and his ability to appeal to A-list movie producers and producers is the secret sauce.”
Netflix CEO Reed Hastings speaks during the Netflix Slate 2018 event at JW Marriott on October 9, 2018 in Bogotá, Colombia.
Gabriel Aponte | fake pictures
In the past few years, all of the other big content companies have started to become more like Netflix, creating their own streaming services and platforms to capture eyeballs. Now Netflix’s digital service, once an island in the cable TV universe, is the leader in a busy space. The result is that Netflix increasingly resembles all the major media companies.
Sarandos told GQ seven years ago that Netflix’s goal was “to become HBO faster than HBO can become us.” He was successful. AT&T, which acquired HBO in its Time Warner deal two years ago, is now trying to turn HBO into something akin to Netflix, expanding HBO to HBO Max, a service that includes family shows and conventional sitcoms.
Trade as an internet company
Where Netflix wants to avoid media comparisons is on Wall Street.
Netflix trades much more as a high-growth tech company than as a content giant. With a market capitalization of more than $ 230 billion, as of Thursday’s close, it is now among the 20 most valuable companies in the United States. Netflix has a market value comparable to AT&T, even with a ninth of the revenue, and has a price-earnings ratio of 106, compared to 41 for Disney, which has its own streaming growth opportunities with Disney + and ESPN. +.
But Netflix continues to show that its heavy investments in content are paying off. Operating income increased 92% in the second quarter from the prior year, and net earnings per share jumped to $ 1.59 from 60 cents.
Sarandos doesn’t talk much about the stock price, but he can spend hours discussing Netflix’s ability to invest much more than anyone else in a movie while still being profitable. At a investor event with UBS in December, Sarandos described his work with Scorsese and “The Irishman,” a three-and-a-half-hour mobster movie that was watched by more than 26 million people in its first week. It was a film that even Scorsese recognized that he could not enter the theater.
“We are basically making movies that would otherwise be difficult to make,” Sarandos said. “They premiere on Netflix and they are produced the way the filmmaker wanted to do it and we could do it.”
Robert De Niro, Al Pacino and Ray Romano star in Martin Scorsese’s “The Irishman”.
Netflix
As her budget increases, one area that excites Sarandos is animation. At the December event, he said that 2022 and 2023 will be great years for the company on that front.
He hopes the animation features “maybe four or six times a year” will appeal to “everyone who has created great animation for every animation studio for the past decade.”
However, all of that was before the coronavirus, which forced the film industry to stop much of its production.
Netflix said Thursday that it has made the most progress to resume production in the Asia Pacific and has never closed entirely in Korea. Production resumed in Europe, as well as two stop-motion animation projects in Oregon and two films in California. The company warned that “current infection trends create more uncertainty for our productions in the United States.”
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