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Netflix (NASDAQ:NFLX) co-CEO Ted Sarandos sounded an upbeat note for the streaming pioneer as the company signaled a tough 2022 will turn into re-accelerated growth in the coming year.
"We're, like most companies, happy to get '22 behind us," Sarandos said in kicking off a UBS conference talk. But in a year where the company's stock (NFLX) took a beating - it's down 49% year-to-date, though that also reflects a second-half rebound, up 55% over the past six months - he said there was a lot to be proud of in terms of performance.
"This year, in very tough conditions, we've launched five of our most watched shows in the history of Netflix ... and three of our most watched films," he said.
That's come in a transformative year for streaming, in which Netflix saw its first-ever quarterly subscriber decline, and a number of market entrants snatched up millions of subscribers to their own services.
Competition is one of the key issues for media investors - with big moves from rivals including Disney (DIS), Warner Bros. Discovery (WBD), Amazon Prime Video (AMZN), Paramount+ (PARA) (PARAA) and Peacock (CMCSA) - but Sarandos was sanguine: "We've got the very fortunate position ... while our competitors are reinventing themselves pretty radically, we get to do exactly what we're doing. It's a little bit better every day and stay the course."
There's not too much competition or too much content in streaming today, he noted, saying an "old media sense" would say there's a glut of content, but "it's not all for you."
The content spending is about adding value to consumers, a necessity for extracting value from the proposition. "So the core KPIs [key performance indicators] in this business are very simple: engagement, revenue and profit. So for some reason, when we talk about this business, we get clouded with a bunch of other things like Rotten Tomatoes scores and raw subscriber numbers, without any ARPU [average revenue per user] attached to that. And I think that's not really good way to measure this; I would have measured engagement, profit and revenue."
As for Netflix's heavy spending on original content and whether it will keep growing from $17B in program spending as it looks to re-accelerate growth, Sarandos echoes previous suggestions that it's likely to flatten out: "I don't know what precisely the right number is, but it's in the right ballpark."
With rivals like Amazon.com (AMZN) and Apple (AAPL) investing more in live sports - and Netflix itself putting in a few rights bids - Sarandos mostly brushed off questions about any big moves in that area.
"We've not seen a profit path to renting big sports," he said. "We're not anti-sports, we're just pro-profit, and we've yet to figure out how to do it ... and I'm very confident that we can get twice as big as we are without sports."
As for its freshly launched advertising-supported service, Sarandos alludes to more service tiers ahead: "We have multiple tiers today [in ad-free service]. So it's likely there were be multiple ad tiers, but nothing to talk about yet."
On the ever-present question of mergers and acquisitions, Sarandos said Netflix (NFLX) wasn't likely to change its longtime philosophy. With its expansion into videogames, the company's done some "light M&A," and Netflix might take a peek in the intellectual property space, but don't hold your breath for transformative deals: "Historically we're builders, vs. buyers, so I think we'll probably lean on that for a while."
A week ago, co-CEO Reed Hastings suggested at an NYT conference that he regretted not getting into the advertising business sooner.