Investors in Netflix, Inc. (NASDAQ: NFLX) have been on a thrill ride. In its 2017 third quarter, the streaming pioneer boosted its total subscribers to 109 million, up 26% year over year, and grew revenue by 30% to $2.98 billion over the prior-year quarter.
There has been justifiable concern about the company's increasing debt load and negative cash flow, so investors are looking for any indication from the company that its strategy will continue to bear fruit.
Netflix Chief Content Officer Ted Sarandos gave the keynote address at the UBS 45th Annual Global Media and Communications Conference and shared some interesting tidbits regarding the state of the industry and the future of Netflix. These four quotes from Sarandos provide insight into where the company goes from here.
The Crown was one of Netflix's most expensive original productions. Image source: Netflix.
Putting cost into perspective
Netflix is always making decisions about spending on content, and the cost of some programming gets an inordinate amount of press. An example is the highly successful original The Crown, which has been called "one of the most lavish television dramas ever made." Sarandos pointed out that most of the press about the show concerned the budget, which reportedly ran upwards of $100 million.
Sarandos pointed out that cost is not necessarily the best measurement of value:
The truth of it is it's one of our most efficient shows. Relative to people watching and its ability to attract subscribers and retain subscribers. It's one of our most efficient uses of the money we spent on The Crown.
On Disney becoming a streaming competitor
Beginning in 2017, an agreement with The Walt Disney Company (NYSE: DIS) allowed Netflix to become the exclusive streaming platform for a wide variety of Disney content. Additionally, it supplied Netflix with characters for some of its most popular self-produced shows, including Marvel's Daredevil, Jessica Jones, and Luke Cage, which culminated in the recently released The Defenders. That partnership will soon be coming to an end.
In August, Disney announced that it would debut a self-branded streaming service, as well as one for its sports network ESPN, and end its exclusive content deal with Netflix.
Sarandos was asked what that meant to the company and to the marketplace. His response:
What Disney going direct to consumer means, I don't really know, and I'm not positive that they do, either. I know that they have a history of both direct-to-consumer and third-party selling of almost everything they're involved with...and Disney's always been very good at figuring out the magic formula for that.