Drama at Netflix
How the streaming giant can halt its losses
While you spent the holidays streaming Bird Box, Black Mirror: Bandersnatch, Netflix was playing out a corporate drama of its own, poaching Activision Blizzard chief financial officer Spencer Neumann to be its new CFO.
Just before the news emerged, Activision abruptly announced it would fire Neumann, who had agreed to a provision that barred him from negotiating for a new job until the last six months of his contract.
It was a sign Neumann wasn’t willing to pass up a chance to work at Netflix, this era’s preeminent highflying, money-burning media company. Neumann’s mandate is clear. A
headline put it this way: “New Netflix CFO to tackle cash flow conundrum”.
Original thrillers like , or choose-your-own-adventure gambits like Bandersnatch aren’t cheap. And as Netflix’s public profile has climbed, so have its losses. Analysts predict the company will report about US$3 billion ($4.5b) in negative cash flow for 2018, up from US$2b in the previous year. Fans of wildly expensive, high-quality television should hope it can figure out its balance sheet.
The most obvious solution is for Netflix to just continue to increase the number of people who subscribe to its video-streaming service. Its core growth strategy has paid off so far. Recently, the company has taken on a more global focus, creating content for countries around the world. As part of this approach, it could also increase the price of a subscription.
Another, more untested path would be to cater more to active users over less engaged ones. This is where the company has a lot to learn from Disney and Activision, Neumann’s former employers. Both, in very different ways, do a great job of charging different customers vastly disparate amounts of money for consuming their content. Disney doesn’t just charge you for a ticket to see Star Wars. You can buy action figures, go to a Disney theme park, or watch The
Clone Wars on Netflix. There are endless ways to upsell customers based on their affection for a particular piece of intellectual property.
Right now, Netflix charges most people the same amount, no matter how much they consume.
A third path for improving cash flow would be to simply spend less. This might seem like an appealing tactic for a new CFO, but I’d argue the levers are partly out of Netflix’s control. If you take for granted, as Netflix does, that it wants to be a once-ina-generation global media company, then you need to work backwards from there. Netflix needs to pay what it costs to hire talent.