MUMBAI: Hotstar, Amazon, and Sony Pictures Networks India can heave a sigh of relief. Netflix CEO Reed Hastings has stated that the global streaming powerhouse is going to continue to focus on entertainment; cricket is not on the table at all. What this means that it will be refraining from participating in the IPL cricket rights tender which will be coming up for bidding soon.
Speaking with CNBC on Squawk Alley on 31 May from the Code Conference in California, Hastings was pretty emphatic that both, sports and news, are a no-go area for Netflix. He said: “You know, no plans on news and sports. Those are tough businesses and we've got a lot of room to grow in movies and TV shows. Expanding into standup comedy. Unscripted. So, we are going to really focus on that on a global basis.”
He went on to add that Netflix could do movies about sports as the company was focused on video content that has repeat viewing. Said he: “It's things that you don't only want to consume once. Whereas the Warriors and the Cavaliers (two NBA teams) are going up again and people will be intense on that and then it won't – you know, afterwards, there is no after viewing. Whereas our shows, there really is.”
Hastings agreed that India was definitely a complicated market for a US company “But, for an Indian company, they feel fine about it,” he said. “We still have a lot to learn. Now, we've done awfully well in Latin America and in Europe and, of course, in North America. So, we've learned some things. But, we have a lot of room to grow in Asia and a lot to figure out still.”
He is not disturbed by the explosion of OTT players rushing to grab a few cents from the consumer's wallet. “Around the world, there's all kinds of new options coming up that give people opportunity. It is like saying there are too many mobile phone apps. You know, there's 100,000 but you probably only pay attention to 30. But, different people have a different set of them. So, i think it is great,” he said.
Hastings disclosed that Netflix is more about being consumed on the mobile phone in Asia – as compared to the US where consumers are spending more time on it on traditional widescreen TVs. “About two-thirds of the viewing is on large screen televisions, either from your Xbox or Playstation or directly with the smart TV. When you get used to watching on a mobile phone, you watch all kinds of content and sports on a phone. You adapt to that,” he explained.
“We are just doing great content and it is available on any screen. You paid $1,000 for a new television, you are going to use it. You look for the shows and the images. With that and with HDR, which has a color intensity. It makes the TV just pop. 4k transforms the in-home experience. That's one of the big drivers and with mobile on the low end.”
Hastings said that cord-cutting is not really being driven by the rise of streaming services like Netflix, Hulu and Amazon Prime. “Very few people have cut the cord. We are about 50 million in the US, and we have seen maybe two million or three million of 50 (million) cut the cord,” he elucidated.
“Don't think of it as a big overlap that we are driving cord cutting that is probably mostly from pricing. In general, if you look at cord cutting, it is like two to three per cent per year, like broadcast ratings over the last 30 years. It will take a very long, slow, secular decline no big calamity and then they will adjust the economics.”
According to him, the rapid expansion of Amazon is what is alarming. He said: “Well, they are so scary. I mean, everything Amazon does is just so amazing. I mean, how are they doing so many different business areas so well? It's like they are trying to repeal the basic laws of business of limited capability. So, we are continuing to watch them and be impressed with them. And they are helping to grow the industry because they are investing in the content.”
However, he was clear that Netflix is not going to go head to head with the giant. He explained: “If we try to out-amazon Amazon, then that's a losing battle. So, what we have to do is be the specialty play. We are trying to be Starbucks and they are trying to be Walmart. So, we have to have brand-intense love and focus. And, what they do is incredible at their breadth. So no, we wouldn't focus on those things. We would focus on how do we be, really, the embodiment of entertainment, and joy, and movies and TV shows.”
He maintained that Netflix’s content budgets are only going to grow. Its content purse for 2017 has around $6 billion in it, but that is not going to be enough going forward.
“As we grow the membership base, we want to grow the content budget. There are so many great shows on Netflix but there are so many great shows we don't yet have. We are going to continue as we grow the membership base to try to get more shows and more movies. (All this has) Been great for talent and writers for everyone. There is so much competition now between all the new players plus the existing players, like HBO, are beginning to grow. It is this new age of television. Nobody is sure where it is going, except for the quality of movies and TV shows is continuing to decline.”
