Netflix CFO Defends Spending Spree on Original Content
"We might be to the point where we might start seeing more budget constraint," said exec David Wells.
Netflix will spend about $6 billion to acquire and produce content this year, but the streamer needs a steady supply of new shows to grow so it therefore has no regrets, even though it has racked up $4.8 billion in debt already, CFO David Wells told Wall Street on Tuesday.
Netflix has been beaten up by some analysts and reporters for its allegedly free-spending ways when it comes to content — mostly its original shows — but Wells said it was worth the cost, considering it helped the streamer get to about 104 million subscribers worldwide.
And besides, there is a method to all the mad spending, the exec said at the Goldman Sachs Communacopia Conference in New York.
"You could decide to invest everything and more into content, so we have some discipline reserve for growing operating margin at this point," Wells said.
"For a while, we were not budget-constrained, we were project-constrained," he continued. "We might be to the point where we might start seeing more budget constraint. That has some benefits in terms of helping drive discipline on the content line."
Whether or not the CFO's remarks mean Netflix might rein in some of its bidding on existing or original content remains to be seen, as Wells was not terribly specific.
"Just a headline: If we're able to grow the top line, we're going to be guided by steady growth of operating margin and reinvest what's left into content," he said.
With Amazon, Facebook, Twitter, Apple and more getting into the content game, there are more buyers than ever, but Wells said that the price is rising only for shows in the top tier of quality while the price of lesser shows are stagnant or falling.
With so many subs, Wells said Netflix has no problem monetizing what it buys and produces.
"That doesn't mean that we aren't disciplined on the price. We still have walked away from some things," he said.
Wells also said the company is investing in beefing up its mobile quality, but that customers overwhelmingly prefer the big TV screen and co-viewing experience. Even youngsters who seem to prefer watching shows on mobile devices grow out of it, he said.
"It will become more important, but right now it's about the large screen," Wells said.