Los Angeles: Faced with an unprecedented global health crisis that has frozen businesses around the world, Netflix Inc. is reassuring customers (and investors) that it won’t run out of new TV shows or movies anytime soon.
The company has already finished production on almost all of its slate for this year, and has also finished filming many programs for next year. Season four of The Crown, an award-winning drama about British royals, is already in post-production, as is Over the Moon, an animated project.
“We work really far out relative to the industry,” Chief Content Officer Ted Sarandos said during an earnings call with analysts Tuesday. “We don’t anticipate moving things around.”
Over the past decade, Netflix has lured more than 180 million customers to its streaming service by offering a never-ending buffet of new shows. Seemingly nothing — not debt, not competition, not bad reviews — could stop its weekly drop of new dramas, comedies and documentaries.
But the coronavirus has plunged Netflix into unknown territory. The company has paused production all around the world, with the exception of Iceland and South Korea. The global health crisis has interrupted the production of a new season of the hit show “Stranger Things,” as well as a movie starring Dwayne “The Rock” Johnson.
With a lineup that includes Too Hot to Handle, Black AF and Space Force, Netflix isn’t going to run out of shows this quarter. It also has the rights to the Michael Jordan documentary The Last Dance, which has already been a hit for ESPN. But Netflix has no way of knowing what will happen later this year, which is one of the reasons it cautioned investors Tuesday not to read too much into a record-breaking surge in subscribers last quarter.
“No one knows how long it will be until we can safely restart physical production in various countries, and, once we can, what international travel will be possible, and how negotiations for various resources (e.g., talent, stages and post-production) will play out,” the company said in a letter to shareholders.
Netflix has shifted all of its animation series to remote production, and did the same with post-production on more than 200 shows. Animation is a huge new area of investment for Netflix, and now includes a couple of buildings in Hollywood. The company earned an Oscar nomination in 2020 for the animated movie Klaus, and has more than a dozen animated series due for release this year. It’s unclear how the new setup will affect the rollout of any projects.
Netflix still plans to release more original content in 2020 than last year. And for the moment, the pause in production is a boon to its finances, helping lift cash flow.
If Netflix can’t make as many movies itself, it can always buy them. Its film division will benefit from other studios being eager to offload product due to the temporary shutdown of movie theaters. Paramount Pictures and Media Rights capital sold Netflix The Lovebirds, a comedy starring Issa Rae and Kumail Nanjiani, while Legendary sold Netflix a film starring Millie Bobby Brown of Stranger Things fame.
Rather than waiting to see when they can release those movies in theaters, the studios can book a profit by selling the projects above cost to Netflix. Netflix, meanwhile, gets new films to market to its users.
But if Netflix can’t get production up and running this year, neither animation nor new movies will fill the hole. The company releases hundreds of new TV shows, documentaries and other specials each year, and most of them require having dozens or hundreds of people on a set somewhere.
A long hold on production could prevent Netflix from releasing as many shows as its customers have come to expect, and provide a reason for many cost-conscious consumers to cancel their subscriptions. The company put out 180 new titles in the U.S. last quarter, according to the blog What’s on Netflix, and had plans for similar amounts in the quarters ahead.
Netflix said that a lack of new material might affect it less than peers because of its large library of old shows. But the company has also said time and time again that new shows are the biggest drivers of new customers. That’s why Netflix has minimized the impact of rival studios pulling popular programs like The Office and Friends. – Bloomberg
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