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Netflix Management Talks Data Privacy, Content, and Technology

By Danny Vena – Apr 22, 2018 at 3:03PM

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Netflix's earnings interview provides investors with insight into another record-breaking quarter.

For the first quarter of 2018, Netflix (NFLX 2.08%) showed once again that its quickly accelerating subscriber growth was no fluke. The company added 7.41 million new viewers, more than a million higher than its already ambitious forecast. The result also blew past analysts' estimates for 6.6 million additions. Netflix now boasts 125 million subscribers worldwide, validating the company's strategy of ratcheting up its spending on programming. Netflix plans to spend between $7.5 billion and $8 billion on content this year, with an emphasis on owning much of it -- which the company says is less expensive on a per-subscriber basis.

In the company's earnings press release, and during its quarterly earnings interview, a number of topics were discussed that will likely be of interest to investors. Here's what Netflix executives had to say about data privacy, content, and technology.

A scene from Netflix program Money Heist, with female character pointing a gun.

Money Heist, or La Casa de Papel, became the most watched non-English-language series on Netflix -- ever. Image source: Netflix.

Data privacy

The issue of privacy has been making headlines in recent weeks, since the revelation that personal data of an estimated 87 million Facebook users was harvested by consulting firm Cambridge Analytica.

Netflix CEO Reed Hastings was asked about the potential implications for the company regarding data privacy, especially considering the recent focus by lawmakers, consumers, and regulators. Hastings, who serves on Facebook's board of directors, drew attention to the differences in Netflix's business model:

We're very different from the ad-supported businesses. We've always been very big on protecting all of our members' viewing. We don't sell advertising. I think we're substantially inoculated from the other issues that are happening in the industry.

Hastings went on to distance the company from the issue even further by pointing out that Netflix is "much more of a media company in that way than pure tech." 


Netflix has consistently pointed to the quality of its original content as the basis for its strong subscriber growth, and this quarter was no different. The word "content" came up more than 40 times during the call, showing just how important the subject is to Netflix.

Ted Sarandos, Netflix's chief content officer, pointed out that the company has created original series in 17 countries to date, and it expects that this will continue to expand.

Netflix cited several of its foreign originals to drive home the point that quality programming knows no borders; foreign-language thriller Dark was one example. Sarandos said that even though the show was made in Germany for German audiences, it played so well in the U.S. that it would have been a "big hit on cable" here. The company had previously stated that the show found significant audiences throughout the U.S., Europe, and Latin America. 

Another example was La Casa de Papel (or Money Heist in English-language territories) -- a Spanish-language heist thriller -- which Netflix said in its earnings press release "became the most watched non-English series on Netflix ever." The program was so successful, in fact, that Sarandos revealed in the earnings interview that Netflix "bought the series IP [intellectual property] and we'll be producing sequels and spin-offs of La Casa de Papel as original content for years to come."


Despite Hastings' protestations to the contrary, Netflix is a company with technology in its DNA. Greg Peters, Netflix's chief product officer, revealed several ways the company is bringing technology to bear in new ways as it moves forward. As more and more Netflix customers view content on mobile devices, the company wants to be sure that it provides a quality experience for those viewers:

So, whether that is making sure that our apps are lightweight enough so they load really quickly and [consumers] have a great experience there, to making sure that our end coding is very, very efficient, so that even if you have a less-than-great network connection, you can still get a really incredible video experience on that mobile phone.

As Netflix ventures further into producing and owning original content, it's also looking to apply its technological prowess to the process of delivering that content, to see if it can be done more efficiently. Netflix also pointed out that some of the increase in general and administrative expenses in the current quarter is related to the build-out of the company's production studios.

More of the same

The biggest takeaway from the company's earnings interview is that Netflix is staying the course. It continues to focus on quality content, harnessing the data it gathers from users to serve up programming they want to see, and using technology to ensure that users have the best possible experience.

Maintaining its very narrow focus drove record-setting first-quarter subscriber gains, while revenue and profitability continue to grow.

Danny Vena owns shares of Facebook and Netflix. The Motley Fool owns shares of and recommends Facebook and Netflix. The Motley Fool has a disclosure policy.

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