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Netflix (NFLX 0.75%) swooped in on Activision Blizzard's (ATVI +0.00%) former CFO Spencer Neumann just two days after he was fired from the video-game holding company.
Activision Blizzard announced on Dec. 31 that Neumann was on paid leave and that it was letting him go. Hours later, rumors circulated that the firing was a result of him being poached by Netflix. On Jan. 2, Netflix officially announced that Neumann was its new CFO. He will replace Netflix's former CFO David Wells, who announced in August that he planned to step down from the company after 14 years.
Here's what we know about why Neumann was fired, his work history, and what he can do for Netflix in the new year.
Netflix wasted no time hiring a new CFO in the new year. Image source: Netflix.
Why was Neumann fired?
Neumann started working at Activision Blizzard less than two years ago. He was let go on Monday "for cause unrelated to the Company's financial reporting or disclosure controls and procedures," according to a Dec. 31 filing with the Securities and Exchange Commission. Neumann is being replaced by Dennis Durkin, who had previously worked as Activision Blizzard's CFO from 2012 to 2017.
While Activision Blizzard hasn't given a specific reason for letting Neumann go, an inside source told CNBC that it's because he was pursuing another opportunity. Poaching top executives from other companies has become a common practice for Netflix, which seems to have its choice of employees thanks to its envied spot as the top player in the content space. In fact, Viacom and Twenty-First Century Fox have each sued Netflix over its aggressive hiring approach.
Neumann is leaving Activision Blizzard during a tough time for the company; its shares dipped more than 26% in 2018. And he's joining Netflix during what's sure to be an important year for the streaming giant, as Walt Disney (DIS +0.41%) plans to enter the streaming market with its own video platform.
Where has Neumann worked?
Neumann has a solid work history at Activision Blizzard, Disney, and private-equity firms Providence Equity Partners and Summit Partners. He graduated from Harvard University with both a bachelor's degree in economics and an MBA.
At Disney, Neumann held a number of senior positions that relate to the work he'll be doing at Netflix. He worked as executive vice president (EVP) of the ABC Television Network from 2001 to 2004, and as CFO of the Walt Disney Internet Group from 1999 to 2001. Most recently, he worked as CFO and EVP of Global Guest Experience at Disney's parks and resorts division from 2012 to May 2017, when he left to join Activision Blizzard for 18 months.
Of course, his extensive experience at Disney is interesting, considering it's due to launch its own video streaming platform this year. Netflix has been putting up a calm front about the incoming competition. But behind the scenes, Netflix is likely hatching an aggressive defensive campaign to hold onto its 137 million subscribers.
What can Neumann do at Netflix?
At Netflix, Neumann will be focusing on the production financials behind the company's quickly growing library of movies and TV shows. For this reason, Netflix specifically wanted its new CFO to be based in the production hub of Los Angeles, a source told Reuters.
Neumann is leaving a struggling company for a company that's still peaking. While Activision Blizzard's stock suffered last year, Netflix's shares rose about 40%.
Last quarter, Netflix added about 7 million new subscribers, while its revenue rose 34% to $4 billion. The company is guiding for 9.4 million additions in its fourth-quarter report, due out on Jan. 17. In addition, the company expects revenue to rise 27.8% for a record quarterly revenue of about $4.2 billion.
However, to keep up its growth, Netflix needs to spend big bucks on content each year. Last year, Netflix estimated it would spend $8 billion on content and warned investors that it planned to increase its budget each year. The rate of cash burn has been a concern for investors, who wonder if this model is sustainable, especially as companies with more cash -- like Disney and Apple -- join the game.
As mentioned above, Netflix is sure to use Neumann's knowledge about the inner workings of Disney to its own advantage this year, as Disney is expected to launch its family-friendly video streaming platform in late 2019. In fact, Netflix also poached former ABC Entertainment president Channing Dungey in December to be its new VP of original content. Clearly, Netflix isn't ignoring the looming threat of Disney.
Now that you know more about Neumann, it's clear why Netflix was eager to scoop him up heading into 2019. He has extensive experience in the content game, is based in Los Angeles, and can help Netflix finalize its game plan to compete with Disney's new platform.
