Neither SAG-AFRA nor the Writers Guild of America is talking to the Alliance of Motion Picture and Television Producers, a group that includes Netflix
Netflix Inc.’s stock tumbled 5% Wednesday after the company’s chief financial officer acknowledged that prolonged Hollywood strikes are hurting business and offered soft guidance on operating margins.
“I think really kind of cutting through it, the main thing [is] there’s a lot of folks [writers and actors] out of work and the business isn’t moving forward,” Netflix NFLX, -2.85% CFO Spencer Neumann said at the Bank of America conference in New York. “And so it’s terrible for all those folks that are not working, and it’s not good for the business. So that’s what we’re most focused on.”
Neither SAG-AFRA, which went on strike July 14, nor the Writers Guild of America, which began striking May 2, is talking to the Alliance of Motion Picture and Television Producers, a group that includes Netflix.
Equally concerning to some investors were the operating margins Neumann offered — in in the 18% to 20% range — while the current consensus is around 19.8%. He said he expects margins to “tick up going forward” as the company accelerates revenue growth in 2024 and beyond.
Neumann cautioned that “it is not easy” to build an advertising business from scratch, as the company is attempting to do amid escalating competition from Walt Disney Co. DIS, +1.20% and Apple Inc. AAPL, +0.88%. Netflix is rolling out an ad-supported tier over multiple quarters, and Neumann said a “healthy proportion” of accounts are moving in that direction.
“Revenue is building” in 2024, he added, but did not provide specific numbers.
Neumann also indicated that Netflix will not be investing big money in live high-profile sporting events because he doesn’t see an immediate return on such investment. The company is focusing on lifestyle sports programming, he said, and is not ready to spend billions on live-sports rights.
He described gaming as a “developing business” and “a long-term growth opportunity” with a five- to 10-year time frame. It has been about two years since Netflix entered the market, and there are some 70 games on the service.
Neumann’s comments prompted Pivotal Research Group analyst Jeffrey Wlodarczak to reduce his average revenue-per-user growth projections to 2% from 4%, reducing Netflix’s fourth-quarter revenue forecast to $8.73 billion from $8.89 billion. Analysts on average are modeling for $8.85 billion in Netflix’s fourth fiscal quarter.
Wlodarczak maintained a buy rating and price target of $600 on shares of Netflix.
