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Earnings

Netflix earnings: Huge lockdown subscriber bump

Netflix logo
  • Q1 revenue: $5.77B (+27.6% YoY, +5.5% QoQ, vs. $5.74B expected)
  • Q1 earnings: $709M (+106.1% YoY, +20.8% QoQ)
  • Q2 guidance: Netflix forecasts $6 billion revenue and $820 million earnings for Q2 of 2020.

The big number: Driven by stay-at-home orders around the world, Netflix saw its number of subscribers surge by 15.8 million, as opposed to the 7 million the company had forecast, to a total of 182.82 million. Most of those subscribers joined in March, meaning that the company won't fully see an impact on its revenue until Q2 of 2020.

People are talking: "It's a bunch of us feeling the wind." CEO Reed Hastings was frank during the company's Tuesday afternoon earnings call that any forecast on COVID-19's impact on the business is just guesswork at this point. "In a couple of months, we'll be able to grapple with the long-term implications," he said. For now, the company was just focused on keeping the service up and running. "Our small contribution to these difficult times is to make the home environment a little more bearable," Hastings said.

Opportunities: Netflix clearly benefited from people staying at home. As a result, Netflix had to tweak its streaming tech to save bandwidth in some markets and hire 2,000 additional customer service agents to deal with increased demand. However, executives cautioned that some of this growth may just be front-loaded, possibly resulting in softer growth numbers later this year. Or as the company put it in its letter to shareholders: "Intuitively, the person who didn't join Netflix during the entire confinement is not likely to join soon after the confinement."

Threats: Netflix's numbers were affected by a strengthening dollar, putting a ding on international revenue, which has been the company's biggest growth driver. Beyond that, the company is starting to see an impact of productions shutting down across the world. It still plans to go ahead with its release plans for Q2 and Q3, but had to stop dubbing content in Italian, and a closer look at the numbers reveals further trouble ahead: Netflix now expects to spend $1.5 billion less on content production this year than it had previously planned.

The power struggle: Asked about competitors, Hastings singled out Disney+ for a level of execution he hadn't seen from other competitors ever since Netflix's founding. "It's stunning," Hastings said. "My hat is off to them." At the same time, he reiterated a long-held belief that Netflix is competing not just against other subscription services, but also YouTube, gaming and more, and that this competition is not a zero-sum game. "No one is gonna get it all," he said. "It's working out very well for us."

Microsoft wants to replace artists with AI

Better Zoom calls, simpler email attachments, smart iPhone cases and other patents from Big Tech.

Turning your stories into images.

Image: USPTO/Microsoft

Hello and welcome to 2021! The Big Tech patent roundup is back, after a short vacation and … all the things … that happened between the start of the year and now. It seems the tradition of tech companies filing weird and wonderful patents has carried into the new year; there are some real gems from the last few weeks. Microsoft is trying to outsource all creative endeavors to AI; Apple wants to make seat belts less annoying; and Amazon wants to cut down on some of the recyclable waste that its own success has inevitably created.

And remember: The big tech companies file all kinds of crazy patents for things, and though most never amount to anything, some end up defining the future.

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Mike Murphy

Mike Murphy ( @mcwm) is the director of special projects at Protocol, focusing on the industries being rapidly upended by technology and the companies disrupting incumbents. Previously, Mike was the technology editor at Quartz, where he frequently wrote on robotics, artificial intelligence, and consumer electronics.

People

Inside tech’s efforts to invest in Black banks

Tech companies are facing escalating calls to go beyond deposits.

Yelp is the latest company to announce it will be depositing $10 million across three Black-owned banks, including Carver in New York.

Photo: Mark Kauzlarich/Getty Images

Aaron Mitchell, the director of HR for Netflix Animation Studio, had already been working for months on a proposal to address the racial wealth gap when the killing of George Floyd rocked the country in May. Suddenly, it seemed like every company was coming out of the woodwork with pledges to invest and diversify and do better.

On May 27, Mitchell sent an email to Netflix CEO Reed Hastings asking him what he thought of a plan to invest $100 million in Black banks, a unique strategy to funnel more capital back into Black communities struggling amid the COVID-19 pandemic. At that point, no other corporation had made a similar public commitment. Mitchell said the $100 million was an arbitrary amount of money with symbolic significance: It was the same amount that Netflix spent on "House of Cards," a flashpoint in the company's history.

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Emily Birnbaum

Emily Birnbaum ( @birnbaum_e) is a tech policy reporter with Protocol. Her coverage focuses on the U.S. government's attempts to regulate one of the most powerful industries in the world, with a focus on antitrust, privacy and politics. Previously, she worked as a tech policy reporter with The Hill after spending several months as a breaking news reporter. She is a Bethesda, Maryland native and proud Kenyon College alumna.

Power

Sonos CEO Patrick Spence: There’s money in ad sales for us

The smart speaker maker adds in-house ad sales as radio service continues to grow.

"Given the kind of customer base that we have and given the adoption we've seen in Sonos Radio, there's absolutely advertising revenue there," Patrick Spence says.

Photo: Andrej Sokolow/Picture Alliance via Getty Images

Sonos is doubling down on its efforts to monetize services on its platform, and is now looking to build out an in-house ad sales team for its free Sonos Radio service. Sonos CEO Patrick Spence confirmed the news in a conversation with Protocol on Wednesday, saying that in-house ad sales could help the company attract the right kind of brand advertisers to its platform. "Given the kind of customer base that we have and given the adoption we've seen in Sonos Radio, there's absolutely advertising revenue there," he said.

Spence made these remarks ahead of the release of the company's fiscal Q4 2020 earnings results. The company grew its revenue 16% year-over-year, to the tune of $339.8 million for the quarter. Earnings per share came in at $0.15, ahead of the $0.02 that analysts had expected. The company added 1.8 million new households to its customer base in its fiscal 2020, and close to 11 million households now own Sonos products, with an average of 2.9 Sonos products in each of those households.

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Janko Roettgers

Janko Roettgers (@jank0) is a senior reporter at Protocol, reporting on the shifting power dynamics between tech, media, and entertainment, including the impact of new technologies. Previously, Janko was Variety's first-ever technology writer in San Francisco, where he covered big tech and emerging technologies. He has reported for Gigaom, Frankfurter Rundschau, Berliner Zeitung, and ORF, among others. He has written three books on consumer cord-cutting and online music and co-edited an anthology on internet subcultures. He lives with his family in Oakland.

Power

Pluto TV CPO Shampa Banerjee explains why free video is booming

Video services have to get over their U.S.-centric thinking to succeed internationally, Banerjee says.

"We're always very U.S.-centric. We think everyone is like us, with 500 devices. It's not [like that]," said Pluto TV CPO Shampa Banerjee.

Image: Pluto

ViacomCBS is on track to make $2.5 billion with digital video this year, and a growing part of that revenue stream is Pluto TV, the ad-supported video service the company acquired in early 2019. Pluto ended Q3 with close to 36 million monthly users and video ad dollars more than doubling year-over-year. "It's an amazing asset, and it's growing even faster than we had hoped," said ViacomCBS CEO Bob Bakish during the company's Q3 earnings call earlier this month.

A key part of Pluto's success has been its product design, which mimics the look and feel of cable TV, complete with linear channels and a traditional programming guide. To learn more about what makes Pluto tick, and what the service has in store for 2021, we recently caught up with Pluto TV CPO Shampa Banerjee.

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Janko Roettgers

Janko Roettgers (@jank0) is a senior reporter at Protocol, reporting on the shifting power dynamics between tech, media, and entertainment, including the impact of new technologies. Previously, Janko was Variety's first-ever technology writer in San Francisco, where he covered big tech and emerging technologies. He has reported for Gigaom, Frankfurter Rundschau, Berliner Zeitung, and ORF, among others. He has written three books on consumer cord-cutting and online music and co-edited an anthology on internet subcultures. He lives with his family in Oakland.

Power

Investors didn’t like Ubisoft and Activision’s earnings

Both stocks plunged on the companies' forecasts.

The outlook is good for console manufacturers, but not so much on the software side.

Image: Protocol

Big Tech companies weren't the only ones reporting earnings this week; some of the biggest players in the gaming industry were, too. And there was a sharp divide: While the outlook's good for console manufacturers, things are less peachy on the software side.

Sony and Microsoft both reported earlier in the week, and both companies' gaming divisions had pretty good quarters. While PS4 sales dropped, unsurprisingly, software and subscription revenue soared. And an optimistic outlook for the PS5 — Sony's hoping to sell 7.6 million by the end of March — and the subscription and software sales that should entail, led Sony to raise its full-year operating income forecast by 13%.

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Shakeel Hashim

Shakeel Hashim ( @shakeelhashim) is a growth manager at Protocol, based in London. He was previously an analyst at Finimize covering business and economics, and a digital journalist at News UK. His writing has appeared in The Economist and its book, Uncommon Knowledge.

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