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PopFinance – E01 – Netflix Says Goodbye To “The Office”

[INTRODUCTION]

[0:00:00.8] FA: Welcome to Just Curious Media, this is PopFinance. I’m Francois Aure, I’m a forex analyst and author and US markets contributor for CCM markets.

[0:00:09.5] SH: I’m Sarah Helms. I am an attorney working in the beautiful Los Angeles area. Nice to be here today.

[0:00:16.3] FA: Today, we are talking about the bomb shell that is reverberating around living rooms across the world. That Netflix is set to lose its rights to The Office in 2021.

[0:00:29.5] SH: Tears are being shed right now. It is a sad, sad day. I mean, it’s crazy to believe that we’re losing one of the most beloved shows off of our favorite binge network.

[0:00:40.5] FA: Well, we’re not going to be losing it forever, it’s going to NBC, they’re basically reclaiming their rights to the show and they’re going to use it to launch their own platform on NBCU. But this is surely a big blow for Netflix, it certainly looks like it’s a sign of things to come.

[0:00:56.4] SH: Yeah, I think that begs the bigger question and what I think we want to chat about today and that is, what is the future of Netflix look like? I mean, if this happens to every big show on Netflix, what will Netflix be without its core, Office, Gilmore Girls, New Girl, all of the things that we binge watch while we’re cleaning the kitchen, what will Netflix be without it?

[0:01:19.7] FA: It will be Bojack Horseman and Orange is the New Black.

[0:01:23.6] SH: I mean, two of the most horrendous shows, I’m sorry for anyone that loves them but Bojack Horseman is terrifying and Orange is the New Black is even more terrifying but for completely separate reason.

[0:01:33.1] FA: They certainly aren’t shows that you come home from work and pop on and watch four or five episodes and don’t really even notice they’re on but laugh at the occasional joke which is essentially what people use Netflix for.

[0:01:43.8] SH: Right.

[0:01:44.5] FA: At the moment. This problem is only going to get worse for Netflix because Disney are pulling all their movies, they’re planning to launch their own streaming platform. Some serious problems for Netflix if they can’t come up with this hits and they’re certainly spending enough money but is it going to work? The company is seriously in debt.

[0:02:03.3] SH: As the guru of all things financial. I have some thoughts on what I think as a none financial expert. Netflix can do to keep us there, too keep it running on my Roku app or whatever, Amazon stick, whatever you use. The first thing is simply shell out the cash to keep these shows. I mean, why is that impossible? I mean, how much money are we really talking about here? Because can they shell out the cash to keep Friends – 

[0:02:30.0] FA: We’re talking about hundreds of millions of dollars that Netflix probably doesn’t have.

[0:02:35.3] SH: I hate Netflix. Dear Netflix thinkers over there. How have we not thought that these are the core things people are watching and we haven’t saved the cash to shell out for the next contract? I’m not understanding why this isn’t thought about previously.

[0:02:46.5] FA: Well, I think they probably did think about it but when Netflix first came to market, it was really just them in terms of the streaming at home market end. The competition just wasn’t there but now, the competition is lining up and they’re saying, why are we going to let you use our stuff and if you are going to use our stuff, we’re going to massively overcharge you to the point that it’s not going to be financially feasible for you to do it.

[0:03:10.3] SH: So your opinion is what? The office is just the first of the many pulls that we’re going to see in the next two years?

[0:03:15.7] FA: Well, I think it’s inevitable. I mean, if you’re NBC and you’re desperately trying to get your platform of the ground, why would you give your shining jewel to your biggest competitor? Certainly you’re going to give it to them, either for a price that breaks them or you’re just going to take it away from them whenever you possibly can.

[0:03:31.9] SH: It would just be a sad, sad day. We were looking at some statistics earlier. I mean, isn’t the Office, what did you say it was? 7%?

[0:03:38.3] FA: Well, from the most recent statistics we could find which was maybe a year or so old, Netflix, in terms of total viewership, the Office was 7% and friends was 4% so 11% of their entire viewership were shows they don’t own, don’t have the rights to that these companies can pull or charge them an exorbitant fee for.

[0:03:57.9] SH: Okay, here’s my other big issue with Netflix and this is maybe my other big suggestion. Dear Netflix, I hope you’re listening. Not in the way that I want because as a consumer, I don’t want this but just strategically thinking, if they would stop with the weird log in’s, they could make more money, right?

If I log in to Netflix, I have like five different profiles, me, mom, dad, brother, dog. There’s so many different profiles you can click on because you only pay for one subscription but I could be watching it on my iPad, my whatever, whatever and my mom can be watching it on all of her devices. Why would you not want to change the subscription and that way they can make more money? I mean, that has to be the answer.

[0:04:35.5] FA: I think that’s a completely valid point. They have to make it more difficult. I’ve never met a person under the age of 30 who pays for Netflix.

[0:04:44.7] SH: Never. Because everyone’s using mom and dad’s. I mean, literally have a thing in my family where we each pay for one type of network, I mean, don’t call the police, we each pay for one different – 

[0:04:54.3] FA: Well, I don’t think that’s illegal. 

[0:04:55.8] SH: It should be because it’s crazy to me. I mean, I pay for one application, someone else pays for another and then we just kind of swap the log in’s. I mean, someone over there must realize this but what can they do? 

[0:05:07.4] FA: Well, if you look at the way Netflix runs its business, it’s almost totally focused on growth. They don’t really seem to care about these sort of small point financial details that would actually make them more money. They seem to just keep going deeper and deeper into debt, they just took out another 10 billion dollars of debt, their debt is ballooning and they’re not really interested because they know they have to create content. They’re just going as hard as they can to try and create hit shows. I don’t think they’re making enough or making them fast enough.

[0:05:38.5] SH: Well, all I’m saying is that Sarah Helms has some suggestions, they can go ahead and give me a call, hire me because I have other things as well. In addition to the subscription, the log in things, I still think they need to keep on making those juicy rom coms. I mean, truly. The best part of the Netflix game, the Rom-Com life is back. This last year and a half, they’ve produced so many wonderful Rom-Coms that people are loving.  Yes, they’re probably not your favorite but other consumers, other millennials are loving them.

[0:06:11.1] FA: Speaking of movies that aren’t my favorite. I do have an interesting statistic that I know you’re going to like that I can’t believe.

[0:06:16.9] SH: Okay, feed it to me, let me hear it.

[0:06:19.1] FA: The masterpiece that was The Kissing Booth, I believe you’re familiar with the reference.

[0:06:23.6] SH: Am I familiar? I’m deeply familiar.

[0:06:26.9] FA: The cinematic tour de force. Netflix were extremely pleased with themselves because apparently, 50% of people who watched that movie watched it more than once.

[0:06:34.3] SH: Well because you can’t not watch it once. I mean, what is there not to love about this show, you’ve got Joey King, you’ve got her big, tall, gangly and in real life boyfriend who is also her onscreen boyfriend who is seriously like the most ginormous man I’ve ever seen in my life. They fall in love, there’s a kissing booth involved, there’s a nerdy best friend who is secretly jealous, love triangles. I mean, it’s gorgeous, it’s wonderful. It’s nostalgic and there’s a wonderful slew of romantic scenes whether riding on the back of a moped in like downtown Los Angeles.

I mean, no one doesn’t love that except apparently you.

[0:07:04.3] FA: Right, well, I’m extremely skeptical of that Netflix statistic but I can understand there is a market for it. It does seem that if Netflix is going to survive the relentless onslaught from these bigger companies is they’re going to have to make stuff like that. That resonates with I guess people like Sarah here, who think that The Kissing Booth and Joey King is enough to carry a movie.

[0:07:24.9] SH: It’s enough to carry Netflix network. I mean, they’ve made a ton of these that people are loving.

[0:07:29.2] FA: Yeah, I mean, definitely trying to tailor the content and nowadays, we have analytics that can tell us the eye color of the age group that likes to watch the shows and they’re definitely trying to capitalize on that and they’re probably doing a good job on that. The question is, is there enough appetite from people to actually forward this unique content. Is it not an argument that we can make that basically, people just want to watch Parks and Rec. They just want to watch The Office, they don’t want this new content and they’re not going to come back and binge it like Netflix needs them to.

If they’re about to take an 11% hit, purely because people are pulling content from losing Friends which just seems inevitable and losing The Office. They’re going to lose 11% and then the competitors are going to come. They’re going to lose 11% if they had no competitors. But all these guys are coming to market. I think it’s going to be really worrying and I think that’s why the share price has been stagnating because if you look at the debt load and you look at the troubles that are coming.

People are saying, can Netflix ride out the storm? And I’m not sure they can.

[0:08:32.7] SH: I disagree. It’s shocking, I know. But here’s why. Because I, as a consumer want to go to one application. I don’t’ want to go to NBC media Inc. and then go to this app and then go to this app, I just want to go to one central application. I think Netflix arguably is the most user friendly application of the ones we have out there. 

I want to go to the one and I want to binge watch all my favorite shows in one place. Right now, that’s what – 

[0:08:58.2] FA: Without adverts, I think that’s a big – 

[0:09:00.3] SH: We will get to that. We will get to that because Hulu you’re pissing me off but that’s neither here nor there. I want to go to one place. I want to binge all of my favorite shows in one place and so when you start pulling them and segregating them into separate places, that is going to make me as a consumer very angry because when I sit down and I think I want to clean the kitchen, what do I want to watch, I may just pick that juicy Rom-Com from Netflix as oppose to having to be forced to go to NBC to watch my Gilmore Girls or whatever because I just want all the selection in one place. 

So I do think that they’re still winning there in terms of they are being the most user-friendly and like I said, no one is going to want to segment their choices. I mean that is what makes Netflix so great right now, which brings me back to original on point, which is shell out the cash come on here people. Just do it. 

[0:09:42.4] FA: Right but that already shelling out so much cash to make it. I guess your point is stop spending the money on all of these hit and miss projects because I think that’s fair to say Netflix is quite hit and miss right now. They make some great stuff, they make some horrendous stuff. 

[0:09:56.8] SH: Can we talk about Black Mirror? That must have cost them however much money. 

[0:10:00.2] FA: Well I don’t know. I have not seen Black Mirror. Is it not a good show?

[0:10:03.2] SH: I don’t know but from the previews it can’t possibly be. It is not possible and then you throw Miley Cyrus in there who’s only claim to fame was Hannah Montana, which was a fantastic show. Her acting career is over. You cannot put her in some creepy show and stop spending the money on that and to be honest – 

[0:10:18.7] FA: Miley if you are listening, we would love to have you on the show. Don’t listen to Sarah. 

[0:10:22.2] SH: My point is, is that you can make cheap good content because as I said, we love the Rom-Coms. They can’t possibly cost as much as Black Mirror. They just can’t. I mean look at the production value. All you have to do is go film in the middle of a beautiful place with two beautiful people. That can’t cost that much money. So spend it on that but then shell out the rest of the money towards keeping the content we love. It is not that hard people, I mean come on. 

[0:10:46.5] FA: Right and I think that is an extremely valid point. The question as ever with these things is will Netflix heed your advice? It doesn’t look like it. If you look at the way that they are investing in studios in Albuquerque, they are trying to launch I think it is their first physical actually Netflix studio where they are going to produce shows. It just seems like they’re hell bent on becoming a big player in creating the content and what you are saying and I agree is they should strip it all back. Be a fantastic platform, make some shows but only make the best show. 

[0:11:17.2] SH: Yeah, if Mr. Netflix is listening let me use Amazon Prime as an example who I know is one of your competitors, when I go on they have newer movies that maybe have just left the theaters that I can pay for. It is a little bit extra but just that little bit extra like I don’t mind spending a couple of bucks extra if it is a movie I really, really want to see. So why does Netflix not have an option for me to purchase a movie? In addition to my baseline 12, 15. 

If you are apparently filthy rich, the $18 subscription, which I am not sure anyone has. If you are short on cash, make it so that you have these movies available for purchase. Is that crazy? 

[0:11:54.3] FA: Well I tried to. I pre-empted your idea there and I actually tried to research this and I had to go back all the way to 2010 where they were talking about how Netflix wanted to keep these subscription process extremely simple and when they were launching the concept, it was quite a new concept. So they were essentially saying to people pay us, I think it was $10 back then, “Pay us $10, watch whatever you want as much as you want, whenever you want and no restrictions, no limits,” and they just wanted to keep it really, really simple. 

They didn’t want to try and market it, oh and also you can pay $6 to watch A Star is Born, etcetera. So they were trying to really streamline the process and make it really palatable for people. 

[0:12:36.4] SH: I appreciate that but desperate times call for desperate measures and this is not 2010. We’re in 2019 I mean it’s time. 

[0:12:44.1] FA: If I want to watch a movie, I’d go to Amazon Prime. I don’t know if anyone else even does it. They might do it in terms of the pay per view. I think they do, certainly Roku seems to offer me a ton of options but it is so easy when it is set up with your prime account. You just go on and it – 

[0:12:58.7] SH: That is what I am saying, which could be the ticket for Netflix as well. 

[0:13:02.1] FA: Does Netflix want to wade into another battle? I mean they’ve got NBC on the one side saying, “Give us back all your successful shows,” they’ve got Amazon Prime on the other side saying, “We’re going to get these movies. We can pay for these movies. We’re going to buy all the rights because we can.” Let’s face it, Netflix is not Amazon in terms of the financial situation. Amazon are a massive company compared to Netflix. 

[0:13:24.6] SH: At some point they are going to have to make some hard choices because I will not see my beloved platform just disintegrate. So Francois, I guess what we want to end this and maybe this is the ultimate question because this may solve all of Netflix problems because you are probably their toughest consumer, I am not. I mean I will watch anything. 

[0:13:41.7] FA: I just watched Game of Thrones and The Sopranos and occasionally John Oliver. 

[0:13:46.3] SH: When he’s good, these shorter episodes. 

[0:13:48.1] FA: When he’s good, what are they doing with these shorter episodes man? 

[0:13:50.1] SH: I don’t know, John if you are listening, we got to have a long chat. Anyway, so what are you looking for Netflix to do? You don’t want The Kissing Booth. You don’t want the shows that they’re making, the 13 Reasons Why, the Riverdale, which I love by the way Reed, keep it coming but what are you looking for as one of the toughest consumers? 

[0:14:08.3] FA: My biggest issue with Netflix content and this might be even a psychological thing as we said, I am a fairly difficult consumer but when I am watching it, it just looks cheap to me. A lot of the scripts you wonder who signed off on this show? Did you just sign off on this because you’ve got the stars to do it and you needed to show so you put this out and obviously people are making more TV shows than they’ve ever made. 

So the talent pull is getting stretched really thin right now. The actors, the writers, everyone is being spread out more. It used to be you could just focus. We’ve got 10 unbelievable writers in the US, you know when they used to write The Simpsons then the guys from The Simpsons went to Frasier. You just have all of these unbelievable concentration of talent and now, it’s just getting so spread out and that is what Netflix looks like to me. 

It feels two dimensional and I watch it so many two dimensional characters, so many two dimensional shows and I am being excessively mean there. But, that is how I feel a lot of thee time, there are exceptions but House of Cards, unbelievable show to start off with. Totally immersive world. But when I think about what else I watched on Netflix that I felt that same excitement to wait for that next season of House of Cards, I can’t think of one.

[0:15:17.3] SH: It seems, in summation, that Netflix needs to make a choice. It’s either Sarah or Francois because you can’t get both consumers, you either get me and keep pumping out those Rom-Coms or you go back to square one and start making House of Cards content but you’re going to lose one side of the consumer base either way. Is that what you’re saying?

[0:15:37.2] FA: My point to that would be, Mr. Hastings, when you launched Netflix, were you just hoping for essentially lifetime on demand? Because that’s where they’re headed.

[0:15:46.6] SH: Not necessarily a bad thing. I love a good lifetime movie, that’s my point. I guess it just depends.

[0:15:51.1] FA: Right, but then I compare it to HBO and I’m like, I’ve got my hard earned money here, am I going to spend the money on HBO or am I going to spend it on Netflix when I know the kind of shows that HBO puts out. I’m going to keep my HBO subscription because at least I can re-watch game of thrones because I know no one’s coming for that because that’s HBO through and through. No one’s got any rights to that except HBO.

[0:16:10.4] SH: Yeah, HBO for life. Well, Reed, you’ve heard our cries, we’re of the people and we represent the consumers here, we represent the households that are crying at this news. Only you can determine the future. You’ve heard us.

[0:16:23.5] FA: I know in Sarah’s case, The Office and Friends probably make up about – and Gilmore Girls which is also a threat here.

[0:16:30.2] SH: I can’t even talk about that. I will be devastated as a brief aside, it’s something that every woman should do. At the start of every fall, just put it on and watch it through from about I don’t know, October when you’re feeling Halloween-y because for whatever reason, Gilmore girls always has this like very seasonal vibe. I mean, you can’t really watch it in the summer, it’s not a summer show.

[0:16:50.2] FA: Well, you can’t watch it anymore because it’s getting pulled.

[0:16:52.7] SH: Okay. Well, my point was, start it in the fall, finish it in the lovely winter, it’s always a feel good.

[0:16:59.3] FA: There you go, Friends in the summer, Gilmore Girls in the fall, The Office in the – all the season.

[0:17:04.0] SH: All the time.

[0:17:05.0] FA: Yeah, all the time that you’re not watching the others.

[0:17:07.3] SH: There you go.

[0:17:07.8] FA: That used to be – you know, Netflix’s ticket.

[0:17:10.6] SH: Well, we’re saying bye to that former life. Reed, do something about it please.

[0:17:13.9] FA: Now it’s going to be the kissing booth, Bojack Horseman and – 

[0:17:18.2] SH: Orange is the new black.

[0:17:18.9] FA: Orange is the new black.

[0:17:19.6] SH: Welcome to your new reality people.

[0:17:21.1] FA: Very sad. Very, very sad. As you can tell, this is really a crossroads for Netflix, they’re facing unprecedented challenges, unprecedented competition, the cost of content is going up, the cost of making new content is going to go up, where do they go from here? I don’t know. I think it’s going to end badly.

[0:17:42.3] SH: We shall see.

[0:17:42.8] FA: I think we’re going to leave it there, thank you Sarah.

[0:17:44.9] SH: Thank you Francois.

[0:17:46.1] FA: If you enjoyed the show, you can subscribe to use on iTunes.

[0:17:48.7] SH: You can also find us any place you usually get your podcast and please feel free to leave us a review there.

[0:17:54.2] FA: Look out for our other episodes.

[END]

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