Netflix is ‘still Netflix’ as they produce live Chris Rock special, resist live sports: Analyst

Wedbush Managing Director in Equity Research Michael Pachter discusses Netflix and their plans to produce a live Chris Rock special, and gives his outlook on the future of media streaming rights. Read More...

Wedbush Managing Director in Equity Research Michael Pachter discusses Netflix and their plans to produce a live Chris Rock special, and gives his outlook on the future of media streaming rights.

Video Transcript

SEANA SMITH: All right, well, Netflix is going live. The streaming giant will be airing the highly anticipated Chris Rock live comedy special on Saturday, bookended by pre- and post-shows. It’s the first ever live stream broadcast for the company. For more on this, let’s bring in Michael Pachter, Wedbush Securities managing director of equity research. Michael, it’s great to see you again. So certainly, it’s a big test for Netflix. What do you think of this move, venturing into the live streaming game?

MICHAEL PACHTER: It’s a free publicity move that’s going to have no impact on their business, but it’s going to get people like you to turn it into a news feature. And you’re not the only one. You’re about my 10th interview on this one. They– look, they need programming. The idea that anybody’s going to turn on Netflix by appointment is idiotic. We don’t even know when regular TV shows are on. I think the last show I used to tune in, in real-time was “Friends” at 9 o’clock on a Thursday night, and I can’t– that was 25 years ago.

We use our DVRs. We’ve all been trained by Netflix that whatever we want to watch is on-demand all the time. And in fact, we’re all pissed when something like “The Mandalorian” comes out on Disney+ and season three came out on Wednesday, and there’s only one episode. We don’t get them all.

So this whole concept that Chris Rock is going to stand up live, and I’m going to actually show up Saturday night to watch it, it’s not any worse if I watch it the first time on Sunday or a week from now or a month from now. They’re doing it solely for the publicity. This is not the same thing as signing a real live stream deal like a sports deal, which I don’t think they’re going to do. So Netflix is still Netflix. It’s no different than it was in the past, but they managed to get news media organizations to report on this.

DAVE BRIGGS: Your cup overflows with enthusiasm, Michael. I will tell you why I–

MICHAEL PACHTER: Disdain is the right word. Go ahead. Sorry.

DAVE BRIGGS: I’ll tell you, I would agree with you for the most part, except for this is a cultural moment because we’re all waiting for him to respond to the infamous slap from Will Smith right ahead of the Oscars, which are next weekend. This is a moment that I think has a lot of buzz, and yes, because of organizations like ours talking about it. What number of live viewers will convince you that you’re wrong here?

MICHAEL PACHTER: Well, what number of live viewers saw the slap in the Oscars? I think it was the lowest rated Oscars of all time. So what is that? I don’t even know in the US. 10 million, 20 million? There’s no chance it’ll be 20 million, 0% chance of 20. And hearken back to the days of shows like “The Blacklist,” season one. It got 20 million viewers per episode. And the show “24” got 20 million viewers who tuned in, in real-time.

This thing, 5 million? Sure. Who cares? It’s not going to move the needle. No one is signing up for Netflix to watch this show on Saturday. And oh, by the way, five seconds after the joke about Will Smith’s slap, it’s going to be on Twitter. So who cares? I’ll read about it on Twitter.

SEANA SMITH: Michael, you’ve got two people here that will probably most likely be tuning in–

DAVE BRIGGS: Oh, I’m in.

SEANA SMITH: –to it live.


SEANA SMITH: Yeah, I’m excited. Maybe it’s because we’re part of the people that are hyping it up. So, Michael, you’re not excited about this. Netflix has resisted any sort of venturing into live sports. Would that make sense to you, given the number of eyeballs that it does draw in real-time?

MICHAEL PACHTER: No, you know, live sports is a hook to keep someone subscribing. So, you know, it makes sense for a cable provider, for Comcast. And it makes sense for a retransmission company, like CBS or NBC, to buy sports rights. I think Google is going to fail miserably with the YouTube purchase of Sunday Ticket. I think that’s going to end up being a disaster for them. But it’s going to hurt DirecTV at the same time because you’re going to see people start to cut the cord.

The one company out there that’s kind of built a whole business on this is Fubo, FuboTV, the ticker FUBO. The stocks got crushed because they’re not yet profitable, and they’re still burning cash. But they are a live broadcast channel, all streaming. And it’s mostly sports. I mean, they have all the other networks as well. And they can’t make money. So if they’re not making money focusing on that, YouTube absolutely is not making money on YouTube+. I don’t– Amazon, no chance they’re making money with Thursday Night Football.

So I don’t think live sports is the way to go. The sports leagues have established that their rights are worth billions of dollars. And Netflix just doesn’t have billions to spend on that. And we don’t think of Netflix as a by appointment television broadcaster. We think of them as an on-demand, when we feel like it, and binge the whole thing. So we’re perfectly happy to tune in to YouTube or tune in to Amazon Prime because we’re all Prime members anyway and watch football. We’re not going to join Netflix for that.

DAVE BRIGGS: Yeah, they’ve made a shrewd entrance into sports with some of the series, “Full Swing” and “Drive to Survive,” the new partnership with the NFL profiling Patrick Mahomes and other quarterbacks. But let me ask you, you’ve got an outperform and a 410 price target here. That’s more than 30% upside. What do you love about the long-term outlook for Netflix?

MICHAEL PACHTER: Oh, I mean, you said I was full of enthusiasm, and I said disdain. I love their spirit. So, look, as much as I criticize them for dumb moves like this, I like that they keep getting up after getting just knocked to the ground, and they keep fighting and they keep trying. They had the crap kicked out of them for a brief period of time. They stopped growing subscribers.

And they took a look in the mirror and they said, what can we change? They added an ad-supported tier. That was really smart. Not that it’s going to attract that many new subscribers, but it’s going to keep people from quitting. Anybody who’s paying 15.49 a month who says it’s too expensive and I don’t watch it that often, they have to think hard about trading down to 7 bucks a month with some ads, and they probably will.

So I think you’re going to see a reduction in churn, which results in higher net new subscribers added because they’re going to keep the old ones and add the same number of new ones. And when they grow for two or three more quarters, the stock hits my target. Let’s revisit after that. I think that there’s opportunity there for profitability because they’re cutting their spending. And as long as they don’t do stupid things like bid on sports rights and do really smart things like bid on Chris Rock live so you talk about it, I love the stock.


DAVE BRIGGS: Eagerly awaiting the Chris Rock stand-up special. Michael Pachter, we love it, man. I like your enthusiasm. Thank you, sir. Enjoy the weekend.

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