Two digital media companies report earnings, but media could care less about bottom line
Yahoo’s upcoming sale of core assets and Netflix’s slowing customer growth become the stories rather then sales revenue and profits reported in the latest earnings reports
It is tough being a publicly traded media company. More than a few wish they were privately held, while those that are private often dream about going public until that short span of time each quarter when they have to report earnings then see the hell their fellow CEOs have to go through.
Both Yahoo and Netflix reported yesterday, and though they were both a bit torn down by the press, neither report were disasters. No matter, the press like a story, and each company could provide one.
For Yahoo, the story is their upcoming sale. Final bids were due yesterday and soon enough there will likely be an announcement as to will own the Yahoo core assets. Yesterday’s report and the follow-up investor conference call were really the end of the road for CEO Marissa Mayer, and she had to know it.
Kara Swisher, who clearly is not fond of Mayer, wrote about the call and how odd it was for the company to talk earnings and business as usual when the sale hangs over everything:
Part of me wishes she would just say what I know is in the thought bubble above her head (besides, “Someday, I am going to Peter Thiel you, Kara!!”). You know like:
I really should not have taken this job.
In tech, unlike publishing, it is hard to go years producing disappointing earnings without the media finally saying the emperor has no clothes. You watch what happens when Apple disappoints two or three quarters in a row. In the newspaper or magazine business, with its sycophantic trade press, all a CEO had to do is give another “exclusive” interview to receive good press, say “print is not dead” or something along those lines and the press become compliant.
Take Netflix, the other big company to report yesterday. The company reported revenue up 33 percent, yet you would have thought the end of the world was nigh. The problem was that the company only gained 1.7 million new customers.
Can imagine the NYT or Time Inc. announcing that a brand had gained 1.7 million new readers? We’d all faint.
But for Netflix, that number was disappointing to the press, and to investors who took down the stock in after-hours trading.
“I know it’s not easy on everyone,” CEO Reed Hastings said during the conference call, apologizing for the stock collapse. “The big picture is very much intact, and we’re very excited about it.”
But the reality is that the stock had enjoyed a nice run up in the past 30 days and I’m sure more than a few investors were looking for an excuse to record their gains. They did, as the stock fell around 13 percent.
Netflix, I think it is fair to say, is no flash in the pan. They have done something that few other companies have been able to do, dramatically transform their business model. I miss the days when I used to always have three DVDs from Netflix around the house. The thought of going exclusively to streaming was not something I looked forward to. But they did it, and they made it work. Then they moved into original content. It’s an amazing story really. But one that is so familiar to both the media and customers that it ends up not being a story at all. Meanwhile, legacy media companies are still trying to transition to digital, being dragged into change kicking and screaming all the way.
Customer growth is, however, slowing – and the recent price increase, which should boost revenue, may suppress customer acquisition. We’ll see, of course, in future earnings reports, but in the meantime the media have their story. Imagine, though, what Jeff Bezos could have done with the same report. Amazon is notoriously secretive with its numbers, despite being a public company. And if Netflix were a privately held company, like Hearst or Condé Nast, there would be no mention of slowing customer growth at all.