Netflix Earnings: Bye Reed, plus Lots of Details on Kids Content Performance

Welcome to The Kids StreamerSphere, a regular newsletter where we look at the latest news, deals, and performance data for kids content within the context of global streaming. Comments, questions, suggestions? Please hit me up.

If you work in media, you’d have to be living under a rock to have missed the key headline from the recent Netflix earnings call. Founder and co-CEO Reed Hastings announced his decision to step down. His horse’s mouth statement is?here. There was some online banter that in-depth descriptions of the smooth succession process threw shade at core competitor Disney, but of course I didn’t partake in that.?

The baton is passed to Ted Sarandos , already in place in the role, alongside newly appointed Greg Peters . The former COO had been clearly gaining visibility in corporate comms over the past few months. With the streamer’s recent turbulence, there has been lots of snark about whether Hastings would pass his own notorious “keeper test.” Given he remains on as Chairman of the board, I guess he does. Ultimately, the move was framed as long being in consideration, and in process since Sarandos was upped to co-CEO in July 2020.?

So how do you follow that with other key headlines??

I do my best.

Key Headlines:

A cascade of exec moves…?Bela Bajaria took over Sarandos’ meager side hustle as CCO and Scott Stuber went from “Head” to “Chairman” of Netflix Film.?

Subscribers grew more than the abysmal forecast…?Guidance from last quarter was a 4.6M increase, which would have been Netflix ’s weakest Q4 since 2014. Ultimately it landed at +7.6M, with additions across all markets, notably EMEA up 3.2M. #ThankYouWednesday

Ad sales is crawling, but in a good way…?The advertising tier was launched just two months ago. So far, Netflix are seeing good engagement from users choosing this option, who are happy with the technical interface and experience. Also, the streamer is seeing fewer subscribers than it feared downgrade from premium. Netflix’s bottom line position on this is they’re crawling before they walk, let alone run. As a reminder, no ads are shown on Netflix in kids profiles.

The best succinct take that I thought worth noting was:

Kids Headlines:

Franchise and consumer products were discussed in relation to?Wednesday’s Mac makeup palette, but it sounds like this was more of a hands-off back end for Netflix rather than anything they were driving for themselves. The impact of growing talent was also mentioned; however, I’m sure Disney Channel folks among us would argue “IT WASN’T JUST NETFLIX THAT BUILT JENNA ORTEGA AND SOFIA CARSON, TED!”. Talent was a core focus of the Disney Channel under Gary Marsh. Just ask Zendaya.?

Nuggets of content performance data seem to be less prevalent in earnings calls nowadays, probably because where before there was fish, there is now a fish pond, in the form of the Netflix Global Hours Viewed Top 10, that the streamer releases weekly (abbreviated to NGHV Top 10 going forward —corporate habits die hard). If you’re comfortable with me being your, er, I guess, fishing rod, then read on, and I’ll tell you what I can, er, catch.

Kids Content Performance:

Kids Series:

Tracking the performance of kids series on streaming is like pulling teeth, unless your name is?CoComelon, of course. That’s why I was excited to see?Sonic Prime?set a new record for an animated series debut:?

The spunky little hedgehog is having a hot year.?Sonic the Hedgehog 2?had the second highest animated box office of 2022, both domestically and internationally, coming behind?Minions: The Rise of Gru. Whatever global rights Netflix had for Sonic 1, it lingered in the NGHV Top 10 for eight weeks over the summer, presumably driven by marketing and interest in the sequel. The IP is also seeing good results on Roblox (h/t Jo Redfern ).

Another series worth keeping an eye on is?Little Angel. This YouTube IP was acquired by Moonbug Kids at the start of last year. It launched globally on Netflix in October and popped into the NGHV Top 10 across two weeks. In addition, it grabbed such excellent Trending Top 10 results that it rubbed shoulders with some high performing shows?in the annual kids roundup, despite only being around for the last quarter. I’ve extolled a bit more about this IP?here?and?here. There’s sibling rivalry in the Moonbug household!

Kids Movies:

Moving onto animated movies, and Q4 was CURSED, CURSED I TELL YOU! Globally acquired/produced animated movies have had a certain bankability in featuring in the NGHV Top 10 since it was launched, without the need to have a high profile or serious marketing spend. I?have never, and will never, pass up a chance?to talk about the success of?Chickenhare and the Hamster of Darkness, the little movie that could. That’s why it was so surprising that the start of the quarter saw two significant misses in this space.?Wendell & Wild?and?My Father’s Dragon, two true Netflix Original movies, coming from Oscar-nominated animation creators, failed to break through. Arguably,?Wendell & Wild?was door-jammed between a rock and a hard place. Its PG-13 rating kept it out of the kids section, and its appeal to adults is arguably niche. As for?My Father’s Dragon… stop. My heart breaks.?

Fittingly, I suppose, ’twas?Scrooge?who eventually thawed the miserly freeze of the NGHV Top 10 for animation. Netflix’s love affair with Christmas-themed commissioning shows no signs of slowing down, and the music-filled Dickens adaptation fitted right in. Here’s how it stacked up against other animated titles:?

As you can see from above, this cleared the way for?Guillermo del Toro’s?Pinocchio?to have its moment in the sun. However, it hit lower than?The Sea Beast?(which, incidentally, recently had a sequel announced). Despite being achingly beautiful creatively, I think it’s fair to imagine that kids may have limited interest in repeat viewing, with the movie’s dark themes set against a backdrop of fascist Italy (h/t Andrew W. ). Its recent win at the Golden Globes puts it on good track for the Oscars.?

Elsewhere in animation,?The Battle of Theatrical vs. Streaming waged on. Having debuted in cinemas last March,?The Bad Guys?hit its US Pay window on Netflix. It didn’t hit the heights or the longevity of?Sing 2, but there’s no doubt that animated blockbusters do great streaming business. Here’s how the US Nielsen Streaming Content Ratings results stacked up, with a side order of?Lightyear?to lament as you see fit:

Moving on to live-action films, and it feels like Netflix’s strategy here has evolved. It’s playing in the true family, sit-down, Saturday night space. The streamer speckles in movies that are sure to have appeal for older kids, young teens and up. This quarter saw?Slumberland?and?The School for Good and Evil?hit the kids section. These were both glossy (read $$$), and featured multiple A-list cast (more $$$).?

Sitting just above this in terms of demo was?Enola Holmes 2, once again starring?Stranger Things’ Millie Bobby Brown. The film’s debut elevated its prequel to the NGHV Top 10 also; that’s the power of multi-instalment IP. Like other recent Netflix films, including the runaway success?The Adam Project, this has clear older kids/family appeal, with just enough edge to sit outside the kids section (which is seen as a plus if you’re 11). See below for performance over four weeks, with animated movies included for scale:

I’ve said it before, but it just keeps getting better; this older kid/t(w)een/teen space is, for me, the most impressive part of Netflix’s content strategy for young people. They get that t(w)eens don’t want to be treated as kids, and provide content that fills this gap. That content has edge, just enough in my opinion, though others may disagree, which brings us to?Wednesday.?

The?Wednesday?series was heralded throughout the call as the standout success it clearly is. Across all metrics, there’s no doubting its impact. The show nails tone and appeal for this audience: school setting but a lead character with true quirk; fantastical vampires/werewolves/sirens but a spot-on soundtrack. I could go on. Across live-action content, this movies/series conveyor belt delivers young audiences up into the broader Netflix ecosystem of?Stranger Things,?Fate:?The Winx Saga,?The Umbrella Academy,?Shadow and Bone, etc, etc, etc. Bravo!?

What’s Next?

As we wait to see what the world of Netflix looks like under Ted and Greg, there are a number of things to look forward to. TV Kids Global?had a good writeup on upcoming kids content this week. The most interesting one for me comes on March 17th?(Paddy’s Day for those who celebrate), when animated original feature?The Magician’s Elephant?launches. What’s significant about this is that it’s the first output from animation studio Animal Logic since Netflix acquired it last year.

Despite wobbly comments towards the end of 2022 regarding their animated movie slate, Netflix now seem steady on what’s to come. As already mentioned, a?sequel was recently announced?for?The Sea Beast, alongside an overall deal with its creator, Chris Williams. They can also look forward to?Leu?starring Adam Sandler, coming in November. Add to this 2023 US Pay windows for the likes of?Minions: The Rise of Gru?and?Puss in Boots: The Last Wish, and you have yourself a party.?

It's younger-skewing Original series that don’t seem to be solved for the streamer, neither on live action, nor animation. Perhaps the acquisition of tried and tested IP delivers enough? You can’t help but feel they’re missing the trick on a breakout show, easy and all as that is to write, hard and all as it is to do.?