Netflix Chairman Reed Hastings denied the decision to share the CEO role with Chief Content Officer Ted Sarandos (see 2007160073 and personals section, July 17) foretells his exit from the company or a reduction in his day-to-day duties. “I'm in for a decade,” said Hastings in a Q2 call Thursday (see materials here). “As co-CEOs, it's two of us full time.” Forecasting a 63% year-over-year decline in Q3 net subscriber additions to 2.5 million is based on "the context of what just happened in Q2,” said Chief Financial Officer Spencer Neumann. “We just added 10 million members, which is the largest growth we've ever had in a second quarter.” Lockdowns sent Q1 sub growth soaring. Newer members are “highly engaged,” said Neumann. “They're sticking around with us actually as well or better than pre-COVID.” When a Netflix user churns, “it's always temporary,” said Hastings. “It's just a matter of timing as our service gets better, as maybe their income increases, as the internet gets faster.” The streaming-device maker disputes of the sort that have kept Peacock off the Roku platform are “really unfortunate,” said Chief Product Officer Greg Peters, newly named to the dual role of chief operating officer. “It really impacts consumers when they can't watch the shows that they're thrilled to watch on the device that they have.” COVID-19 on-set “safety protocols” Netflix is installing globally “will become a permanent part of production,” said Sarandos. The time between the shutdown and ramping back up “was spent on scripts and development and preparedness,” he said: That will make the shoots “more efficient." The stock closed 6.5% lower Friday at $492.99.
Netflix did 35% better than its April 21 projections when it delivered 10.1 million net subscriber additions globally in Q2. After Q1 Netflix subscriber net adds as COVID-19 lockdowns hit soared to 15.77 million, Netflix said then it expects viewing to decline and membership increases to slow down as “home confinement ends” (see 2004210059). “We live in uncertain times with restrictions on what we can do socially and many people are turning to entertainment for relaxation, connection, comfort and stimulation,” said a shareholder letter after regular U.S. markets closed Thursday. The first half had “significant pull-forward of our underlying adoption leading to huge growth,” it said. “We expect less growth for the second half of 2020.” It’s forecasting 2.5 million net subscriber adds globally for Q3, compared with 6.8 million in Q3 a year earlier. “Instead of worrying” about all the new competition in the streaming space, “we continue to stick to our strategy of trying to improve our service and content every quarter faster than our peers,” it said. The stock fell 9.9% to $475.40 in after-hours trading. The company also promoted two executives (see personals section, this issue.)
Taiwan Semiconductor Manufacturing Co. business increased slightly in Q2 as 5G deployments offset other weakness, said CEO C.C. Wei on a Thursday investor call. COVID-19 “continues to bring some level of disruption to the global economies,” he said: TSMC is observing “weak consumer demand.” It expects 2020 global smartphone unit shipments to decline by a “low teen” percentage year-over-year, he said. But supply chains are making efforts to build back stability in “actively preparing for new 5G smartphone launches,” he said. The chipmaker is upgrading its 2020 forecast for 5G smartphone penetration to the “high teens” of the total smartphone market in 2020 from 5%-10% penetration in its April forecast, said Wei. TSMC thinks the long-term “underlying megatrend” of 5G remains “intact,” he said: Supply chains will “adjust and rebalance.” There "may be some impact” from the Commerce Department’s May 15 increased export control restrictions on Huawei (see 2005150027), he said. TSMC doesn’t plan to ship Huawei wafers after Sept. 14, said Chief Financial Officer Wendell Huang. TSMC remains on track to build an “advanced semiconductor fab” in Arizona, said Wei: Production is “targeted” to begin in 2024 with monthly capacity of 20,000 wafers.
The ViacomCBS decision to license catalog Paramount TV shows and movies to NBCUniversal’s Peacock streaming service (see 2007010024) demonstrates “we’re in the content monetization business,” Dan Cohen, president, ViacomCBS Global Distribution Group, told the Digital Entertainment Group’s DEG Expo virtual event Thursday. ViacomCBS also is “very much in the space of using content for our own platforms and services,” he said.
The U.K. followed the U.S. lead in banning Huawei equipment on national-security grounds (see 2007140023) “without any solid evidence and under the excuse of non-existent risks,” said a Chinese Foreign Affairs Ministry spokesperson Wednesday. The U.K.’s action “blatantly violated” free trade rules and “eroded mutual trust underpinning China-U.K. cooperation,” she said. “China will evaluate this development in a comprehensive and serious manner and take all necessary measures to protect the legitimate and legal rights and interests of Chinese enterprises.” President Donald Trump’s disclosure Tuesday that he personally “convinced many countries” not to use Huawei as a condition for doing business with the U.S. was “further proof that decisions to ban Huawei are not about national security, but political manipulation,” said the spokesperson. Trump's remark “also shows the world that it is not China, but the U.S., that has been intimidating and threatening others and sowing discord all across the world,” she said.
Though pandemic “consequences” remain a challenge for the global economy, TomTom revenue is “on the road to recovery from the lows that we experienced in April,” said CEO Harold Goddijn on a Q2 investor call Wednesday. The GPS and mapping device supplier had “a very good upward trend in the second half of the quarter, both for automotive and for retail products,” he said. The June 30 quarter started with “factory and retail closures impacting trading conditions for automotive and consumer,” said Chief Financial Officer Taco Titulaer. The quarter got progressively better with the reopening of automotive factories and “the return to retail activity,” he said. “June was by far the strongest month and contributed about half of the quarter's operational revenue,” though it was down 47% from a year earlier, he said.
The content industry even before the COVID-19 pandemic was “moving towards software-based systems, virtualization, cloud” and IP, Michael Koetter, WarnerMedia senior vice president-technology strategy, told an SMPTE webinar on media production in the coronavirus era. With stay-at-home mandates in place since March, “it’s been difficult to sustain normal workflow,” he said. “I think we’ve all jumped into the deep end of the pool with these technologies. We’ve pushed this technology adoption curve forward probably by two years.” And “we have not just remote contributors, but remote production operators, remote engineers -- everyone’s remote.” The “crazy thing” about that environment is “we’re not just surviving, we’re thriving,” he said. “The technology is incredibly empowering. Not only have we managed to keep our production going, but we have done everything from taking hours of commute off people’s days to reducing pollution.” The new normal doesn’t just apply to news or sports, “but also to traditional film and TV production,” he said.
It takes a lot for companies to move supply chains, and 5G, COVID-19 and trade tensions are some factors, a Flexport webinar was told Tuesday. Strong government action requiring companies to move supply chains would be limited to "a few select sectors,” said John Murphy, U.S. Chamber of Commerce senior vice president-international policy. For manufacturers, producing in China was a way of “wringing costs out of the supply chain,” said Flexport Chief Economist Phil Levy. Price pressure has intensified, said Ryan Petersen, Flexport CEO. “Consumers are always going to want the cheapest thing, and if anything, the internet’s made price pressure insanely competitive because consumers are in control now.” They can “go find the cheaper thing from whoever’s got it, wherever they might be,” he added. Asked about prospects for national industrial policy, Murphy referenced a bill introduced last month by Sens. John Cornyn, R-Texas, and Mark Warner, D-Va., that would incentivize U.S. semiconductor manufacturing, provide more federal support for R&D and secure the supply chain. “This isn’t the U.S. becoming China,” Murphy said, comparing the initiative to efforts in Singapore, Ireland and Israel.
COVID-19 stay-at-home mandates didn’t have the same invigorating effect on May smartphone imports to the U.S. as on connectivity tools like laptops and tablets (see 2007100025), show Census Bureau data we accessed Saturday through the International Trade Commission. U.S. importers sourced 12.5 million smartphones from all countries in May. That's up 8.9% from April, down 23% from May 2019. May smartphone imports had $3.01 billion in customs value, down 1.9% from April and 25% from the same year-earlier month. The average May smartphone import was worth $240.56. China generated 79% of May smartphone imports to the U.S., up a few points from April and May 2019. Vietnam, the world’s largest country of origin for smartphones worth less than $200, ceded share to China in May, falling a few points to 14.5%.
During COVID-19 pandemic lockdowns, the 10.37 million laptop and tablet imports to the U.S. in May rose 10.8% sequentially and 21% from May 2019, show Census Bureau data we accessed Friday through the International Trade Commission. May shipments had $4.58 billion in customs value, up 6.5% from April and 25.7% from the same 2019 month. China sourced 93% of the imports. Stay-at-home mandates spurred global shipments of “traditional” PCs to an 11.2% year-over-year increase in Q2 to 72.3 million, reported IDC Thursday. Work-from-home and remote-learning mandates sparked demand growth that “surpassed previous expectations,” said IDC: COVID-19 is returning computers to “the center of consumers' tech portfolio."