Netflix exec worries a Disney merger would make it 'difficult to stay disciplined'

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Netflix’s Ted Sarandos said the company’s strategy to date has been laser-focused on providing a reliable, useful and entertaining SVOD service. And he worried that a merger between Netflix and a larger media company might throw that strategy into disarray.

“I do think that there are some multi-company conflicts that emerge in those big companies that would make it difficult to stay as disciplined as we’ve done,” Sarandos said during an appearance at the 44th Annual UBS Global Media and Communications Conference this week.

Sarandos was responding to a question about whether Netflix would “be happy inside a larger company?” The question was likely a reference to ongoing speculation that Disney might make an offer to acquire Netflix and its 87 million customers and SVOD internet streaming technology.

Indeed, conjecture on the topic has been noisy enough that Bernstein financial analysts including Todd Juenger addressed the potential matchup in a recent report that pegged the possible transaction at around $70 billion. “Investors are asking what we think, so we thought it best to publish our answer, which is: we are (perhaps surprisingly) open to it,” the Bernstein analysts wrote last week.

Separately, others have noted that a technology company like Apple might make a play for Netflix. As Variety pointed out, Apple CEO Tim Cook in October said the company was “open to acquisitions of any size.”

In discussing the topic of a potential merger of Netflix with a larger company, Netflix’s Ted Sarandos added that Netflix has been “maniacally focused on building a great SVOD product.” As a result, he said, the company built a production business in order to create content for its SVOD service. “I have no intention of building product and selling it to other people,” Sarandos said, explaining that other large media companies often have very separate businesses for content creation and distribution, and in some cases the company doesn’t own the rights to distribute its own content. Those are the kinds of “multi-company conflicts” Sarandos said he is worried about in any potential merger or acquisition involving Netflix.

“We sell a product in a way big companies aren’t able to do because they’re so big,” he said.

However, Sarandos acknowledged that additional M&A activity will happen in the media and pay-TV space. “I can tell you that, in a world where carriage fees are shrinking and ad rates are shrinking, consolidation is going to be a necessary outcome.”

And what might this M&A mean for Netflix specifically? “I don’t know about an impact to us,” Sarandos answered.

Apart from the ongoing speculation about Netflix’s corporate future, Sarandos said the company continues to invest in additional content for its service. He reiterated that the company plans to spend $6 billion on original content next year, up from $5 billion this year. He added that the company will double its original series slate to 60 shows in 2017, including 20 unscripted TV shows like the upcoming Ultimate Beastmaster reality competition series.