Netflix Names Ex-Disney TV Chief Peter Rice Content Head Days Before Q3 Earnings; Shares Slip 3%

NFLX said Thursday that former Disney executive Peter Rice will replace Bela Bajaria as chief content officer, effective Oct. 26. Bajaria, who joined from NBCUniversal in 2016 and most recently led the company's global content team, is leaving after nearly 10 years. The change came a day after Netflix cut roughly 6% of its workforce, about 1,000 jobs, and lands days before third-quarter results due after the close on Oct. 20.

Rice most recently ran Walt Disney Television and Disney's general entertainment group, which included ABC, FX and Hulu, and before that led Fox Networks Group. He takes over a $20 billion content budget. Wedbush analyst Alicia Reese wrote that his years at Fox and then at Disney after it bought Fox give him "unique insight into the consolidation of two major studios," relevant if Netflix pursues another studio. BMO's Brian Pitz was less charitable, reading Bajaria's sudden exit as a sign that "user engagement may have remained soft" through the third quarter.

The engagement worry has a track record. Netflix said in July that viewership rose just 2% in the first half, and it won 16 Emmys this year versus 44 in 2021. Shares fell about 3% to $70.35 in Friday morning trading, leaving them down 25% this year, and were at $70.53, down 2.9%, late in the session in SentiSense's 15-minute-delayed data. Wedbush cut its price target to $90 from $105 while keeping an Outperform rating, and Huber Research downgraded the stock to Underweight earlier in the week.

Tuesday's report is the first test of the reset. Netflix guided to a third-quarter operating margin of 33.2% and diluted EPS of $0.82, and expects content expense to rise about 10% this year. Investors will want commentary on engagement trends and on how Rice and the post-layoff organization plan to allocate that budget.