Netflix Poaches Activision's CFO

After a five-month search, Netflix (NASDAQ:NFLX) has appointed a new chief financial officer (CFO), and his long tenure at Disney (NYSE:DIS) suggests the company might be gearing up for the coming war with the House of Mouse. The company's hire, former Activision Blizzard (NASDAQ:ATVI) finance executive Spencer Neumann, shows that it's going to make Mickey and friends fight for every new subscriber.

This news comes on the heels of the revelation that the video game titan was firing Neumann for undisclosed reasons. Earlier this week, Activision said in a regulatory filing that it planned to terminate Neumann for reasons unrelated to the company's financial reporting. The exec was reportedly still under contract with Activision, and several reports suggest that his termination may have been the result of his job search and negotiations with Netflix.

This article originally appeared in the Motley Fool.

The chief financial officer position is among the most critical roles in a company and can be a key component to the success or failure of the business. Let's look at Neumann's past to see if it provides insight into Netflix's choice for its new finance chief.

A long stint in the media industry

Neumann has been CFO for Activision since mid-2017, which is a relatively short time for a C-suite executive. Before his stint with the video game publisher, Neumann served as the CFO and executive vice president of Global Guest Experience of Walt Disney Parks and Resorts, from 2012 until May 2017. He was also executive vice president of the ABC Television Network from 2001 to 2004 and CFO of the Walt Disney Internet Group from 1999 to 2001. He even held positions with a number of private equity firms.

One of the biggest contributing factors in Netflix's decision to hire him may have been his history with Disney and his extensive experience with finance and accounting in the media industry. Netflix long ago signaled that it planned to have as much of half of its library made up of Netflix originals, and having a seasoned media executive was probably high on the company's list of attributes for its new CFO.

A glimpse behind the curtain

A history in the media business would certainly be a plus working with Netflix. Early last year, the company released a revised overview of its content accounting, a 26-page presentation that detailed the growing complexity of accounting for its movies and television programs. Each program falls into one of several broad categories, with each requiring a slightly nuanced set of rules to govern its accounting treatment:

• Self-produced Netflix-branded originals, wherein Netflix wholly owns the intellectual property. Examples include Stranger Things, A Series of Unfortunate Events, and 3%.
• Licensed Netflix-branded originals, wherein the intellectual property is owned by others, but Netflix retains certain rights to the productions. Examples include House of Cards (Media Rights Capital), Orange Is the New Black, (Lionsgate), and Marvel's Daredevil (Disney).
• Second-run movies and television shows that are licensed for a period of time from their owners. These include How to Get Away with Murder (Disney's ABC), Shameless (Showtime), and Black Panther (Disney).

The right person for the job?

The new position reunites Neumann with several former Disney and ABC network alumni, including former ABC Entertainment Group President Channing Dungey, and noted show runner Shonda Rhimes, who spent 15 years at ABC, creating a plethora of hit programs such as Grey's Anatomy, Scandal, and How to Get Away With Murder. Both have recently inked deals with Netflix as the company continues to raid Disney's talent coffers.

The growing complexity of Netflix's production accounting, its international operations, the company's heavy debt load, and its negative cash flow probably all factored into the streaming giant's decision to hire Neumann. His long stint at Disney, including experience at its ABC television network, may have helped develop the unique set of qualifications that will hopefully serve him well at Netflix -- even as the two companies prepare for the streaming wars to come.

Danny Vena owns shares of Activision Blizzard, Lions Gate Entertainment Class A, Netflix, and Walt Disney and has the following options: long January 2019 $85 calls on Walt Disney. The Motley Fool owns shares of and recommends Activision Blizzard, Lions Gate Entertainment Class A, Lions Gate Entertainment Class B, Netflix, and Walt Disney. The Motley Fool has a disclosure policy.