Financial advisors who have Netflix in their clients’ portfolios have asked me if there is something they can do in response to the deplorable marketing of the film ‘Cuties’ by Netflix. I would suggest that if you have Netflix in the accounts of some of your clients, either directly or as part of a mutual fund (and there is a pretty good chance that you do), you have a great deal more power than you think you do. As you know, shareholders, or their designated proxies, have the legal right to vote for (or against!) members of the board of directors, which sets policy and chooses the CEO. A group of shareholders with as little as $2,500 worth of the stock held for a year actually has a right to put a resolution before every other shareholder which has binding authority. Various ideological identity groups have used small investments to completely dominate the discussion. It’s time for people who uphold basic principles of sexual morality (including not sexualizing children) to use the authority we already have.
The statement below is designed for advisors to send to Netflix. This will have its greatest impact if sent directly through the company’s Investor Relations Portal, as opposed to the various means used by the general public. It’s quite easy to do. It took me about two minutes to fill in my information and to copy and paste the letter into the box. You can use all of this letter, or copy any section you like, or you can write about your concerns in your own words.
I am a financial advisor who has clients who are invested in Netflix, and recent events have caused me to have deep concerns about the company, its success, and its moral state in the wake of the controversy surrounding the promotion of the film Cuties. Through your salacious marketing of the film Cuties, Netflix has damaged its moral reputation, by associating itself with the sexualization of young children. Netflix has incurred substantial risk – both financial and moral. I will start with the financial.
Netflix has seen a massive spike in cancellations since this issue has arisen. Analytics firm YipitData reported a spike in cancellations as high as eight times the rate of the previous month, as of September 12th. That is a much higher spike in cancellations than Netflix faced after the launch of DisneyPlus. In at least one sense, a single poster and film description has had more of short-term impact on Netflix’ subscriber base than the launch of a major competitor with the backing of one of the largest, most well-known companies in the world.
Over the course of September, Netflix has underperformed the NASDAQ. As of this writing, Netflix’ stock has declined at the rate of -12.36% from September 1st, approximately when this controversy began. Over the same period, the NASDAQ 100 has declined by only a rate of -9.96%. Of course, stock market prices are determined by a wide variety of factors and subject to variation, but Netflix’ underperformance has coincided with a major controversy for the company. As such, Netflix’ leadership would be unwise to completely disregard this signal from the markets.
Furthermore, Netflix is facing substantial risk from both state and federal government. Four state attorneys general have demanded the film Cuties be removed from Netflix’ catalogue. Three sitting U.S. Senators have asked Netflix directly for an explanation as to how a film could be advertised in a way that implicitly valorizes erotic dancing by children as a method of liberation from the burden of traditional family values.
One of these Senators, Ted Cruz of Texas, asked the Department of Justice to investigate whether Netflix has violated federal laws against the production and distribution of child pornography. Needless to say, these represent substantial risks to the company, and whether legal action materializes or not, Netflix has suffered a loss in prestige that cannot be denied, as evidenced by the spike in cancellations and negative media coverage.
Netflix should immediately take steps to rectify the damage it has incurred and ensure something like this does not occur again. For starters, Netflix should consider instituting a program promoting viewpoint diversity at the company. Netflix has programs devoted to encouraging diversity in gender, race, and sexuality, but has no programs to ensure diversity of values, ideology, and political viewpoint among its employees. At Netflix’ annual shareholder meeting, the board lobbied against the passage of a resolution designed to do just that.
This resolution merely asked Netflix to produce a report about the potential risks of omitting viewpoint and ideology from its Equal Employment Opportunity policy, but at the urging of the Board of Directors, it failed to pass. Perhaps Netflix would not be in the situation it finds itself in now if it had taken its shareholder’s legitimate concerns about viewpoint diversity and ideological suppression seriously. How is it that the Cuties poster and description generated a national controversy, but raised no red flags inside the company? This failure betrays a deep-seated ideological monoculture at our company. Netflix publicly apologized for its poster and description, removed the offensive material, and posted a video with the director as an act of damage control. You have acknowledged publicly that your marketing of the film was inappropriate, yet there has been no indication that Netflix is doing anything to change the culture that produced this scandal. Is Netflix truly so insular that you could not have anticipated this backlash? Perhaps individuals who are sympathetic to a “conservative family’s traditions” would have been more likely to object to a promotion campaign that trashes those traditions.
A problem this significant demands a serious process of self-examination by the company, one that originates from the Board level, not the management team which dropped the ball. It should include not just the issues mentioned above regarding the well-known tech company cultural bubble, but also the moral and cultural risks associated with morally debased content, especially that which involves children and teens. If the Board does not initiate such a review, perhaps shareholders should via resolution.
This letter is not intended as mere confrontation for its own sake. I am not an activist attempting to draw Netflix into disrepute, but a financial advisor, alerting Netflix to the plausible and legitimate concerns that I have. Netflix has incurred damage to its reputation, which may very well be against my client’s interests and values. Beyond that, by damaging its reputation in this way, Netflix may be establishing itself as a controversial and unreliable investment, a factor that advisors will have to consider in the construction of portfolios. Investors who are aware of this controversy – which is likely a great many, given its wide coverage inside and outside financial media – may very well ask that Netflix be excluded from their portfolio on moral grounds. When a company incurs financial and reputational damage, it makes itself a less attractive investment.
Under normal circumstances, the matter of a single film’s poster and description would be too trivial to be of concern to the bulk of investors or investment advisors. But in this case, the marketing was so egregious that Netflix has incurred risks substantial enough to warrant significant concern from those tasked with constructing portfolios. Beyond the financial costs to investors, which may be considerable, there is a moral cost that must be given serious consideration. At least one Senator has raised the possibility that, through its promotion of Cuties, Netflix was complicit in the production of child pornography. This is a very grave matter. Those in Netflix’ leadership, perhaps who would prefer this controversy be forgotten and not dealt with directly, to consider the warning found in Matthew 18:6 concerning millstones and those who cause young children to stumble.