WEBVTT - Netflix Adds 9.33 Million Customers, Crushing Street Forecasts 0:00:02.920 --> 0:00:10.719 Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg Business 0:00:10.720 --> 0:00:13.960 Wait inside from the reporters and editors who bring you 0:00:14.000 --> 0:00:18.360 America's most trusted business magazine, plus global business, finance and 0:00:18.400 --> 0:00:22.880 tech news. The Bloomberg Business Week Podcast with Carol Messer 0:00:23.040 --> 0:00:25.759 and Tim Stenebeck from Bloomberg Radio. 0:00:26.480 --> 0:00:29.000 All Right, everybody, we're gonna stay with Netflix right now 0:00:29.080 --> 0:00:32.279 because the stock is down just about five percent here 0:00:32.320 --> 0:00:34.440 in the aftermarket. Kind of the red stickies, as we 0:00:34.560 --> 0:00:37.000 like to say, the big headlines at Bloomberg. This was 0:00:37.000 --> 0:00:39.239 a blowout number. I can feel like it shocked all 0:00:39.240 --> 0:00:42.720 of us. First quarter streaming paid net change in terms 0:00:42.760 --> 0:00:46.360 of the subscribers up nine point three three million. Timmy 0:00:46.520 --> 0:00:48.440 estimate was four point eight four million. 0:00:48.560 --> 0:00:49.520 That's not the only beat. 0:00:49.640 --> 0:00:52.159 First quarter EPs coming at five dollars and twenty eight 0:00:52.200 --> 0:00:54.400 cents per share. Estimates were for four dollars and fifty 0:00:54.400 --> 0:00:58.400 two cents. The company also out with second quarter EPs, 0:00:58.440 --> 0:01:01.160 the guidance for sixty eight versus it's a four fifty four. 0:01:02.400 --> 0:01:03.480 And then another big headline. 0:01:03.480 --> 0:01:06.000 We should note they're going to end reporting quarterly membership 0:01:06.080 --> 0:01:08.360 numbers next year. We got a great group of folks 0:01:08.400 --> 0:01:10.160 with us right now to help us break down these numbers. 0:01:10.200 --> 0:01:12.600 Paul Sweeney is co host of Bloomberg Surveillance. He joins 0:01:12.640 --> 0:01:14.440 us on the phone from New Jersey. Paul spent thirty 0:01:14.520 --> 0:01:16.959 years as a media analyst, also with US as Bloomberg 0:01:17.000 --> 0:01:19.680 News earnings reporter Red Brown. Hey, Paul, I want to 0:01:19.680 --> 0:01:21.160 start with you because I got to tell you, I'm 0:01:21.160 --> 0:01:24.600 pretty surprised by the reaction to these numbers, considering they 0:01:24.600 --> 0:01:27.160 were such it was such a blowout quarter. Why do 0:01:27.200 --> 0:01:29.319 you think the stock is moving lower in the after hours. 0:01:29.880 --> 0:01:31.520 Yeah, I think it's a little bit by the rumor. 0:01:31.600 --> 0:01:33.479 So the news people have been hyping up this quarter 0:01:33.520 --> 0:01:36.440 as a really big quarter because you know, the paid 0:01:36.440 --> 0:01:39.520 subscription was going to fuel subscriber growth. Yet again here 0:01:39.560 --> 0:01:42.080 that a big beat on subs last quarter. So the 0:01:42.120 --> 0:01:44.880 stock was up about twenty five percent since they reported 0:01:45.000 --> 0:01:47.000 in January. So it's probably just taking back some of 0:01:47.000 --> 0:01:49.440 those games. But you know, across the board, the subscriber 0:01:49.520 --> 0:01:53.240 numbers really really were impressive. One thing to note about 0:01:53.280 --> 0:01:55.200 that big subscriber beat to the last couple of quarters. 0:01:55.320 --> 0:01:58.240 These are kind of short term phenomena. As you know, 0:01:58.320 --> 0:02:01.760 the people that were sharing accounts now we're paying for 0:02:01.800 --> 0:02:04.640 their owns and that'll fade out over the next several quarters, 0:02:05.040 --> 0:02:07.480 and then the focus will become, i think, on the 0:02:07.560 --> 0:02:09.920 advertising side of the business as well. 0:02:10.200 --> 0:02:12.520 Yeah, it's interesting. Do you care, Paul to hear that 0:02:12.520 --> 0:02:15.280 they're going to end reporting quarterly membership numbers next year? 0:02:15.600 --> 0:02:17.160 It feels like it's something we focus on. 0:02:17.280 --> 0:02:20.360 Yeah, yeah, it really is, and that, quite frankly, that 0:02:20.360 --> 0:02:23.840 had been the primary driver of this stock really since 0:02:23.919 --> 0:02:27.240 it switched to this digital streaming format. That was the 0:02:27.440 --> 0:02:30.280 metric that moved the stock. The company really wants to 0:02:30.320 --> 0:02:33.280 get away from that and get more towards Hey, guys, 0:02:33.360 --> 0:02:36.520 just view us as you would any other company stock. 0:02:36.560 --> 0:02:39.559 Look at revenue, look at cash flow, look at profitability, 0:02:39.919 --> 0:02:42.000 all those types of things, and let's focus less on 0:02:42.120 --> 0:02:45.320 subscriber growth because, quite frankly, we pretty much got pretty 0:02:45.360 --> 0:02:47.560 much everybody that's out there, so it's really not so 0:02:47.639 --> 0:02:50.280 much subscriber story. It's more how much money can we 0:02:50.280 --> 0:02:51.200 make off each subscriber? 0:02:51.320 --> 0:02:52.280 Paul, one more to you. 0:02:52.320 --> 0:02:53.840 And then I want to bring in Red Brown, our 0:02:53.880 --> 0:02:57.239 earnings reporter who's been watching these numbers closely. Why would 0:02:57.280 --> 0:03:00.040 a company Is there any positive way to read in 0:03:00.080 --> 0:03:02.960 to a company like Netflix no longer reporting this. I mean, 0:03:03.040 --> 0:03:06.400 no question, the more data for investors the better. Is 0:03:06.440 --> 0:03:08.119 this a negative this is a negative sign? 0:03:08.240 --> 0:03:11.280 No? Oh yeah, I think. I think for an investor 0:03:11.320 --> 0:03:14.880 and an analyst, you always want more information, particularly when 0:03:14.880 --> 0:03:18.440 it's critical information in terms of what drives the growth 0:03:18.520 --> 0:03:21.080 of the business. And it's obviously just it's subscribers and 0:03:21.080 --> 0:03:24.160 how much revenue you generate off each subscriber. It's pretty simple, 0:03:24.320 --> 0:03:25.919 so I you take one of those data points away. 0:03:26.120 --> 0:03:29.040 But we've seen other companies in other industries do that, 0:03:29.400 --> 0:03:33.640 particularly subscriber based industries. They try to get you away 0:03:33.639 --> 0:03:36.600 from that number and get you back to where are 0:03:36.680 --> 0:03:39.240 Look how they are managing the business, and what they're 0:03:39.240 --> 0:03:41.840 telling you is we're not managing the business to maximize 0:03:41.840 --> 0:03:44.400 subscriber with We're managing the business to maximize revenue and 0:03:44.440 --> 0:03:48.839 profit per user. That's our management focus and that's how 0:03:48.880 --> 0:03:50.320 we look at it, and that's how we think you 0:03:50.360 --> 0:03:51.040 should look at it. 0:03:51.120 --> 0:03:52.960 Red Brown, come on in on it. We talk earnings 0:03:53.000 --> 0:03:55.480 with you all the time. You know, I'm watching Netflix 0:03:55.520 --> 0:03:59.000 shares that have been bouncing around in the aftermarket a 0:03:59.000 --> 0:04:01.320 lot of moves right now, This still lower down about 0:04:01.320 --> 0:04:02.200 three and a half percent. 0:04:02.880 --> 0:04:05.160 Yeah, I mean, I think what might be explaining a 0:04:05.160 --> 0:04:06.920 little bit of the negative movement too, as we saw 0:04:06.960 --> 0:04:10.680 them actually boost their full year outlook for operating margin. 0:04:11.040 --> 0:04:14.600 They beat EPs in the first quarter. Their guidance for 0:04:14.640 --> 0:04:17.440 the second quarter was ahead of estimates as well, But 0:04:17.520 --> 0:04:19.240 it seems like there's a little bit of a disconnect 0:04:19.240 --> 0:04:21.719 between the full year number. If you know, those two 0:04:21.720 --> 0:04:24.400 pretty healthy beats are not translating to the full year 0:04:25.400 --> 0:04:29.000 analysts investors might start to question maybe where in that 0:04:29.120 --> 0:04:31.120 back half of the year are things starting to slow 0:04:31.240 --> 0:04:33.520 down as well. So I think that might also be 0:04:33.600 --> 0:04:36.159 factoring in here a little bit to the negative price 0:04:36.200 --> 0:04:36.960 movement we're seeing. 0:04:37.080 --> 0:04:38.640 Let's speak a little bit to what Paul was saying, 0:04:38.640 --> 0:04:40.440 and I think it's a good point that we talked 0:04:40.480 --> 0:04:42.920 about it earlier. Just you know, this stock has been 0:04:42.960 --> 0:04:46.000 on fire this year, and you know, it looks like 0:04:46.040 --> 0:04:48.719 the numbers are are pretty upbeat, but it has been 0:04:48.800 --> 0:04:52.600 such an outperformer this year, and I just do wonder 0:04:52.640 --> 0:04:54.039 how much of that is at play as well. 0:04:54.360 --> 0:04:56.800 Yeah, I mean, if you look at what analysts are 0:04:57.400 --> 0:04:59.360 rating for the stock, that it's kind of topped out 0:04:59.360 --> 0:05:02.680 at the analyst ratings point at this point. So you know, 0:05:03.040 --> 0:05:06.480 even with these really impressive numbers, uh, maybe the it's 0:05:06.560 --> 0:05:08.839 just kind of a hit hit its ceiling for the 0:05:08.880 --> 0:05:09.360 time being. 0:05:09.680 --> 0:05:12.240 Hey, Red, it's so interesting, you know, I was saying 0:05:12.240 --> 0:05:14.240 as we were going into our beyond the bell our 0:05:14.320 --> 0:05:17.400 our coverage with TV as we you know, waited for 0:05:17.400 --> 0:05:19.960 these Netflix earnings, I was saying, you know, this could 0:05:20.000 --> 0:05:22.400 really set the tone for the quarter for a lot 0:05:22.440 --> 0:05:24.520 of the consumer tech companies that are set to report 0:05:24.560 --> 0:05:27.599 in the coming weeks. And yet yet we get a 0:05:27.600 --> 0:05:30.520 blowout number pretty much across the board, and we see 0:05:30.520 --> 0:05:32.240 a negative reaction like this, and I'm wondering how we 0:05:32.279 --> 0:05:33.960 can extrapolate this beyond Netflix. 0:05:34.440 --> 0:05:37.080 Yeah, it's a good question. I mean, people have been 0:05:37.120 --> 0:05:39.599 really focused on earnings this quarter, and a lot of 0:05:39.640 --> 0:05:41.839 analysts are saying, you know, focus on the numbers, don't 0:05:41.839 --> 0:05:44.960 buy unto the hype, and has really big implications for 0:05:45.160 --> 0:05:48.880 the stock market at general at the moment. So I 0:05:48.880 --> 0:05:51.360 don't know if if people kind of are on edge 0:05:51.360 --> 0:05:54.640 and looking for any excuse to sell at the moment, Yeah, 0:05:54.640 --> 0:05:57.440 it could. It could paint a pessimistic picture for the 0:05:57.760 --> 0:05:59.440 remainder of the quarter. Here probably for. 0:05:59.480 --> 0:06:01.520 Us to come on back in here. I'm just thinking, 0:06:01.560 --> 0:06:03.200 you know, we're getting ready for the analyst calls, and 0:06:03.240 --> 0:06:04.440 I feel like there's going to be a fair amount 0:06:04.480 --> 0:06:07.039 of questions, especially as you see the stock kind of 0:06:07.040 --> 0:06:09.279 bouncing around here. What's kind of the top one or 0:06:09.279 --> 0:06:11.200 two questions that you would want to be putting up 0:06:11.520 --> 0:06:13.040 on that call. 0:06:13.160 --> 0:06:15.880 Yeah, one revenue and one cost question. The revenue side 0:06:15.920 --> 0:06:19.799 is talk to us about the advertising component. How well 0:06:19.880 --> 0:06:22.920 is that catching on with subscribers. How many subscribers are 0:06:23.000 --> 0:06:26.039 going to the advertising tier, and that's a big thing 0:06:26.040 --> 0:06:27.880 because that's going to be one of the drivers going forward. 0:06:28.040 --> 0:06:29.640 And then a second one on the call side is 0:06:29.960 --> 0:06:32.560 where are we on our programming budget you need to 0:06:32.600 --> 0:06:35.800 spend more to drive more subscriber growth or are is 0:06:35.800 --> 0:06:37.680 a company at a good level of spend? Because if 0:06:37.720 --> 0:06:40.039 they are at a good level of spend, boy, the 0:06:40.080 --> 0:06:43.400 profits just really start churning for this company, and the 0:06:43.440 --> 0:06:44.400 free cash flow as well. 0:06:44.480 --> 0:06:46.120 I do want to bring in some of the advertising 0:06:46.160 --> 0:06:48.920 information that you mentioned, Paul in the letter. The company 0:06:49.200 --> 0:06:51.400 did come out and say that ADS membership grew sixty 0:06:51.400 --> 0:06:54.560 five percent quarter on quarter after rising nearly seventy percent 0:06:54.600 --> 0:06:57.440 sequentially in each of Q three twenty three and Q 0:06:57.560 --> 0:07:00.679 four twenty three. They're also saying that over forty percent 0:07:00.680 --> 0:07:03.000 of all sign ups in our ads markets, remember it's 0:07:03.040 --> 0:07:06.000 not fully rolled out, are coming from our ads plan 0:07:06.600 --> 0:07:10.480 for advertisers. The companies focusing on measurement solutions, including new 0:07:10.520 --> 0:07:14.239 partnerships with Kantar and Lucid for brand awareness and recall, 0:07:14.320 --> 0:07:17.160 and then Nielsen Catalina solutions for sales lift. Paul, I 0:07:17.200 --> 0:07:18.680 don't have to tell you because you've been covering this 0:07:18.720 --> 0:07:21.320 for years. How wild is it for us to talk 0:07:21.320 --> 0:07:23.720 about Netflix and measurement because this is a company that 0:07:23.760 --> 0:07:26.080 for years was like, we don't care about ratings, We're 0:07:26.080 --> 0:07:27.760 never going to share any numbers, We're never going to 0:07:27.800 --> 0:07:30.160 do ads, never, never, never, And here they are talking 0:07:30.200 --> 0:07:31.200 about Nielsen. 0:07:32.080 --> 0:07:36.000 Yeah, exactly, this is crazy. It's a great point. They're 0:07:36.000 --> 0:07:38.760 going to have to start the disclosing audience levels of 0:07:38.960 --> 0:07:42.320 some degree, but we already know that the advertising video 0:07:42.320 --> 0:07:46.120 on demand model is a very successful model. Advertisers are 0:07:46.160 --> 0:07:50.440 switching some linear TV broadcasting cable to the more digital platforms, 0:07:50.880 --> 0:07:54.600 and they've been itching to get to the streaming base 0:07:54.720 --> 0:07:57.760 of Netflix. So there will be a lot of advertisers demand, 0:07:58.640 --> 0:08:01.280 and you know, Netflix is going to have to provide 0:08:01.320 --> 0:08:04.239 the advertisers and their agencies with some data because system 0:08:04.240 --> 0:08:06.600 they can just get a sense of pricing and value. 0:08:06.920 --> 0:08:07.320 Yeah, you know. 0:08:07.360 --> 0:08:09.760 And the other thing is like I'm thinking about content, right, 0:08:09.840 --> 0:08:12.400 you know, original content versus licensing. And when we were 0:08:12.400 --> 0:08:14.360 talking with Githa rang an ant On earlier, she said, 0:08:14.360 --> 0:08:17.040 you know, one of the upsides is that they are, 0:08:17.120 --> 0:08:19.200 you know, doing a lot of licensing deals. They had suits, 0:08:19.440 --> 0:08:21.240 they just did something with sex and the City that's 0:08:21.320 --> 0:08:23.400 just coming out. I mean, when you think about it, 0:08:23.440 --> 0:08:25.800 Paul as an analyst and somebody who understands the space, 0:08:25.840 --> 0:08:28.760 I mean, cheaper to do a licensing deal versus creating 0:08:28.760 --> 0:08:29.800 that original content. 0:08:30.800 --> 0:08:34.600 It is generally speaking, it is much cheaper to license 0:08:34.679 --> 0:08:37.160 the show than to create it, particularly the shows that 0:08:37.280 --> 0:08:41.280 they make, which are extraordinarily high quality, and they have 0:08:41.480 --> 0:08:44.440 very big budgets and other good and that's the that's 0:08:44.520 --> 0:08:47.040 the investment part. The good is is it does drive 0:08:47.120 --> 0:08:49.880 subscriber growth. So I think most investors would say that's 0:08:49.920 --> 0:08:52.960 a good investment to make in original programming. We got 0:08:52.960 --> 0:08:55.160 to find a balance here and so and that's the 0:08:55.160 --> 0:08:56.680 same and that's true for the media companies. They have 0:08:56.679 --> 0:08:59.720 to find a balance on what they licensed to Netflix 0:08:59.720 --> 0:09:01.599 and what they keep on their own streaming services. 0:09:02.000 --> 0:09:04.280 Red Let's say you had a chance to ask management 0:09:04.480 --> 0:09:06.480 question today on the call that's coming up. 0:09:06.480 --> 0:09:07.440 What do you want to hear about? 0:09:07.480 --> 0:09:09.360 Yeah, I mean we're talking about programming and what's going 0:09:09.440 --> 0:09:11.120 to be driving growth in the future. I think there's 0:09:11.120 --> 0:09:14.200 a big question around sports. Yeah, what what level of 0:09:14.200 --> 0:09:16.920 investment are they planning on putting in that that area? 0:09:16.960 --> 0:09:20.959 We know it's highly competitive, it's really crowded, it's very expensive. 0:09:21.679 --> 0:09:23.560 They are kind of stipping their toe in with some 0:09:23.600 --> 0:09:27.560 of these combat sports. But yeah, it be we wwe 0:09:27.800 --> 0:09:30.200 the Jake Paul and Mike Tyson fight later this summer. 0:09:30.880 --> 0:09:33.080 We will want to hear kind of what is their strategy. 0:09:33.120 --> 0:09:36.400 They've been on the sidelines for a while now, and 0:09:36.600 --> 0:09:38.920 you know, have they been able to see the mess 0:09:38.960 --> 0:09:42.320 that sports streaming has been from, you know, paying billions 0:09:42.360 --> 0:09:44.480 and millions of dollars? Do they have a different strategy 0:09:44.520 --> 0:09:47.320 like they have in so many other cases in the market. 0:09:47.800 --> 0:09:50.320 I do wonder too, And I'm just looking at something 0:09:50.360 --> 0:09:53.040 like a Walt Disney in the aftermarket and Obviously, it's 0:09:53.080 --> 0:09:55.440 not just about streaming. It's just down slightly down about 0:09:55.480 --> 0:10:00.000 one tenth of one percent here, Warner Brothers, Discovery, same store. 0:10:00.160 --> 0:10:01.760 I mean, Paul, is there anything that you kind of 0:10:01.760 --> 0:10:04.720 extrapolglate when you look at something like a Netflix and 0:10:04.760 --> 0:10:06.360 then what it means for some of the other streaming 0:10:06.400 --> 0:10:07.520 services that are out there. 0:10:08.280 --> 0:10:10.960 I think it's actually all net positive, which is it 0:10:11.080 --> 0:10:14.600 just shows you the strength of the streaming business model. 0:10:14.600 --> 0:10:17.200 We now know when you look at Netflix's financials that 0:10:17.240 --> 0:10:21.959 it can be extraordinarily profitable, generate really high returns. So 0:10:22.120 --> 0:10:25.360 now the question is who else can join Netflix with 0:10:25.440 --> 0:10:29.560 those types of financial metrics? Ken Disney do it, Ken 0:10:29.600 --> 0:10:32.800 Warner Brothers, Discovery, Ken Powermount. That's kind of the question 0:10:32.840 --> 0:10:35.280 a lot of those investors are asking themselves. But they 0:10:35.360 --> 0:10:38.559 can be done here if you look at Netflix west In. 0:10:38.600 --> 0:10:41.160 Paul Sweeney, thank you so much. We so appreciate it. 0:10:41.240 --> 0:10:44.120 Our own Paul Sweeney, who has covered the media industry 0:10:44.160 --> 0:10:46.559 and did as a banker for many years, thirty years 0:10:46.600 --> 0:10:49.160 as a media analyst, so really great to get his insight. 0:10:49.840 --> 0:10:51.720 We're going to continue with Red Brown. We're also going 0:10:51.760 --> 0:10:54.400 to roll into it our Githa Ranganathan, who covers the 0:10:54.440 --> 0:10:57.360 media space for our Bloomberg Intelligence team. You know, getha 0:10:57.440 --> 0:10:59.880 you called it on the subscriber numbers. 0:11:00.360 --> 0:11:02.240 She really did. Can you remind everyone what she told 0:11:02.320 --> 0:11:03.079 us a couple hours ago? 0:11:03.240 --> 0:11:05.320 You said it was going to be a much higher number. 0:11:05.400 --> 0:11:08.680 It is a much higher number. Walk us through the quarter? 0:11:08.760 --> 0:11:09.840 And why is it that? 0:11:09.920 --> 0:11:10.240 Though? 0:11:10.400 --> 0:11:13.160 First of all, I'm assuming you're watching the stock in 0:11:13.200 --> 0:11:15.440 the aftermarket. It's down about two point six percent. It 0:11:15.559 --> 0:11:18.400 just has been bouncing around a lot. Walk us through 0:11:18.400 --> 0:11:20.920 the quarter? Maybe why you think, I mean, should investors 0:11:20.960 --> 0:11:21.880 be disappointed here? 0:11:23.280 --> 0:11:23.319 So? 0:11:23.480 --> 0:11:26.720 Absolutely right, Carol, it was a blowout quarter. I mean, 0:11:26.960 --> 0:11:28.840 I think it came in much higher than expected. We 0:11:28.840 --> 0:11:31.920 were kind of thinking maybe six seven million dollar seven 0:11:31.960 --> 0:11:35.040 million subscriber ads net ads range. 0:11:35.440 --> 0:11:37.240 This was, of course way above that. But I think 0:11:37.280 --> 0:11:38.120 what is really. 0:11:37.960 --> 0:11:40.839 Kind of causing a little bit of concern here is 0:11:40.880 --> 0:11:44.800 that they are going to stop reporting subscriber metrics altogether, 0:11:45.559 --> 0:11:47.520 and that I think is coming as a little bit 0:11:47.600 --> 0:11:51.200 of a disappointment. I mean, Netflix is out and out 0:11:51.240 --> 0:11:54.640 a subscriber story, or at least it always has been, 0:11:55.320 --> 0:11:57.120 and so this is kind of going to require a 0:11:57.160 --> 0:12:01.000 complete change in the mindset of investors, right, you know, 0:12:01.040 --> 0:12:03.680 this is this was always such an easy model to follow. 0:12:04.000 --> 0:12:06.880 You know, you just multiply subscribers by the monthly price 0:12:06.880 --> 0:12:08.719 that you pay, and you you, you know, you kind 0:12:08.720 --> 0:12:10.840 of have your whole model. But now they're going to 0:12:10.840 --> 0:12:14.280 stop reporting subscriber numbers. They're going to stop reporting the 0:12:14.400 --> 0:12:17.319 average revenue per user. So it's kind of going to 0:12:17.400 --> 0:12:22.040 it's it's definitely becoming. It's I would say, it's gone 0:12:22.120 --> 0:12:26.520 from kind of high growth to now more you know, uh, 0:12:26.559 --> 0:12:30.120 definitely a very profitable company, but obviously they do seem 0:12:30.160 --> 0:12:33.200 to be kind of signaling that subscriber growth that the 0:12:33.240 --> 0:12:34.839 party is going to be over at some point. 0:12:34.960 --> 0:12:37.959 Correct me if I'm wrong, Githa. But did Netflix used 0:12:37.960 --> 0:12:41.480 to report churn and then they stopped reporting churn and 0:12:41.559 --> 0:12:44.480 that was a really big deal to investors when that happened. 0:12:45.320 --> 0:12:48.400 That was a very very long time ago. Yes, they did, 0:12:48.720 --> 0:12:51.120 they would, they would mention it, and yeah, they did 0:12:51.200 --> 0:12:52.360 stop reporting it. 0:12:52.400 --> 0:12:53.760 But subscribers, again. 0:12:53.600 --> 0:12:57.320 This is the bread and butter of this whole streaming business. 0:12:57.400 --> 0:13:00.320 So I think it's it's definitely going to require people 0:13:00.360 --> 0:13:01.920 are going to take some time to kind of digest 0:13:01.960 --> 0:13:03.240 that getha. 0:13:03.280 --> 0:13:05.199 We've seen them they have started to give us a 0:13:05.200 --> 0:13:09.400 little bit more viewership on information over the past year 0:13:09.440 --> 0:13:12.520 or so. Do you think that that is part of 0:13:12.559 --> 0:13:14.560 them kind of trying to signal that, you know, ads 0:13:14.600 --> 0:13:16.520 are going to become a bigger part of our business, 0:13:16.559 --> 0:13:19.000 and you know how big of a part of their business. 0:13:19.040 --> 0:13:20.720 Do you think that will be in the next couple 0:13:20.760 --> 0:13:21.200 of years. 0:13:22.400 --> 0:13:24.640 Yeah, So right now, they haven't really given us any 0:13:24.679 --> 0:13:28.080 concrete metrics around advertising, I mean, other than the first 0:13:28.160 --> 0:13:30.040 number that they gave us in January, which was roughly 0:13:30.080 --> 0:13:34.000 about twenty five million active users. They did report something 0:13:34.040 --> 0:13:36.400 today by saying, you know that they've seen like forty 0:13:36.440 --> 0:13:38.520 percent of their new signups are actually on the adyar, 0:13:38.600 --> 0:13:41.959 but we don't actually have a concrete number. That said, 0:13:42.040 --> 0:13:44.439 I think what they're doing, they're they're they're still kind 0:13:44.480 --> 0:13:48.719 of taking pretty a pretty measured approach, but there are 0:13:48.760 --> 0:13:52.040 signals that they really are looking to get or to 0:13:52.120 --> 0:13:54.560 scale up their advertising business, and I think sports is 0:13:54.559 --> 0:13:56.440 obviously a big way that they're going to do that. 0:13:57.200 --> 0:13:59.560 You know, you obviously saw that the WWE deal. There 0:13:59.600 --> 0:14:01.199 are a few more things that are out there on 0:14:01.240 --> 0:14:04.640 the horizon obviously the NBA being a big one, and 0:14:04.840 --> 0:14:07.120 they if they make an aggressive bid for that, then 0:14:07.160 --> 0:14:09.880 that really tells us how serious they are about advertising. 0:14:09.920 --> 0:14:11.679 And I think potentially what they're what we're looking at 0:14:11.679 --> 0:14:14.240 in terms of advertising dollars if they get everything right. 0:14:14.880 --> 0:14:15.440 It has been a. 0:14:15.440 --> 0:14:18.960 Little bit underwhelming so far, but if they you know, 0:14:19.000 --> 0:14:22.200 if they're able to execute with the sports and the 0:14:22.200 --> 0:14:26.760 other live events expected to be at least ten to 0:14:26.840 --> 0:14:29.920 fifteen percent of their revenue by twenty twenty five, So 0:14:30.000 --> 0:14:32.000 you know, you're looking at a forty forty five billion 0:14:32.040 --> 0:14:34.120 dollar business. I think you're going to see four to 0:14:34.200 --> 0:14:36.200 five billion at least in advertising. 0:14:36.280 --> 0:14:38.480 It is kind of interesting, and you know, Githa, we 0:14:38.600 --> 0:14:40.240 all kind of kid. It's like, I only have so 0:14:40.280 --> 0:14:42.120 many hours to watch all this stuff, and so we're 0:14:42.160 --> 0:14:44.080 picking and choosing, and it seems like there's so much 0:14:44.080 --> 0:14:46.120 out there. I mean, the company said in their letter 0:14:46.160 --> 0:14:49.480 to shareholders, with more than two people per household on average, 0:14:49.520 --> 0:14:52.440 we have an audience of over half a billion, and 0:14:52.480 --> 0:14:54.400 then they go on to say no entertainment companies ever 0:14:54.480 --> 0:14:57.200 programmed at this scale and with this ambition before. But 0:14:57.240 --> 0:14:59.640 it does feel like, you know, and listening to you 0:14:59.680 --> 0:15:02.600 talk that, you know, them not reporting their quarterly membership 0:15:02.680 --> 0:15:07.560 numbers in the future, that they are conceding that there 0:15:07.600 --> 0:15:09.960 is just a point that we're going to max out. 0:15:10.000 --> 0:15:12.640 We can just only sign up so many people. And 0:15:12.680 --> 0:15:15.160 that means even on a global scale, right. 0:15:15.960 --> 0:15:18.240 Yes, on a global scale. So back in the day, 0:15:18.320 --> 0:15:20.440 you know, maybe even about three four years ago, they 0:15:20.440 --> 0:15:23.200 would always talk about this one billion number as their 0:15:23.520 --> 0:15:26.800 total addressable market. About two years ago, that's when the 0:15:26.800 --> 0:15:29.600 great Netflix reset and the Great correction happened, they kind 0:15:29.600 --> 0:15:31.760 of toned that down. They said, you know, it's probably 0:15:32.000 --> 0:15:34.280 closer to about four hundred five hundred million as the 0:15:34.320 --> 0:15:37.320 total addressable market looks like it's you know, probably even 0:15:37.360 --> 0:15:41.560 slightly smaller than that, you know, so they definitely are 0:15:41.600 --> 0:15:44.120 conceding that there is an upper limit, There is a 0:15:44.120 --> 0:15:46.880 ceiling to kind of the growth here. 0:15:47.360 --> 0:15:49.320 But is there something like I always laugh about this 0:15:49.320 --> 0:15:51.560 sometimes when we talk about some of these big tech names. 0:15:51.600 --> 0:15:53.040 We used to talk about this a lot. By Apple, 0:15:53.040 --> 0:15:55.200 We'd be like, Oh, it's a disappointing number, yet they 0:15:55.240 --> 0:15:57.440 still sell a lot of stuff, And I understand it's 0:15:57.440 --> 0:16:00.280 growth trends and trajectory. Can we still though, can see 0:16:00.360 --> 0:16:02.920 that Netflix still is kind of the big behemoth in 0:16:02.960 --> 0:16:03.480 this space. 0:16:04.280 --> 0:16:05.160 They absolutely are. 0:16:05.200 --> 0:16:09.120 They have completely cemented their dominance when it comes to 0:16:09.200 --> 0:16:11.120 this whole streaming wars. I mean, I think the streaming 0:16:11.160 --> 0:16:14.280 wars are pretty much over. They are the winner, There's 0:16:14.320 --> 0:16:16.720 no doubt about that. And now it's just about them 0:16:16.840 --> 0:16:20.240 kind of you know, getting into different verticals, kind of 0:16:20.280 --> 0:16:23.320 becoming that that you know, that one service they probably 0:16:23.360 --> 0:16:26.040 will you know, kind of absorbi absorb a lot of 0:16:26.080 --> 0:16:28.920 the other smaller streaming services. I think, just because they're 0:16:28.960 --> 0:16:33.080 licensing so much of content from them and they you know, 0:16:33.120 --> 0:16:35.600 it's just but at this point, it's definitely going to 0:16:35.640 --> 0:16:38.280 become you know, how much pricing power do they have? 0:16:38.400 --> 0:16:40.240 So right now we are at about fifteen and a 0:16:40.280 --> 0:16:43.520 half dollars for a standard plan in the US. How 0:16:43.640 --> 0:16:46.120 much upside is there? Can that go to twenty twenty 0:16:46.160 --> 0:16:48.560 five dollars? That is kind of the big question. 0:16:48.960 --> 0:16:51.320 So it's funny as you're saying this, I'm thinking to myself, Okay, well, 0:16:51.320 --> 0:16:53.680 you know, twenty years ago, all we wanted was all 0:16:53.680 --> 0:16:55.560 the card options for TV, and we kind of got 0:16:55.560 --> 0:16:56.920 that now and I think a lot of us are 0:16:56.960 --> 0:16:58.000 spending more on. 0:16:57.920 --> 0:16:59.640 All a combination of all these services. 0:16:59.680 --> 0:17:02.040 Given that you know, it's Paramount, it's Hulu, it's Max, 0:17:02.080 --> 0:17:04.560 it's Disney Plus, it's Netflix, just to name a few. 0:17:05.440 --> 0:17:08.320 I do wonder, getha, where the growth is for Netflix 0:17:08.359 --> 0:17:10.960 at this point. Is it in the ad supported model, 0:17:11.040 --> 0:17:14.359 is it outside of the United States? Where is that 0:17:14.400 --> 0:17:17.760 growth coming from? As the company matures, Is it raising prices? 0:17:18.680 --> 0:17:21.959 Yeah, it's actually tim it's all of the above, and 0:17:22.000 --> 0:17:23.520 it's just you know, it's going to be a very 0:17:24.000 --> 0:17:26.399 it's a very tough balancing act for them because they 0:17:26.400 --> 0:17:28.640 don't want to do anything too quickly and too rashly, 0:17:29.040 --> 0:17:31.120 which is why when they were kind of implementing their 0:17:31.119 --> 0:17:33.840 whole password sharing crackdown, they were very careful not to 0:17:33.960 --> 0:17:36.840 raise prices because you know, they didn't want to anger 0:17:37.200 --> 0:17:40.199 you know, existing customers. So again, it's going to be 0:17:40.480 --> 0:17:42.240 it's going to be tricky. They're kind of walking a 0:17:42.280 --> 0:17:45.280 tight trope here. But yeah, they are going to use 0:17:45.359 --> 0:17:47.520 all the different levels that they have to kind of 0:17:48.240 --> 0:17:51.600 keep profitability, which is their main metric right now, profitability 0:17:51.600 --> 0:17:53.600 and margins kind of climbing up. 0:17:54.400 --> 0:17:57.200