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Speaker 1: This is Bloomberg Daybreak Asia for this Friday, January in

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Speaker 1: Hong Kong, Thursday January in New York and coming up

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Speaker 1: this hour. Netflix reports stronger than expected subscriber numbers for

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Speaker 1: the last quarter and the company CEO is giving up

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Speaker 1: his post. FED Vice chair Lele Brainerd favors high rates

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Speaker 1: for some time to cool inflation. The Netherlands and Japan

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Speaker 1: may be close to joining the US in a fight

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Speaker 1: to restrict chip technology to China. China's COVID's are says

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Speaker 1: infections are down substantially. Russia talks nuclear war. Internal Tesla

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Speaker 1: emails say must directed a video saying the card drove itself.

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Speaker 1: I'm at Baxter with lovel News. Another big name is

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Speaker 1: eliminated early at the Australian Open on Dan Schwardsman, I'll

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Speaker 1: have that story. More coming up in Bloomberg's boards. That's

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Speaker 1: all straight ahead on Bloomberg Daybreak Asia on Bloomberg eleven

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Speaker 1: and three O, New York, Bloomberg Washington, d C, bloom

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Speaker 1: one of six one Boston, Bloomberg nine sixties, San Francisco,

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Speaker 1: Sirius x M one nineteen and around the world on

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Speaker 1: Bloomberg Radio dot Com and via the Bloomberg Business app.

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Speaker 1: Good morning, I'm de Prisoner and I'm Brian Curtis. Here

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Speaker 1: are the stories we're following today. Netflix co founder Read

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Speaker 1: Hastings stepping aside as CEO of the company. He's been

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Speaker 1: at the helm for more than two decades, and Hastings

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Speaker 1: is leaving the position to his longtime associates Ted Sorrandos

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Speaker 1: and Greg Peters. Surrandos was already co CEO along with Hastings,

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Speaker 1: and Peters was the chief operating officer. Let's get more

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Speaker 1: here from Bloomberg's Ed Ludlow, Ted Surrandos is the Hollywood

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Speaker 1: guide making the deals on the entertainment and content side,

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Speaker 1: whereas Greg Peters has been leading efforts not just on advertising,

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Speaker 1: but if you look at a lot of the cell

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Speaker 1: siders who upgraded the stock going into this earnings, the

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Speaker 1: bullishness was around how Netflix is pace to deal with

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Speaker 1: all of the issues this industry is facing. They haven't

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Speaker 1: had supported here that they feels reasably priced great pieces

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Speaker 1: leads that. Meantime, Netflix ended last year on a high note.

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Speaker 1: The company added about seven point seven million subscribers last quarter.

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Speaker 1: Analysts were predicting only four point five million. Netflix shares

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Speaker 1: are up almost seven percent in after hours and a

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Speaker 1: reminder coming up in a few moments. We'll be chatting

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Speaker 1: with Gita Ranganathan, Bloomberg intelligence analyst on US media and

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Speaker 1: a specialist on Netflix. Today we heard from the Vice

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Speaker 1: Chair of the FED, Lael Brainard, saying that interest rates

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Speaker 1: will need to stay elevated for some time as a

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Speaker 1: way of cooling inflation. Here she is speaking at the

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Speaker 1: University of Chicago Booth School of Business. Inflation has declined

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Speaker 1: in recent months, but inflation is very high and it's

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Speaker 1: going to take time and resolve to get it back then,

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Speaker 1: and considerably over the past year, as the Federal Reserve

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Speaker 1: and central banks around the world have tightened policy considerably.

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Speaker 1: FED Vice chairlo Brainerd now she did not say exactly

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Speaker 1: what her peak rate was or what she envisioned it

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Speaker 1: would be, and she didn't explicitly stay a preference for

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Speaker 1: whether the FED should downship to a quarter point move

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Speaker 1: at the next decision. And that, Brian, as you well know,

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Speaker 1: will happen on February one. Absolutely can't wait. I'll be

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Speaker 1: getting up early. The Netherlands and Japan are likely to

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Speaker 1: join the US in curbing China's access to chip technology.

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Speaker 1: We're told the Dutch and Japanese export controls maybe agreed

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Speaker 1: upon soon and finalized as soon as the end of

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Speaker 1: this month, but the Hagan Tokyo are not expected to

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Speaker 1: accept all of Washington's restrictions. That said, Beijing may still

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Speaker 1: find itself cut off from a lot more of the

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Speaker 1: world's most advanced chip technology. Currently, the US limits exports

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Speaker 1: of American made machinery and also bans US citizens from

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Speaker 1: working with Chinese chip makers. With Japan and the Netherlands

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Speaker 1: joining in, now China's access to top level chip making

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Speaker 1: equip it will be significantly downgraded. Alright, let's take a

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Speaker 1: look at some of these top stories. I want to

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Speaker 1: go back Doug to to take a peek at Netflix.

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Speaker 1: The number is looking pretty good, and it's interesting because

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Speaker 1: I think the change at the top seems to have

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Speaker 1: really got the attention of most investors. Yeah. One of

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Speaker 1: the things I think is interesting here is that it

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Speaker 1: really points to a plan for succession. Right Ted Srandos

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Speaker 1: Greg Peters now going to be co CEO S We

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Speaker 1: have Mr Hastings stepping back, although he will continue to

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Speaker 1: serve as executive chairman, and I mentioned that the succession issue,

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Speaker 1: because today Brian we heard from Texas Instruments and veteran

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Speaker 1: Haviv e Lan will be the next CEO and that

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Speaker 1: will happen as of August one. I'm sorry April first,

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Speaker 1: but we know here one of the things that the

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Speaker 1: street has struggled with is is the issue of succession.

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Speaker 1: It looked no further than Disney, right, the fact that

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Speaker 1: Bob Iger had to come back the story on Bob

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Speaker 1: Chapick that didn't work well at all. Yeah, this one

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Speaker 1: maybe a pretty good model, and on the numbers, the

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Speaker 1: numbers were not actually all that great. Earnings a pretty

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Speaker 1: big miss, revenue pretty much in line. But I think

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Speaker 1: what investors like here is is this new model and

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Speaker 1: and the fact that the subscribers jumped as much as

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Speaker 1: they did. The stock was really punished last year down

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Speaker 1: around fifer so, and this move today shows you that

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Speaker 1: investors are getting back on board. Yeah, that was a

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Speaker 1: big beat on subscribers. Now, the company is not going

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Speaker 1: to give guidance on future subscriber growth, but it did

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Speaker 1: say it is expecting for the first quarter of this

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Speaker 1: year kind of modest editions, although they will be fewer

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Speaker 1: than what we saw happen in the fourth quarter of

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Speaker 1: last year, and just briefly on Lao Brainer because you

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Speaker 1: mentioned that story, I think that if you look at

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Speaker 1: the headline, it seems maybe it could be interpreted in

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Speaker 1: a in a negative way, and that she once rates

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Speaker 1: high for some time to cool inflation. But I'll put

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Speaker 1: it to you that one of the things that she

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Speaker 1: says fairly frequently now, which is getting people's attention, she

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Speaker 1: starts talking about the humulative tightening that's in the pipeline

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Speaker 1: that lies ahead, and that seems to be a signal

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Speaker 1: to investors that it's a kind of preparation for maybe

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Speaker 1: moving to the next phase, which could be either a

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Speaker 1: pause or talking about it. Remember that it does operate

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Speaker 1: with a leg speaking of monetary policy, right, so even

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Speaker 1: if they reach a terminal rate, it is likely, at

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Speaker 1: least in the view of the market, that that rate

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Speaker 1: will remain in place for the foreseeable future. The market

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Speaker 1: right now is expecting a cut by the end of

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Speaker 1: the year. I don't know that that's really what we're

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Speaker 1: going to see though. Yep, the market and the FED

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Speaker 1: is still apartment all right. It is time now for

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Speaker 1: global news. China's COVID. Czar says infections have fallen to

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Speaker 1: a relatively low level at Baxter. Has that story in

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Speaker 1: the news from the nine SWS room in San Francisco

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Speaker 1: ed Yeah, what relatively is Brian is the question. Sancho

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Speaker 1: Lan says China is doing a very good job at

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Speaker 1: entering a new stage of the fight against COVID, and

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Speaker 1: that it is stable and orderly. She says a number

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Speaker 1: of hospitalized patients with severe symptoms is declining steadily and

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Speaker 1: that medical treatment has apparently been effective. She did say, though,

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Speaker 1: that emergency treatment and care of patients remains tough tasks

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Speaker 1: for medical workers. Vladimir Putin's Russian government is warning NATO

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Speaker 1: that at the feet of Russia and Ukraine could trigger

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Speaker 1: uh nuclear war. That while the head of the Russian

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Speaker 1: Orthodox Church says the world would end if the West

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Speaker 1: tried to destroy Russia, NATO Secretary General Jean Stoltenberg says,

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Speaker 1: do not underestimate what Russia would do. They are now

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Speaker 1: acquiring and more and more weapons, reaching out to all

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Speaker 1: the machines, including iron on their planning new offenses. Meanwhile,

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Speaker 1: the debate between Germany and the US over supplying Ukraine

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Speaker 1: with more tanks does not come to an end. US

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Speaker 1: Defense Secretary Lloyd Austin says they continue talking though will

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Speaker 1: continue to support Ukrainian people as as they resist Russian

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Speaker 1: aggression and defend their sovereign territory, and Austin says tanks

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Speaker 1: do have to be sent. US Treasury has started to

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Speaker 1: put in some emergency measures to pay debts as a

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Speaker 1: ceiling has met. Democratic Senator Joe Manchin and Davos with

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Speaker 1: Bloomberg's David Weston says, of course, the debt does have

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Speaker 1: to be addressed. If you want to have concerns about

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Speaker 1: should we or should we not? Absolutely we should, We

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Speaker 1: should pay our debts. Should we allow him to grow

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Speaker 1: disproportionately where we have more trouble every year coming to

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Speaker 1: that conclusion to pay the debts when we could have

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Speaker 1: done something, Mansion says. Republican Senator Mitt Romney has come

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Speaker 1: forward with a package that includes social Security, Medicare, the

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Speaker 1: Highway Trust, and it's time for Speaker Kevin McCarthy to

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Speaker 1: move forward. Kevin McCarthy is a wonderful opportunity for him

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Speaker 1: to say, listen, let's act like adults. We've got a debt,

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Speaker 1: whose foot fault. We're all at fault. How do we

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Speaker 1: fix it together and move forward? Yeah, but Manchon says,

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Speaker 1: of course that needs to be funded, and Bloomberg's Governor

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Speaker 1: Government reporter Emily Wilkins says, one of the major questions

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Speaker 1: is whether Speaker McCarthy will be able to get his

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Speaker 1: party together. Obviously, with him and his speaker on nomination,

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Speaker 1: we saw a lot of consternation there. We saw a

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Speaker 1: lot of hardline members really willing to kind of hold

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Speaker 1: their feet to the fire to get what they wanted.

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Speaker 1: And I think the big question this time is what

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Speaker 1: exactly will their asks be? And the debates will go

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Speaker 1: on for several months. Ellen Musk oversaw the creation of

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Speaker 1: a video that exaggerated the abilities of test Lea's autopilot system.

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Speaker 1: Bloomberg's Dana Hall says internal emails show how important he

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Speaker 1: felt in promoting the system. This is technology that has been,

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Speaker 1: you know, under scrutiny for quite some time now, and

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Speaker 1: I think what's what's relevant is that, Okay, yes, we

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Speaker 1: got emails that are frankly six years old, but they

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Speaker 1: are They show just how heavily involved Musk himself was

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Speaker 1: in the creation of the video. The production of the

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Speaker 1: video and what the language of the video was going

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Speaker 1: to say. Now there are a number of investigations ongoing

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Speaker 1: and the false claims made by the company, and now

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Speaker 1: they're directly tied to Elon Musk. There are several cases

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Speaker 1: where families are suing Tesla because of crashes that cost

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Speaker 1: lives in San Francisco. I'm Ad Baxter. This is Bloomberg.

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Speaker 1: Hi everybody, I'm Brian Curtis in Hong Kong along with

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Speaker 1: Fonny Quinn in New York, and this is Bloomberg Daybreak Asia.

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Speaker 1: Let's get to our guest, Gita Ranganathan, Bloomberg intelligence analyst

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Speaker 1: on US Media, for a closer discussion about Netflix. Gita,

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Speaker 1: thanks very much for joining us. As mentioned, the stock

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Speaker 1: bolted higher in after hours, and and I suppose that

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Speaker 1: will have a lot to do with with the numbers

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Speaker 1: that are the beaten subscribers and the new model, which

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Speaker 1: we can talk about in a few moments, but let's

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Speaker 1: start off with read Hastings stepping aside. Is this a

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Speaker 1: good model for succession? Yeah? Thank you so much Brian

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Speaker 1: for having me. Yes, I think it's a good model.

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Speaker 1: I mean, this is this is something that they have

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Speaker 1: been working towards now for quite some time. If you

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Speaker 1: read the blog post out on you know, the Netflix website,

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Speaker 1: it basically says that this is something that they've been

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Speaker 1: planning for about ten years. And you know, even elevating

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Speaker 1: Tedsarrandas who was at the time Chief Content Officer to uh,

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Speaker 1: you know, a co CEO position about two three years

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Speaker 1: ago was kind of a step in this direction UM

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Speaker 1: and you know, and the shared leadership which will be

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Speaker 1: now between Ted Surrenders and an operational expert in Greg

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Speaker 1: Peters actually makes a lot of sense because if you

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Speaker 1: just think about it, Ted Surrenders is very much the

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Speaker 1: face of you know, creative content, creative expertise. He kind

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Speaker 1: of rubs shoulders with all the big wigs in in Hollywood, um,

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Speaker 1: you know, talent, studio creatives, UM and Greg Peters, on

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Speaker 1: the other hand, uh tends to have very heavy operational expertise.

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Speaker 1: He has been instrumental in kind of building out Netflix's

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Speaker 1: partnerships and so many overseas markets, and he's also led

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Speaker 1: both the ad efforts as well as the gaming efforts.

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Speaker 1: So again, he has very very deep knowledge of the

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Speaker 1: product and how to improve the user experience. I think

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Speaker 1: the model absolutely makes sense for the company. Gita explained

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Speaker 1: to us why it is subscriber girls blue past estimates.

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Speaker 1: I mean, in some parts of the world it was

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Speaker 1: double estimates that revenue grows didn't beat estimates so much. Yeah, so,

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Speaker 1: you know, obviously the subscriber beat was it, which was

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Speaker 1: a huge, uh you know, out performance of something that

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Speaker 1: we were not expecting. Although having said that, just kind

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Speaker 1: of looking back, it's almost the content titles that they had,

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Speaker 1: these were huge, huge successes, and Netflix kind of points

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Speaker 1: to those even in their subscriber letter with you know,

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Speaker 1: some of their most successful shows in their history actually

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Speaker 1: coming in the fourth quarter. In terms of revenue numbers,

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Speaker 1: what we've seen is that there has been a huge

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Speaker 1: drag from foreign exchange in general. Although those headwinds are moderating. Um,

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Speaker 1: they did report revenue numbers or revenue growth numbers that

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Speaker 1: were slightly better than what they had initially projected. It

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Speaker 1: was still pretty weak and a lot of that, of course,

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Speaker 1: just has to do with the foreign exchange impacts. It

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Speaker 1: was interesting that the sub growth was actually stronger in

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Speaker 1: the US and Canada than it was in the Asia Pacific.

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Speaker 1: Are they are they struggling a little bit in the

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Speaker 1: Asia Pacific. Yeah, there's a really very interesting point, and

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Speaker 1: I kind of noticed that as well. Um. I think

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Speaker 1: what it does is it really kind of points to

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Speaker 1: the opportunity now that they have in the Asia Pacific region,

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Speaker 1: especially with the rollout of the new ad tear. So

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Speaker 1: remember the AT tear was something that they only rolled

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Speaker 1: out in a few select markets, more in the developed markets.

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Speaker 1: But as they kind of get their learnings, as they

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Speaker 1: kind of glean whatever initial um you know, learnings from

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Speaker 1: that from that launch, they're going to obviously apply that

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Speaker 1: into a lot of these emerging markets where the the

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Speaker 1: the addressable market is really huge, and these are priced

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Speaker 1: sensitive customers who would really welcome and add supported tier,

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Speaker 1: you know, and economically priced um AT supported tiers. So

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Speaker 1: I think it's actually a huge opportunity for them going

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Speaker 1: forward because obviously growth has stalled right now and so

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Speaker 1: many of these regions, so this is a great way

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Speaker 1: to kind of kind of reinvigrate that. It's still all

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Speaker 1: about the most watched show. Guta and Netflix managed to

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Speaker 1: have seven of the ten most watched shows on streaming

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Speaker 1: in mid December, which is that's pretty fantastic. How does

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Speaker 1: it keep that performance up without blowing through budgets? Yeah,

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Speaker 1: so I think what what we're finally seeing is kind

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Speaker 1: of them achieving this steady state, if you will, a

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Speaker 1: little bit. So they did run into, um, you know,

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Speaker 1: a little bit of hiccup during the pandemic. Um, just

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Speaker 1: because there were so many pandemic related shutdowns, you know,

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Speaker 1: they had to shut down production. That caused a lot

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Speaker 1: of delays across the board and obviously defected their whole

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Speaker 1: release schedule. But I think they've kind of finally worked

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Speaker 1: past that. We're seeing a much more steady cadence of hits,

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Speaker 1: and I think they finally kind of really fine tuned

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Speaker 1: their algorithms. They know what is working, what resonates with

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Speaker 1: audiences across the go, across the globe, and we're seeing,

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Speaker 1: you know, such a good mix of not just English

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Speaker 1: language titles, We're seeing a great mix of you know,

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Speaker 1: titles from across the world, whether it's Korean shows, whether

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Speaker 1: it's you know, Norwegian films. Um, it's all kinds of

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Speaker 1: content that is resonating with their customer base. Yeah, that's

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Speaker 1: got to be good news. Um. And And looking at

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Speaker 1: the overall jump in subscribers and the positivity that surrounds Netflix.

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Speaker 1: It seems like it's not like they're stealing share from

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Speaker 1: some of the other providers, or at least if you

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Speaker 1: look at the after hours performance, the other companies like

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Speaker 1: Disney and Paramount and Warner Discovery all did well. So

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Speaker 1: is it just a time where all the streamers are

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Speaker 1: looking better? Yeah? I think this year is definitely going

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Speaker 1: to be uh, you know, where things are definitely looking up.

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Speaker 1: I think the worst is finally behind us. And a

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Speaker 1: lot of that is because I think the um this

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Speaker 1: hyper focus on subscribers is kind of going to shift

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Speaker 1: a little. But of course Netflix did outperform on the

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Speaker 1: subscriber number, but it's no longer just It's no longer

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Speaker 1: just about subscriber growth. I mean, so many other things

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Speaker 1: are equally important, and we're going to see that kind

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Speaker 1: of play out with other streamers as Yeah. This is

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Speaker 1: Bloomberg Daybreak Asia, your morning brief on the story is

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