Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: This is a breaking news update from Bloomberg.
Speaker 3: Instant reaction and analysis from our three thousand journalists and
Speaker 3: analysts around the world. Okay, Netflix shares finally bouncing around
Speaker 3: a little bit, up about two percent in the after hours.
Speaker 3: The company did just report first quarter profit that exceeded estimates.
Speaker 3: It was boosted by a recent price increase, a strong
Speaker 3: slate of programming across the globe, like the UK hit
Speaker 3: series Adolescents. I want to bring Lucas Shaw in right now.
Speaker 3: He's been all over this story, and he's all over
Speaker 3: this company and has been for years.
Speaker 2: Lucas.
Speaker 3: This report is unique because it's the first time they
Speaker 3: haven't reported subscriber data. We knew this was coming. Everybody
Speaker 3: knew this was coming. It is there a way to
Speaker 3: back into that number or our investors just ignoring that now?
Speaker 1: Well, I think you can try to figure it out,
Speaker 1: at least in the first couple quarters by by looking
Speaker 1: at revenue and modeling out how many people that they
Speaker 1: added and factor in the price increases. But look, a
Speaker 1: lot of other companies get measured based on sales and profit.
Speaker 1: There's no read the Netflix can't it's a little less
Speaker 1: fun for me. I think it's a little less fun
Speaker 1: for all of us. We'd appreciate the added transparency, but
Speaker 1: for the you know, they made sure that in the
Speaker 1: first quarter of not doing that, they met or beat
Speaker 1: on pretty much every metric.
Speaker 4: What for you, Lucas also stands out? I mean we
Speaker 4: were just talking about too, you know, and that it
Speaker 4: has been an outperformer. We've seen some movements up certainly
Speaker 4: this week. But what for in this release? There's a
Speaker 4: lot there that really stood out for you? Is it
Speaker 4: some of the content that they're offering. We talked a
Speaker 4: little bit about live content and sports with our TV colleagues,
Speaker 4: but I'm just curious for you what's significant here.
Speaker 1: I was a little confused. You know, they issue this
Speaker 1: letter to shareholders every quarter, and they had this long
Speaker 1: section that was titled competition that didn't really talk about
Speaker 1: competition that much. They spent a lot of time talking
Speaker 1: about how much they're investing in production overseas, and then
Speaker 1: they had a chart from the UK showing their growth
Speaker 1: there and how they're only behind BBC and ITV and
Speaker 1: I think important to Netflix on television screens, they're ahead
Speaker 1: of YouTube because Netflix really doesn't like that. In the US,
Speaker 1: YouTube can now say that more people watch it than Netflix.
Speaker 1: So I sort of read that as like a long
Speaker 1: effort to show ways in which it's both ahead of
Speaker 1: all of it sort of traditional Hollywood competitors, and in
Speaker 1: some of these foreign markets on televisions it's still ahead
Speaker 1: of YouTube. I think that's where Netflix feels the most
Speaker 1: competitive pressure at the moment.
Speaker 3: Does it still feel like it can? I mean, Lucas,
Speaker 3: this is a company that you know, years ago would
Speaker 3: say it's competing with anything that anyone is doing looking
Speaker 3: at a screen, you know, whether that's gaming, whether that's
Speaker 3: watching traditional linear TV, whether it's looking at TikTok for example.
Speaker 3: I think there was a year they called out TikTok
Speaker 3: specifically or quarter they did that. Do they still think
Speaker 3: about all those are Do they still think about competition
Speaker 3: that way?
Speaker 1: Yeah, the company still thinks of anything that is leisure
Speaker 1: time as competition.
Speaker 2: How much it talks about.
Speaker 1: Some of those other behaviors I think depends on the quarter.
Speaker 1: Right Like right now, they may be more focused on
Speaker 1: your traditional video entertainment programming. There's some quarters I feel
Speaker 1: like they oftentimes do that when they have.
Speaker 2: Like a really killer quarter because they.
Speaker 1: Don't really need to spend any time on their immediate
Speaker 1: competition because everyone can see that it's going very well.
Speaker 1: And so then they talk sort of loftily about like
Speaker 1: Fortnite or TikTok or sleep or any of these other topics.
Speaker 4: How does it feel to not get the subscriber numbers?
Speaker 4: Subscription numbers?
Speaker 2: I mean, I don't like it.
Speaker 1: Who would we all like using data to evaluate a company.
Speaker 1: It was always the easiest way to know if things
Speaker 1: were going well or not. And it feels a little
Speaker 1: even though they would push back on this, it does
Speaker 1: feel a little bit like they're trying to hide it
Speaker 1: because they know that their subscriber growth is going to
Speaker 1: be good, but not as good as it used to be,
Speaker 1: and so it allows them, you know, they can only
Speaker 1: do so much to adjust the subscriber numbers, but increasing
Speaker 1: and decreasing subscribers is now just one of a few
Speaker 1: levers they have, right because they're going to raise prices,
Speaker 1: they're going to have advertising, they're going to do a
Speaker 1: lot of different things that allows them to kind of
Speaker 1: shift people from a metric that is maybe a little
Speaker 1: harder to control to one that's a little easier for them, Lucas.
Speaker 3: As we were preparing for these results, we saw this
Speaker 3: narrative emerge that this is, you know, a tech company
Speaker 3: that could be at least a little shielded from the
Speaker 3: chaos that we're seeing when it comes to tariffs and
Speaker 3: when it comes to trade, because well, look at what
Speaker 3: they're dealing in. But at the same time, it is
Speaker 3: a discretionary expense for consumers.
Speaker 2: So I'm wondering.
Speaker 3: How you view that and whether or not if we
Speaker 3: do see maybe some sort of downturn as a result
Speaker 3: of higher prices from tariffs from trade, that could actually
Speaker 3: be a risk to the company.
Speaker 1: Yeah, I think consensus is that they're to your point,
Speaker 1: they're more insulated both because look that, yeah, they don't
Speaker 1: deal in any hard goods, so there's the tariffs don't
Speaker 1: have a direct impact unless you start to see other countries,
Speaker 1: you know, impose price increases on services, which is possible
Speaker 1: but not something that we've seen yet. You know, they're
Speaker 1: a little bit impacted in the cost of making things
Speaker 1: because of just pariffs will impact factors that go into production,
Speaker 1: But in terms of discretionary income, look, they keep raising prices,
Speaker 1: maybe some people will decide Netflix just isn't worth it.
Speaker 1: Netflix has the best churn, which is sort of the
Speaker 1: cancelation rate in the streaming business. It's way ahead of
Speaker 1: everyone else, and so you have to think that when
Speaker 1: people are looking at what they're going to cancel, it
Speaker 1: will not be at the top of that list. It
Speaker 1: will probably be close to or at the bottom of
Speaker 1: that list. So again, I think they're in better position
Speaker 1: than most. But look, they're big enough that even a
Speaker 1: slight increase in churn is a headache for them, So
Speaker 1: they're not immune. I just think it depends on, you know,
Speaker 1: if we go from a trade war into a full
Speaker 1: on recession or if we just have like this period
Speaker 1: of uncertainty. I think just uncertainty is fine for Netflix.
Speaker 1: You know, recession's not good for anyone.
Speaker 4: Hey, one last quick question for you, Lucas on the
Speaker 4: analys call, what is the question that must be asked?
Speaker 2: Good question?
Speaker 1: I mean, I expect they'll get a bunch of normal
Speaker 1: questions about sports and advertising. I guess I'm probably most
Speaker 1: curious about advertising. They keep talking about how they're close
Speaker 1: to this being a material part of their business. They're
Speaker 1: teasing it out a little bit more in their shareholder letter,
Speaker 1: but we don't. We haven't really had a material any
Speaker 1: material numbers on that business other than like these sort
Speaker 1: of vague monthly active user figures. So I'd love for
Speaker 1: them to go into more detail. I don't expect that
Speaker 1: they will.
Speaker 4: All right, great stuff, Hey, thank you so much, have
Speaker 4: a great weekend. Bloomberg News entertainment reporter Lucas Shaw with
Speaker 4: a breakdown on Netflix. Just want to drive everybody's attention
Speaker 4: because I'm looking at it in the aftermarket and we're
Speaker 4: now seeing the stock up about three point six percent here.
Speaker 4: Let me just pull it up once again on my
Speaker 4: Bloomberg yet almost three point eight percent as we speak.
Speaker 4: Netflix reported first quot a profit that exceeded Wall Street forecasts,
Speaker 4: boosted by a recent price increase and a strong slate
Speaker 4: of programming across the globe like the hit UK series Adolescence.
Speaker 4: Keep in mind, this is the first time that the
Speaker 4: company has reported financial results without disclosing how many customers
Speaker 4: it added are lost, something we talked about with Lucashaw,
Speaker 4: which has been such a crucial yardstick excuse me to
Speaker 4: gauge the company's performance. But again, the stock up about
Speaker 4: three point nine percent.
Speaker 3: Hey, I want to bring in Mark Douglass right now.
Speaker 3: He's president and CEO of Mountain. It's the company that
Speaker 3: has software that helps companies target advertising when it comes
Speaker 3: to smart TVs. He joins us here in the Bloomberg
Speaker 3: Interactive Brokers studio. I want to pick up exactly where
Speaker 3: Lucas left off, and that's advertising. We don't know a
Speaker 3: lot about how much revenue is actually coming from advertising.
Speaker 3: They don't have a specific place for it in the
Speaker 3: shareholder letter today. How much do you think they're getting.
Speaker 5: I think it's still pretty small for them. What's really
Speaker 5: important is half of all new subscribers they reported previously
Speaker 5: in previous quarters are buying the ad supported tier.
Speaker 2: What does that tell you?
Speaker 5: So, it tells me they have a growing backlog of
Speaker 5: revenue that's going to occur in the future because essentially
Speaker 5: every person that gets the ad supported tier is currently undermonetized.
Speaker 5: But despite that, they have record breaking earnings. So imagine
Speaker 5: what the earnings are going to be when they are
Speaker 5: fully monetized, which would effectively double the revenue per customer
Speaker 5: for their new customer.
Speaker 3: You must have spent time with the advertising tier of Netflix,
Speaker 3: just be given your business.
Speaker 5: Yeah, well some I know a lot of the key people.
Speaker 2: But no.
Speaker 3: But I mean like the experience because I think a
Speaker 3: lot of people who have been using Netflix for years
Speaker 3: we don't have the advertising plan.
Speaker 5: So I don't.
Speaker 3: But if you're watching, like if you're watching something on YouTube,
Speaker 3: for example, and an AD is just thrown in there,
Speaker 3: it can be pretty eruptive. Yeah, what's the experience on Netflix.
Speaker 5: It's it's like watching any other streaming service ad supported
Speaker 5: streaming service. There are pods of ads. There's just a
Speaker 5: lot fewer ads right now.
Speaker 2: How well is it targeted?
Speaker 5: They I don't think it's very targeted. I think Netflix
Speaker 5: probably an issue right it is. It's because Netflix is
Speaker 5: kind of starting from the big brand advertiser perspective and
Speaker 5: to really fully monetize that that there, you know, they
Speaker 5: have to take market share away from the entire rest
Speaker 5: of the industry because those big brand advertisers, they're not
Speaker 5: increasing their spend. So so I think that's part of
Speaker 5: the challenge they have in monizing monetizing the ads. But
Speaker 5: they will get there, and when that kicks in, it's
Speaker 5: going to be the same way password cracking down on
Speaker 5: password sharing.
Speaker 3: You know, I just want to My experience with advertising
Speaker 3: was in one of these I don't know, like a
Speaker 3: similar service was when Amazon decided to kind of get
Speaker 3: rid of the free yeah Prime video. And I'll tell
Speaker 3: you like, I was like watching something Carol and just
Speaker 3: cut out for an ad at a terrible time.
Speaker 1: Right.
Speaker 3: It was thrown in a really sloppy way. It's only
Speaker 3: I think three dollars more a month to pay for it,
Speaker 3: and I was like, I'm done.
Speaker 2: That's it.
Speaker 3: No more from like a you know, I don't know
Speaker 3: what's wrong with me, but I'm like, I'm not even
Speaker 3: going to partake in this.
Speaker 2: I've done with it.
Speaker 4: It's amazing how we as consumers of video and content
Speaker 4: right where we used to be we didn't have a choice,
Speaker 4: you know, in linear television where you had to stop,
Speaker 4: you know, or you had a commercial and you ran
Speaker 4: the bathroom or something and like, but.
Speaker 3: Now it's program okay, I'm just before and we love you,
Speaker 3: we love you, okay.
Speaker 5: All right?
Speaker 4: So then how much I mean we were talking about
Speaker 4: how Netflix has been a bit of an app performer
Speaker 4: this year. It's more than nine percent here, So when
Speaker 4: do we start to see those numbers and that enthusiasm
Speaker 4: that you're talking about as a result kind of start
Speaker 4: to show up. Well, I think, and is the stock
Speaker 4: underpriced because of it?
Speaker 5: I think Netflix. I think Netflix is somewhat immune because
Speaker 5: think of it this way. The first thing you get
Speaker 5: is the last thing you cancel, and Netflix for streaming
Speaker 5: is definitely the first thing you get. It's the first thing.
Speaker 5: There's data that shows it's you know, you turn on
Speaker 5: the TV. The first thing you hit is let me
Speaker 5: go see what's on Netflix. And remember the highest price
Speaker 5: offering the highest priced subscription, Yeah, costs sixty eight percent
Speaker 5: more than their lowest price, so you can just like
Speaker 5: kind of go, you want to save some money, you
Speaker 5: just downgrade the subscription. You don't need to cancel it.
Speaker 2: So I think for them to get to the.
Speaker 5: Point where people are canceling like it, it's nearly impossible.
Speaker 4: You can't put food on the I'm all getting Hopefully
Speaker 4: nobody has to do that.
Speaker 3: Just sorry, the squid game on the table exactly.
Speaker 2: Mark.
Speaker 3: When it comes to the landscape out there, Yeah, okay,
Speaker 3: I know first mover advantage is going to be part
Speaker 3: of your answer here. But Netflix stands apart from the
Speaker 3: competitors out there, and part of it is that some
Speaker 3: of them were legacy media companies that were trying to
Speaker 3: adapt to this new world that Netflix helped pioneer. But
Speaker 3: why is Netflix so good at this and everybody else
Speaker 3: is struggling?
Speaker 5: Well, my friends at Disney would properly this.
Speaker 3: I mean you know they would. They disagree that Netflix
Speaker 3: does it better? Well, I think Netflix, do you think
Speaker 3: they would? It's the thing is they might say we
Speaker 3: have blue and Netflix doesn't.
Speaker 2: But that's it.
Speaker 5: Yeah, what what well they have? They have a lot
Speaker 5: more sports. But I agree with what you're saying, which
Speaker 5: is when you turn on the TV, Netflix is generally
Speaker 5: the first thing you're going to check. And and that's
Speaker 5: just an insane advantage because it allows you to turn
Speaker 5: shows that maybe people wouldn't have watched, like WWE, and
Speaker 5: turn them in the top ten hits on Netflix just
Speaker 5: because you know, you you sit down on the couch,
Speaker 5: turn on the TV. WWE is on and it's live,
Speaker 5: why you know what, and it's there for you to watch.
Speaker 5: It gives us this incredible power to turn average content
Speaker 5: into really big hits, and to turn great content into
Speaker 5: like like NFL sport NFL games in the nearly Super
Speaker 5: Bowl on a regular weekend.
Speaker 2: You're more of a UFC person.
Speaker 4: Yeah, totally not. Advertisers, where do they want to put
Speaker 4: their ads in terms of content? Is it the live
Speaker 4: sports stuff?
Speaker 5: Is it?
Speaker 4: What is it? Do they care?
Speaker 2: Are they picky?
Speaker 5: It depends on the advertiser, but generally people lives. You
Speaker 5: can sell live sports all day long.
Speaker 2: From now.
Speaker 5: We're kind of not in that game. We're not dealing
Speaker 5: with brand advertisers. But I know when I talk to
Speaker 5: all the big agencies and things like that, they it's
Speaker 5: all about live sports. They just it's an insatiable appetite streaming.
Speaker 4: They don't care.
Speaker 5: Yeah, streaming live sports. ESPN is now rolling out streaming
Speaker 5: live sports and people are I know from Disney, people
Speaker 5: are just lining up to buy it. And it's every
Speaker 5: streamer is in the process of doing that, and so
Speaker 5: it's always that. After that, I think the appetite changes
Speaker 5: a lot, but there's just something about the engagement live
Speaker 5: sports that advertisers love.
Speaker 2: Yeah.
Speaker 3: The November twenty twenty four Taylor Serrano fight on Netflix
Speaker 3: became the most watched professional women's sports event in history.
Speaker 3: They say that we're well with the upcoming rematch. Were
Speaker 3: poised for another groundbreaking night that will further elevate the
Speaker 3: profile of women athletes. In addition, Netflix is opted into
Speaker 3: a second game for Christmas twenty twenty five, where they'll
Speaker 3: be the home of the NFL for Christmas Day. My
Speaker 3: sister was watching that last year on Christmas Day. They
Speaker 3: say live efforts have primarily focused on the US. We
Speaker 3: expect to extend this strategy to other countries over time.
Speaker 3: How big of an opportunity is that for Netflix given
Speaker 3: what you told me about the ad demand for live sports,
Speaker 3: huge for Netflix if they expand this outside the US.
Speaker 1: Yeah.
Speaker 5: I mean if I was a sportslee, if I was
Speaker 5: Formula one, I would literally just live in front of
Speaker 5: Surrended's house, just like, let's do a deal.
Speaker 2: Why do you think that you haven't done well?
Speaker 5: They already are doing that because Half One's become so
Speaker 5: popular with the foot drive a match. If the gate
Speaker 5: if they just last year, was like.
Speaker 3: So why is it not there now? Do you think
Speaker 3: is it a long term deals that are in place already?
Speaker 2: Yeah?
Speaker 5: I think it's long term deals. I wouldn't be surprised
Speaker 5: if Formula one comes there they go to Europe. Of course,
Speaker 5: football in Europe, I mean the the it's just something there.
Speaker 2: But Netflix is smart.
Speaker 5: They're going to sports that are like like you know,
Speaker 5: female boxing, that wouldn't necessarily be something that would attract
Speaker 5: the huge audience and get the highest rates, and they're
Speaker 5: turning it into the most watched female sports event in history.
Speaker 5: And this is the superpower that they have. It's the
Speaker 5: advantage that they just have over every other streaming network
Speaker 5: by being the first thing you click when you turn
Speaker 5: on your TV.
Speaker 4: I just want to mention we are talking with Mark Douglass,
Speaker 4: President and CEO of Mountain Shares of Netflix. They're up
Speaker 4: about four point six percent. This is the company logs
Speaker 4: record profit in the quarter, revenue tracking above the midpoint
Speaker 4: of its twenty twenty five forecast range, and it does
Speaker 4: see second quarter revenue. So the current quarter that we're
Speaker 4: in eleven point zero four billion, the estimate is ten
Speaker 4: point eighty eight bill. And when it comes to advertisers,
Speaker 4: does everybody else want to just be Netflix? Especially when
Speaker 4: it comes to streaming? What do you hear from advertisers?
Speaker 4: Is there first choice always Netflix?
Speaker 5: Not for I think people are very intrigued by advertising
Speaker 5: on Netflix, but at the end of the day, they
Speaker 5: want the consumer wherever they are. And so Netflix started
Speaker 5: their ads here with very very high pricing and they've
Speaker 5: had to kind of come back down the reality and
Speaker 5: read tools. So I don't think advertisers like Netflix are nothing.
Speaker 5: But Netflix has the most viewers, so they potentially have
Speaker 5: the most ad space over time.
Speaker 4: One last quick question. We know you're going to join
Speaker 4: our TV colleagues in just a moment, but a federal
Speaker 4: judge rule that Google illegally monopolized online ad technology markets
Speaker 4: for advertising exchanges and tools used by websites to sell
Speaker 4: ad space. So they say they, you know, we're doing
Speaker 4: anti competitive acts to acquire maintainment opoly power in these markets.
Speaker 4: So what does that possibly mean at this stamp don't.
Speaker 5: I don't think Google is losing any sleep really that ruling.
Speaker 5: If anything, it's their dream scenario. It's the small it's
Speaker 5: a small part of their business. But the you know,
Speaker 5: US federal government has been very focused on it from
Speaker 5: an anti trust and in fact they're probably you know,
Speaker 5: it's like, yeah, focus it's focused on that, don't focus
Speaker 5: on search and AI, and so to me, it's it's
Speaker 5: almost a dream scenario. For the best dream is that
Speaker 5: they're left alone. But if they have to, you know,
Speaker 5: kind of kind of focus on that and even potentially
Speaker 5: give up that great scenario for them. I don't think
Speaker 5: any investor should be worried about Google losing that part
Speaker 5: of their at business.
Speaker 4: All right, kind of interesting different perspective, and we will
Speaker 4: say that Alphabet Chaos were down about one point four
Speaker 4: percent today, a little bit of a swing. Mark, Thank
Speaker 4: you so much, Mark Douglass. He's president CEO Mountain, the
Speaker 4: company of software that helps companies target advertising a smart TV.
Speaker 4: So good to get his perspective.
Speaker 3: Mark, thank you