WEBVTT - Geetha Ranganathan on Netflix Earnings (Radio)

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<v Speaker 1>All right, thanks very much. AD. Ten minutes here before

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<v Speaker 1>the top of the hour, it's time for the daybreak

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<v Speaker 1>Asian media and Tea Leaves review from the Wall Street Journal,

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<v Speaker 1>and this is a story we've talked a lot about

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<v Speaker 1>this morning. China is preparing to impose a fine of

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<v Speaker 1>about a billion dollars on d D Global. This would

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<v Speaker 1>bring to an end a year long investigation. The inquiry

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<v Speaker 1>has been into the company cyber security practices and protection

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<v Speaker 1>of data. Once this penalty is unveiled, the story says,

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<v Speaker 1>the government plans to ease an earlier restriction that bans

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<v Speaker 1>d D from adding new users to its platform. It

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<v Speaker 1>has tens of millions of users but wasn't able to

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<v Speaker 1>add so this wrapping up of the investigation would pave

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<v Speaker 1>the way for d D to kick start a new

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<v Speaker 1>share listing in Hong Kong from a p and this

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<v Speaker 1>is also from the Financial Times earlier. China will take

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<v Speaker 1>resolute and strong measures should the Speaker of the U

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<v Speaker 1>S House of Representative, Nancy Pelosi, proceed with a reported

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<v Speaker 1>to visit Taiwan. Now this was originally reported by the

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<v Speaker 1>Financial Times. She's originally scheduled, or was originally scheduled to

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<v Speaker 1>visit in April, but had a postpone after she tested

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<v Speaker 1>positive for COVID nineteen and from the Nick, Japan Airlines

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<v Speaker 1>is planning to transfer about three thousand workers from its

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<v Speaker 1>core business to its budget carriers and to non aviation units.

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<v Speaker 1>And that's due to forecast of business travel not returning

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<v Speaker 1>to pre pandemic levels for a prolonged period of time.

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<v Speaker 1>That's from the Nick. And back to that Wall Street

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<v Speaker 1>Journal story we mentioned d d U the A d

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<v Speaker 1>r S did advance in the U S session. That

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<v Speaker 1>is a rap on the media. Nine minutes eight minutes

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<v Speaker 1>now before the top of the hour, Yvon, all right,

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<v Speaker 1>let's get more on those Netflix earnings. Now. Things could

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<v Speaker 1>be turning around for the streaming company, losing fewer subscribers

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<v Speaker 1>expected in the second quarter, but the company isn't projecting

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<v Speaker 1>a return to rapid growth anytime soon. Joining us now

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<v Speaker 1>discuss all this is geta rocket, nothing, Bloomberg Intelligence, tech

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<v Speaker 1>and media analysts and geta It's interesting because even read

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<v Speaker 1>hastings at himself, losing close to a million subscribers can't

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<v Speaker 1>be really seen as a success, but investors centainly are

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<v Speaker 1>cheering the news what's your take overall, Yes, so Yvonne,

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<v Speaker 1>definitely a mixed bag, you know, and I think right

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<v Speaker 1>now we're we're you know, just with the stock having

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<v Speaker 1>taken such a beating, I think the general sentiment is

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<v Speaker 1>just less bad is good, which is why we're kind

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<v Speaker 1>of seeing this uh short term relief rally. But if

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<v Speaker 1>you kind of just dig through the numbers a little

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<v Speaker 1>bit and look under the hood. As far as the

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<v Speaker 1>three Q guidance sys concerned, there's really not a whole

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<v Speaker 1>lot to cheer about. Um. So they are guiding to growth, yes,

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<v Speaker 1>so you know they're guiding to about a million subscriber ads.

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<v Speaker 1>But then you look at the number of subscribers that

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<v Speaker 1>you've lost so far in the first half of the year,

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<v Speaker 1>that's just over a million. So it's about one point

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<v Speaker 1>two million or so. So this is really going to

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<v Speaker 1>be a wash at the end of three Q. Uh.

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<v Speaker 1>And there's really no clarity in terms of what the

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<v Speaker 1>long term subscriber trajectory is going to be, uh, you know,

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<v Speaker 1>especially with all these macro headmands kind of building. Um.

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<v Speaker 1>But there are some positives, there are some positives to

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<v Speaker 1>think about. I mean, one thing was the valuation of

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<v Speaker 1>the stock had dropped so far that you know there

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<v Speaker 1>was some room there. Uh. The the the advertising option, which

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<v Speaker 1>is which is coming. I guess they're testing in Latin America.

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<v Speaker 1>I want to ask you specifically about that. Uh, that

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<v Speaker 1>would seem to suggest that there could be some positives

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<v Speaker 1>from that, but that it might be really slow in coming.

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<v Speaker 1>That's exactly right, brand, So this is all going to

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<v Speaker 1>take a while. Yes, there are positives, Uh, definitely, as

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<v Speaker 1>you pointed out, that they are trying to do their

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<v Speaker 1>best in terms of monetizing all of these incremental revenue opportunities,

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<v Speaker 1>whether it is cracking down or password sharing as as

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<v Speaker 1>they are doing as they're testing out right now in

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<v Speaker 1>Latin America, whether it's introducing that new ad vertizing tier.

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<v Speaker 1>But again, remember none of these are inherently in their DNA.

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<v Speaker 1>They have to build this from scratch, and so it

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<v Speaker 1>is definitely going to take time. Uh, you know, and

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<v Speaker 1>and before like it kind of uh has a material

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<v Speaker 1>impact on financials, it's going to be We're we're looking

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<v Speaker 1>at at least another twelve to eighteen months before this

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<v Speaker 1>really kind of boost the top line and the bottom line.

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<v Speaker 1>And what really drove these results was you know, as

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<v Speaker 1>they said one single thing, which was stranger things. I

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<v Speaker 1>wonder in terms of how much they're saying that they're

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<v Speaker 1>going to put into putting generally new content, what's in

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<v Speaker 1>the pipeline. Is there anything there to kind of sort

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<v Speaker 1>of reverse this tide and actually beat the competition spending less? Yes,

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<v Speaker 1>they are. They're actually holding spending flat at about seventeen

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<v Speaker 1>billion dollars in cash content spend. Um. Is that a

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<v Speaker 1>good thing? Well, yes, it does help them from you know,

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<v Speaker 1>an overall financial perspective that is going to partly contribute

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<v Speaker 1>to their free cash flow, their positive free cash flow

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<v Speaker 1>guidance for about a billion dollars this year and substantial

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<v Speaker 1>growth into three. But then, um, you know, you do

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<v Speaker 1>have their competitors kind of really really ramping up, um,

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<v Speaker 1>you know, when it comes to content, whether it's a Disney,

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<v Speaker 1>whether it's an Amazon Prime that's going after football, that's

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<v Speaker 1>going after all of these expensive new drama series. You

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<v Speaker 1>have Apple foraying into sports. So you have all of

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<v Speaker 1>their competitors kind of really going after a huge, big,

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<v Speaker 1>massive pieces of content, taking big swings. And so I'm

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<v Speaker 1>not necessarily sure it's a prudent move for Netflix to

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<v Speaker 1>kind of hold back when you have competition ratcheting up

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<v Speaker 1>so fiercely. That said, uh, and we always defer to

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<v Speaker 1>you a gitab but just to challenge you a little

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<v Speaker 1>bit um, you know, they did have the first mover

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<v Speaker 1>advantage the name. I mean, you know you're gonna cancel.

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<v Speaker 1>If you're going to cancel some streaming, Netflix wouldn't be

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<v Speaker 1>first on your list. It would probably be last on

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<v Speaker 1>the list for for a lot of people. And and

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<v Speaker 1>the past word strategy is kind of interesting. Is there

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<v Speaker 1>some room there? The past word strategy is definitely interesting,

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<v Speaker 1>But remember you have trained people over so many years

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<v Speaker 1>now to kind of do this. They almost encouraged it

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<v Speaker 1>in many ways, and so now suddenly to kind of

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<v Speaker 1>clamp down on it. Uh, is I don't know if

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<v Speaker 1>if it's really kind of going to bring in the

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<v Speaker 1>results that they're hoping it will. And remember that first

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<v Speaker 1>introducing this in Latin America, and Latin America is is

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<v Speaker 1>a very very price sensitive market. You have consumers who

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<v Speaker 1>are you know, where the elasticity demand is extremely high.

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<v Speaker 1>So I'm not really necessarily sure it's going to do

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<v Speaker 1>a whole lot in terms of boosting top line revenue.

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<v Speaker 1>That said, it's definitely a step in the right direction.

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<v Speaker 1>We'll have to wait and water and see how that

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<v Speaker 1>kind of plays out. Um, so yeah, I think they

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<v Speaker 1>are taking a lot of that. There are a lot

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<v Speaker 1>of good initiatives in in the in the pipeline. But again,

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<v Speaker 1>this is still very much a weight and watch story.

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<v Speaker 1>And one one of the interesting things with Ozark. I

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<v Speaker 1>guess that was one of the first where they sort

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<v Speaker 1>of delayed the final episodes or split it into and

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<v Speaker 1>it is not a strategy that kind of helps rather

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<v Speaker 1>than you know, blow everything out of the door at once,

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<v Speaker 1>that you sustain your subscribers. That's actually a great point,

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<v Speaker 1>and that staggered release schedule actually ted Sarandos just mentioned

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<v Speaker 1>this on the call. He said, the main reason for

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<v Speaker 1>the staggered release of you know, Stranger Things, for instance,

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<v Speaker 1>one uh one drop in in in May and the

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<v Speaker 1>second drop in July was really because they hadn't finished production.

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<v Speaker 1>They hadn't wrapped up production on all of it. Of course,

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<v Speaker 1>it does help, it does help with the with with

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<v Speaker 1>the subscriber churn numbers. And I'm just wondering, alright, we

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<v Speaker 1>we have to go You're one of our favorites love,

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<v Speaker 1>You are rung and often Bloomberg intelligence. This is Bloomberg