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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the

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Speaker 1: Bloomberg Intelligence Podcast. Catch us live weekdays at ten am

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Speaker 2: Netflix came out with their earnings. Are you big Netflix watcher?

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Speaker 2: What are you like? You know?

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Speaker 3: I dabble in Netflix? Okay, I do.

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Speaker 4: I have the like the cheapest version of Netflix, like

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Speaker 4: get the EDG. Yeah, I get the ads, which I

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Speaker 4: probably should just pay up because I think it's like

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Speaker 4: a two dollars a month difference. But like I'm a

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Speaker 4: little chinsey on that. But I do watch the Dallas

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Speaker 4: Cowboy Cheerleaders Netflix show.

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Speaker 5: Wow.

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Speaker 4: I think it's really what, it's really well done. So

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Speaker 4: I don't watch a ton of Netflix, but I do.

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Speaker 4: I think I bought the Netflix subscription to specifically watch

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Speaker 4: to watch that.

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Speaker 3: Well, that's what a lot of people.

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Speaker 6: I mean, I don't know.

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Speaker 2: I haven't gott into the Squad Games that's huge for them,

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Speaker 2: Stranger Things A little bit dabbled in. But the thing is,

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Speaker 2: overall they had some impressive results, right, But the problem

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Speaker 2: I'm having this morning is shares are long. We have

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Speaker 2: Netflix down nearly five percent. What is going on here?

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Speaker 2: To explain it all for us is Getha Ranganaglan Ranganathan.

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Speaker 2: She's Bloomberg Intelligence analyst on us media.

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Speaker 3: Getha.

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Speaker 2: Thanks, always a pleasure having you here because you break

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Speaker 2: it down like nobody else does. So talk to us

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Speaker 2: why those Netflix shares are lower this morning?

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Speaker 7: Yeah, So what I would say, Liza Emily is results.

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Speaker 7: We're definitely solid. I mean, we had a solid second

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Speaker 7: quarter print, whether it was second quarter results, whether it

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Speaker 7: was you know, third quarter guidance. Everything came in above expectations.

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Speaker 7: They even raised guidance for the full year, both for revenue,

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Speaker 7: say revenue growth, as well as for operating margin. But

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Speaker 7: I think what we're really seeing, you know, and kind

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Speaker 7: of the muted reaction in the shares today is really

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Speaker 7: because expectations going into the quarter were extremely elevated. And

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Speaker 7: while I say that the quarter was solid, it probably

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Speaker 7: was not exceptional. And I think that is what investors

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Speaker 7: were really hoping for and you really needed for you know,

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Speaker 7: the stock price to go even higher. So at this point,

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Speaker 7: you know, valuations really really high for Netflix trading at

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Speaker 7: about forty five to fifty times forward earnings. So obviously

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Speaker 7: you needed some huge catalysts, which they you know, we

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Speaker 7: have fundamentals that are really really strong, but if you

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Speaker 7: have that one big thing will Netflix didn't necessarily have

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Speaker 7: that this latest earnings report.

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Speaker 4: What did we learn in the earnings just about what

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Speaker 4: at least Netflix is thinking about for the next leg

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Speaker 4: of growth is are they planning more content? Is it

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Speaker 4: more about focusing on live events.

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Speaker 7: Yeah, it's a little bit of everything. Actually, So just

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Speaker 7: if you look for the near term in terms of

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Speaker 7: the next leg of growth, so we're just looking at

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Speaker 7: the next six months or so. They actually have a massive,

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Speaker 7: monster slate and they characterize this as one of their

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Speaker 7: best six month periods ever. You know, you mentioned stranger things,

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Speaker 7: you talked about squid Game, you know, you have Wednesday,

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Speaker 7: you have a whole bunch of other you know, live events,

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Speaker 7: including the NFL. You have some boxing matches, you know,

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Speaker 7: so they really have it all coming up, not just

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Speaker 7: the six month period. The upcoming six month period is

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Speaker 7: of course going to be extraordinarily strong, but then even

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Speaker 7: into twenty twenty six, I mean, management was talking about

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Speaker 7: how they have really this excellent standout content lineup. So

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Speaker 7: content is obviously going to be a very, very big

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Speaker 7: thing for them. But as we kind of look out,

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Speaker 7: you know, every year has its own special you know catalyst.

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Speaker 7: So in twenty twenty four, for instance, it was subscriber growth.

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Speaker 7: It was all about subscriber growth, and you had you know,

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Speaker 7: this password crackdown initiative. You had the new advertising tier

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Speaker 7: that pulled in over forty million new subscribers just in

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Speaker 7: that one year. Then for this year, twenty twenty five,

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Speaker 7: it's really all about price increases, right, So they already

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Speaker 7: raised prices. We're talking about sixteen to twenty percent price

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Speaker 7: increases across most markets, and they're going to continue to

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Speaker 7: raise prices, a lot of it on the back of

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Speaker 7: that content slate, that that monster content slate. But then

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Speaker 7: really as we kind of look forward to twenty twenty six,

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Speaker 7: the big catalyst, and I think the big market mover

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Speaker 7: for Netflix will be its advertising business. So we've kind

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Speaker 7: of seen them, you know, dabble a little bit in advertising.

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Speaker 7: They've been a little bit late to the game, I

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Speaker 7: would say in advertising. This was a pure subscription service.

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Speaker 7: But they've gotten i think most of the pieces ready

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Speaker 7: for that business to take off in a big way.

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Speaker 7: They said that, you know, they're upfront sales so far

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Speaker 7: has been pretty pretty encouraging. And you're absolutely right in

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Speaker 7: terms of the live piece of the puzzle there, because

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Speaker 7: they really need to have a very good live event

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Speaker 7: strategy in order to attract all of those top global

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Speaker 7: brands and top advertisers. And I think they're doing exactly that.

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Speaker 7: And so next year we're going to see advertising. I mean,

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Speaker 7: it's so far it's doing still pretty well. They've said

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Speaker 7: that they're on track to double their advertising revenue for

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Speaker 7: twenty twenty five. But I think it's going to take

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Speaker 7: off in a really really big way next year and

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Speaker 7: then my twenty twenty you know, in another few years time.

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Speaker 7: I mean expect this to be about ten to fifteen

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Speaker 7: percent of their total revenue. So it is going to

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Speaker 7: become a big portion of their growth story going forward.

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Speaker 2: Yeah. I love the live events like the boxing match

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Speaker 2: Amanda Serrano. I was all over then.

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Speaker 6: It was a good one.

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Speaker 2: So you mentioned these prices, So how much can Netflix

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Speaker 2: continue to raise their prices for subscribers, I mean before

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Speaker 2: they start to tune now, before Emily Grafeo shuts it off.

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Speaker 7: I actually think they have very good pricing power and

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Speaker 7: a lot of that, of course, is going to be

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Speaker 7: based off of the content. And they're obviously continuously investing

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Speaker 7: in the content, you know, in a discipline way, but

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Speaker 7: they're definitely broadening it, they're deepening it, and the content

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Speaker 7: definitely has huge appeal. I mean we've seen this, you know,

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Speaker 7: time and time again when they put out all of

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Speaker 7: their engagement. You have every Netflix subscriber watching you know,

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Speaker 7: the Netflix content for an average of about at least

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Speaker 7: two hours a day. So that's definitely pretty strong, you know.

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Speaker 7: So they're going to continue to keep adding to that

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Speaker 7: content in terms of you know, live events, in terms

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Speaker 7: of other things, and you know, it's I think that

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Speaker 7: is definitely going to be a big growth catalyst for them.

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Speaker 4: Just very quickly in the last thirty seconds here Githa

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Speaker 4: talk about their their competition right now, because there are

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Speaker 4: a ton of streaming services. But obviously, i mean Netflix

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Speaker 4: is up about ninety percent over the last year. Did

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Speaker 4: this earnings result show us that they're still the clear

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Speaker 4: leader in streaming?

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Speaker 7: Yeah, they are the undisputed leader. I mean, there's there's

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Speaker 7: absolutely no doubt about this. They've won the streaming wars.

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Speaker 7: The only one other name that kind of keeps coming

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Speaker 7: up in terms of you know, viewing time would be YouTube,

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Speaker 7: But I think both of those platforms are very different.

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Speaker 7: So Netflix really kind of specializes in premium content and

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Speaker 7: scripted content and prestige dramas. YouTube is really more for

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Speaker 7: kind of casual user generated content. But again, you know

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Speaker 7: the way that Netflix management has kind of framed this

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Speaker 7: whole question about competition is that you know, they still

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Speaker 7: have If you kind of just look at the whole

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Speaker 7: viewing time, Netflix and YouTube combined only have about a

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Speaker 7: twenty percent share, so they're really really eighty percent is

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Speaker 7: still up for grabs. And the way that you know,

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Speaker 7: Netflix is kind of characterizing that there's still plenty of

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Speaker 7: upside in terms of them kind of capturing more share.

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Speaker 7: But you're absolutely right, they are way ahead of their

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Speaker 7: competitors in terms of viewing share right now.

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Speaker 2: All right, Thank you very much, Githa. Always glad to

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Speaker 2: have your inside. That's Keitha Ranganath and Bloomberg Intelligence analyst

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Speaker 2: on the US media, keeping us all on top of

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Speaker 2: Netflix learning.

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Speaker 1: You're listening to the Bloomberg Intelligence podcast Catch us Live

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Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android

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Speaker 1: Auto with the Bloomberg Business App. Listen on the and

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Speaker 1: wherever you get your podcasts, or watch us live on YouTube.

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Speaker 4: All right, welcome back to Bloomberg Intelligence Radio. I'm Emily

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Speaker 4: Graffeo with Lisa Matteo. Paul Sweeney is out. We had

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Speaker 4: a slew of earnings today and a good read on

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Speaker 4: the consumer coming out of American Express shares. We're falling,

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Speaker 4: but the credit card company's expenses were higher than expected.

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Speaker 4: Tdcowan called the results neutral overall, noted that the earnings

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Speaker 4: upside was driven by a lower than expected tax rate.

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Speaker 4: We're going to have Paige Smith, Bloomberg Consumer Finance reporter,

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Speaker 4: break all of this down. Maybe we could start with

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Speaker 4: how Amex is standing out from competitors right now and

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Speaker 4: what did the earnings overall show us.

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Speaker 3: Because it does really feel like this is a crowded.

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Speaker 4: Space here for like premium credit cards and premium consumer

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Speaker 4: finance companies.

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Speaker 6: Certainly, thanks for having me.

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Speaker 8: I think the one thing that I would note that

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Speaker 8: the Steve Squerrey, who's the CEO of Amex, got a

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Speaker 8: lot of questions on this this morning on the analy

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Speaker 8: call just the idea that you know, of course, the

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Speaker 8: premium space folks who really love rewards on their credit cards, travel, hospitality,

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Speaker 8: airport lounges, all of those nice things. It's a very

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Speaker 8: crowded space and it's getting more crowded. Actually, City just

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Speaker 8: announced earlier this week, for example, that they were actually

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Speaker 8: re entering the space after sort of taking a bit

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Speaker 8: of hiatus there. So it's it's certainly an area to watch.

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Speaker 8: But AMEX really asserted itself during this batch of earnings

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Speaker 8: to basically say, listen, we are sort of the original

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Speaker 8: premium premium card offer company here and we're going to

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Speaker 8: continue being the premium card offering for consumers in the US.

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Speaker 2: Now, they had record card members spending, So what does

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Speaker 2: that say about the state of the consumer they're continuing

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Speaker 2: to swipe away.

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Speaker 8: Yes, that was another question that Steve fielded a couple

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Speaker 8: of times on the earnings call. It essentially does say

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Speaker 8: that folks in the premium space are continuing to swipe,

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Speaker 8: tap and spend.

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Speaker 6: In every preferred way.

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Speaker 8: And yes, it's it's sort of all's well for the

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Speaker 8: MX consumer at this moment in time.

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Speaker 4: Certainly, did we learn anything about any specific updates to

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Speaker 4: the Platinum Card because people get so obsessed with the

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Speaker 4: people love the updates.

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Speaker 8: And again, yes, it was certainly asked, and no, we

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Speaker 8: do not have.

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Speaker 6: Any more updates for you just yet.

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Speaker 8: We know again that the updates are coming in the fall,

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Speaker 8: and we know the competitive landscape is tight.

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Speaker 6: But are they going to raise the price?

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Speaker 8: I think it's safe to say that they're going to

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Speaker 8: raise the price. That's me putting my spin on things.

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Speaker 8: But if they didn't raise the price, it would be

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Speaker 8: a pretty a pretty great deal, I'll put it that way.

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Speaker 8: And I don't think the economics would really make sense

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Speaker 8: for the card if they did not raise the price.

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Speaker 2: But I'm thinking, so if more people are taking advantage

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Speaker 2: of all these perks, right, because I know I do,

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Speaker 2: like if I'm tracking my points like crazy, So does

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Speaker 2: that kind of mean that, you know what, the consumer

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Speaker 2: is kind of cautious at the same time because we

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Speaker 2: want to go for those deals.

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Speaker 6: I you know, that's a really good question. I don't

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Speaker 6: know if that's the case.

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Speaker 8: I think that there are a lot of deals in

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Speaker 8: rewards hounds out there, like yourself, who really just track

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Speaker 8: it very closely. And there was a comment made on

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Speaker 8: the call that it was something along the lines of,

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Speaker 8: you know, consumers really like these rewards and they track

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Speaker 8: them very closely and they pay for value. So it's

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Speaker 8: I wouldn't say it's maybe a warning sign. I would

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Speaker 8: say it's more of a sign of like a savvy

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Speaker 8: consumer per se.

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Speaker 4: Stable coins are very hot right now on Wall Street.

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Speaker 3: Is that a threat to Amex's business.

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Speaker 8: Well, so, it's certainly been the flavor of the week,

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Speaker 8: if you will.

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Speaker 6: Stable coin. The word stable.

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Speaker 8: Coin has popped up in pretty much every earnings call

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Speaker 8: I've tuned into over the last week, and whether it's

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Speaker 8: the big Wall Street banks or even Schwab mentioned earlier.

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Speaker 8: Schwab reported earnings this morning as well. And you know,

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Speaker 8: when it comes to Amex, they basically said they're very

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Speaker 8: closely watching the technology to see how they can either

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Speaker 8: issue their own stable coin or partner on a stable

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Speaker 8: coin offering of some kind. It's still they sort of

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Speaker 8: hedged and said it's still early days relatively, but one

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Speaker 8: thing was very clear, which is Steve Squery came right

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Speaker 8: out and said, is this a threat to existing payment rails?

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Speaker 6: No, it is not.

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Speaker 8: And that's kind of the same thing that we've been

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Speaker 8: hearing kind of across the payments companies, whether it's from Visa, MasterCard, AMX.

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Speaker 6: Kind of the same tone there.

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Speaker 2: So are people paying off their MX bill? I mean,

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Speaker 2: how credit card debt?

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Speaker 8: So an interesting stat actually that they highlighted in this

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Speaker 8: round of earnings was that gen Z so AMEX is

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Speaker 8: making a pretty concerted push in the younger consumer space

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Speaker 8: at the moment.

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Speaker 6: And they highlighted that gen Z and.

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Speaker 8: Gen Z and MILLENNI ill spenders were paying, they were

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Speaker 8: their delinquency rates were kind of being like thirty plus

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Speaker 8: days past, you past. Their bills were actually lower than

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Speaker 8: industry industry trends for older consumers. So you would think,

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Speaker 8: you know, younger people are just getting used to paying

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Speaker 8: off credit cards and sort of learning about how to

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Speaker 8: handle their debt. And there was kind of some question

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Speaker 8: about AMEX targeting these younger consumers with this like premium

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Speaker 8: credit card that comes with PES, but they've basically countered

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Speaker 8: and said, hey, so far, so good. They're actually paying

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Speaker 8: them off. You know, the delinquency rates are quite low

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Speaker 8: compared with the industry, definitely lower compared with the industry

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Speaker 8: in their peer group, but even lower among older consumers.

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Speaker 8: So kind of an interesting metric. I thought that they

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Speaker 8: highlighted this morning.

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Speaker 2: Well that's some good news. There's a bill you have

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Speaker 2: to Paige my thank you so much for joining us

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Speaker 2: here in the studio. She's Bloomberg Consumer finance reporter talking

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Speaker 2: about AMEX and credit card debt and all of that.

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Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live

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Speaker 1: weekdays at ten am Eastern on Applecarplay and Android Auto

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Speaker 1: with the Bloomberg Business app. Listen on demand wherever you

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Speaker 1: get your podcasts, or watch us live on YouTube.

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Speaker 2: Then Li smitheo alongside Emily GRIFFEO. You were listening to

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Speaker 2: Bloomberg Intelligence. Paul Sweeney does have the day off. Okay,

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Speaker 2: So twenty five year old trading powerhouse Jane Street in

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Speaker 2: the glare of a global spotlight. At least that's according

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Speaker 2: to Katherine Doherty. She's Bloomberg Finance reporter. Her latest big

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Speaker 2: take story. This one a lot to dive into, but

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Speaker 2: I want to start by setting the table, like who

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Speaker 2: is Jane Street and what's that apart from other firms

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Speaker 2: out there.

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Speaker 5: So, Jane Street has become one of the largest trading

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Speaker 5: firms in the US and really across the globe. They

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Speaker 5: started out. Their founders are from Susquehanna. That's another trading

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Speaker 5: firm that they compete with today. But over the years

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Speaker 5: they have really developed their technology and their people to

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Speaker 5: generate billions of dollars in revenue. They've grown so large

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Speaker 5: that their trading revenue has surpassed some of the biggest

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Speaker 5: US banks. They're now larger in scale at least the

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Speaker 5: money that they're making than Bank of America and City Group.

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Speaker 5: So we're talking a lot of money. And they are

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Speaker 5: really behind the scenes. So I like to think about

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Speaker 5: them as they are responsible for the plumbing of the

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Speaker 5: market and making sure that all of the trading is

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Speaker 5: actually just moving through the system. They're handling orders from customers,

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Speaker 5: not directly, some of it is indirectly. If you have

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Speaker 5: a retail broker, they're the ones that are receiving the

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Speaker 5: order from their clients. That order gets sent to a

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Speaker 5: firm like Jane Street, and Jane Street handles the actual

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Speaker 5: execution to make sure that they're matching the buyer and

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Speaker 5: the seller. They might take the order and then eventually

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Speaker 5: they sell it off. But the man player, that's Jane Street.

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Speaker 5: They're the reason that trading can continue. Them and their

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Speaker 5: peers play a very important role in the market structure overall.

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Speaker 4: There is some regulatory scrutiny right now in India when

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Speaker 4: it comes to Jane Street, which we're going to get

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Speaker 4: to in a second. But you write in this big

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Speaker 4: take that you wrote along with Bernard Goid that they're

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Speaker 4: famously secretive.

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Speaker 3: Why are they so secretive on Wall Street?

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Speaker 5: Well, number one, they don't really have to say a lot.

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Speaker 5: This is a private company. What they do doesn't require

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Speaker 5: public interface at all. They're providing a service and they

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Speaker 5: don't have to answer to shareholders. So many times they

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Speaker 5: would they would like to operate.

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Speaker 3: In the dark in many ways.

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Speaker 5: It doesn't necessarily mean what's going on behind the scenes

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Speaker 5: and what's happening in the dark is nefarious at all.

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Speaker 5: There's just not really a reason to say anything. But

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Speaker 5: what they do is so And who who works for

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Speaker 5: Jane Street is a is a very particular type of person.

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Speaker 5: They have quants, they have mathematicians, and this is not

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Speaker 5: unique to to Jane Street.

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Speaker 3: Other peers like.

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Speaker 5: Citadel Securities and Hudson River Trading. They also attract those

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Speaker 5: types of people that go to these firms but those

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Speaker 5: are not the type of people that are in the

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Speaker 5: business to speak out and and they're just doing their

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Speaker 5: job because they're providing a service and that service doesn't

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Speaker 5: necessarily need words. It's it's it's a lot of really

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Speaker 5: intricate again, it's it's the uh, it's the analysis of

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Speaker 5: just how the markets are are moving and and they're

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Speaker 5: trying to just be faster and better than their peers.

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Speaker 3: It's all about competition.

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Speaker 5: And they say all of the market makers, like a

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Speaker 5: Jane Street and a Citadel Securities would say that competition

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Speaker 5: is a good thing because if you are trying to

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Speaker 5: be faster, that of going to be a good thing

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Speaker 5: for their customers because orders are going to be priced tighter,

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Speaker 5: you're not going to lose as much money.

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Speaker 3: And really, the reason that the market has.

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Speaker 5: Evolved in the age of electronic trading in the way

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Speaker 5: that it has is because of these firms.

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Speaker 2: Now, Catherine, you're a pro, so is there anything that

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Speaker 2: surprised you when you were when you were doing this

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Speaker 2: research for this story.

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Speaker 3: I would not say I'm a pro at all.

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Speaker 5: Actually, I mean the reason I enjoy, the reason I

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Speaker 5: enjoy reporting on firms like this is I'm learning so

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Speaker 5: much and the people that work in the markets covering

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Speaker 5: market structure here at Bloomberg, I am fascinated by just

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Speaker 5: how niche and how nerdy it goes. So I mean,

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Speaker 5: I would say what surprised me in this reporting, what

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Speaker 5: surprised everyone on Wall Street was when the numbers were

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Speaker 5: starting to come out of how much money firms like

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Speaker 5: Jane Street were making. It was to surpass the big

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Speaker 5: US banks in terms of creating revenue. That was incredibly

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Speaker 5: surprising and something that even competitors to Jane Would would

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Speaker 5: look and say, how are they doing what they do

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Speaker 5: on the scale that they do? And the answer to

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Speaker 5: that in my reporting and a lot of what this

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Speaker 5: story is about is the amount of risk that this

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Speaker 5: firm is taking.

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Speaker 3: Now.

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Speaker 5: The reason that they can take so much risk, that's

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Speaker 5: another element to it. It's not as if they're just

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Speaker 5: throwing caution to the wind. They they're doing this and

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Speaker 5: they know exactly how much risk they're able to take.

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Speaker 5: The reason they can stomach the risk is because of

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Speaker 5: the capital that they're working with. That capital, the money

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Speaker 5: that they are putting out there and they're for lack

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Speaker 5: of a better word, playing with it's so large and

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Speaker 5: it's all theirs. So if you are a hedge fund

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Speaker 5: as comparison that money, you have to answer to shareholders.

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Speaker 5: So if you're taking big risks and it doesn't work out, well,

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Speaker 5: it's not just oh sucks for us, that's really bad

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Speaker 5: for your clients and your customers.

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Speaker 3: Jane Street, that's their capital.

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Speaker 5: So they might take bigger risk because they think there's

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Speaker 5: going to be a bigger reward on the other side,

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Speaker 5: and if it doesn't work out, it's not as if

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Speaker 5: they have to go explain that or their profit and

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Speaker 5: loss is all their own money. So it's much different

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Speaker 5: than the approaches that the banks and hedge funds take

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Speaker 5: on potentially the other side.

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Speaker 4: We have about a minute left and this is definitely

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Speaker 4: a story that I know we're going to be hearing

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Speaker 4: more reporting on from you. But regulators are watching Jane

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Speaker 4: Street specifically in India. Just give us the high level

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Speaker 4: what the Securities in Exchange Board of India SEB is

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Speaker 4: looking at.

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Speaker 5: So they're looking at Jane Street's trading behavior specifically in

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Speaker 5: the options market. The regulator came out over July fourth

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Speaker 5: weekend within one hundred and five page order outlining what

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Speaker 5: they are alleging is market manipulation, and not go too

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Speaker 5: far into the weeds, but they're pointing out a few things,

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Speaker 5: the size of the trades that this firm is putting on,

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Speaker 5: and because of the size, the impact to the overall market,

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Speaker 5: and they're claiming that Jane Street's behavior is ultimately harmful

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Speaker 5: to the end investor.

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Speaker 3: So this is playing out.

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Speaker 5: The firm has denied that it is doing anything that

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Speaker 5: is nefarious or would be considered market manipulation, So we'll

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Speaker 5: see what happens next.

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Speaker 2: All right, Catherine Doughty, thank you for joining us right

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Speaker 2: here in the studio this morning. She is Bloomberg Finance reporter.

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Speaker 2: You got to check out that article on the terminal.

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Speaker 7: Yeah,