WEBVTT - Netflix and Tesla Give Warnings 0:00:01.440 --> 0:00:05.080 From my Heart where innovation, money and power Collie in 0:00:05.200 --> 0:00:10.080 Silicon Valley, NBN. This is Bloomberg Technology with Caroline Hide 0:00:10.160 --> 0:00:11.559 and Ed Ludlove. 0:00:24.520 --> 0:00:26.680 And Caroline Heinda Blomberg's weldad quarters in New York and 0:00:26.760 --> 0:00:30.280 Ludlow who's off. This is Bloomberg Technology coming up full 0:00:30.520 --> 0:00:31.840 earnings coverage ahead. 0:00:31.880 --> 0:00:33.400 Netflix sept for its worst day. 0:00:33.320 --> 0:00:36.479 Of the year, that says its outlook full short of estimates. 0:00:36.640 --> 0:00:39.479 Will break down the results. Plus, let's look at Tesla's 0:00:39.520 --> 0:00:41.879 results as Elon Musk warns and more blows to the 0:00:41.880 --> 0:00:46.960 company's profitability, and Chip Giant TSMC drops as it warns 0:00:47.000 --> 0:00:50.040 the AI frenzy may not last. We'll have that and 0:00:50.200 --> 0:00:53.400 so much more ahead. First, let's get you up to 0:00:53.440 --> 0:00:55.600 speed with a lackluster day in the markets. 0:00:55.640 --> 0:00:57.480 We send it over to Blomberg's affaguilty a little. 0:00:57.640 --> 0:00:59.880 It is a little lackluster, Caroline. In fact, it feels 0:00:59.880 --> 0:01:02.920 like the first worst down day in many days for 0:01:03.120 --> 0:01:05.240 the major indexes here in the US, because we've had 0:01:05.240 --> 0:01:07.400 this melt up. But some of the big tech reporters 0:01:07.400 --> 0:01:09.319 reports while putting a bit of a wrinkle in that 0:01:09.480 --> 0:01:12.520 right now we have Tesla down six point four to 0:01:12.600 --> 0:01:17.240 two percent of course on its report. That's where profitability 0:01:17.280 --> 0:01:19.720 is an issue. Elon Musk even talking about the idea 0:01:19.760 --> 0:01:21.760 that if rates continue to rise, they will have to 0:01:21.760 --> 0:01:24.679 bring prices down that could weigh on profitability more so. 0:01:24.959 --> 0:01:26.720 And then the fears around some of the other big 0:01:26.760 --> 0:01:29.440 tech companies that have not yet reported, Meta, Alphabet and 0:01:30.160 --> 0:01:33.840 Apple all lower ahead of those reports. This idea that 0:01:33.880 --> 0:01:36.600 we were talking about yesterday. So much movement to the upside, 0:01:36.680 --> 0:01:38.840 but will these reports deliver? Now if we flip up 0:01:38.840 --> 0:01:41.080 the boards, we are going to see that what this 0:01:41.200 --> 0:01:44.400 means for the s and P five hundred and the 0:01:44.520 --> 0:01:47.320 NASAC well, we are looking at a down day, of course, 0:01:47.360 --> 0:01:49.840 and the nicy Fang Index down even more, down three 0:01:49.880 --> 0:01:52.920 point two percent. The socks not immune from this. We 0:01:52.960 --> 0:01:54.880 have been video down quite a bit. We also have 0:01:54.960 --> 0:01:57.360 AMD down. And then finally, if we take a look 0:01:57.360 --> 0:02:00.000 at the other big earnings a lagger that is Netflix, 0:02:00.040 --> 0:02:01.559 So I think we have a chart of that here. 0:02:01.760 --> 0:02:04.160 We're going to see, Wow, gosh, the worst day I 0:02:04.280 --> 0:02:07.680 believe since April twenty twenty two. And Caroline, there's this 0:02:07.800 --> 0:02:09.800 continued puzzle. I'm sure you're going to solve it on 0:02:09.840 --> 0:02:13.360 this show. In the next hour. But record blowout subscribers. Well, 0:02:13.360 --> 0:02:15.760 I don't know if a record, but blowout subscribers. But 0:02:15.800 --> 0:02:18.120 where's the revenue And they're talking about still keeping that 0:02:18.120 --> 0:02:19.880 double digit for the end of the year. 0:02:20.400 --> 0:02:22.000 Putting a lot of pressure on the fourth quarter. 0:02:22.080 --> 0:02:24.760 Quite frankly, Yeah, Bank of America looking optimistic towards that 0:02:24.800 --> 0:02:27.120 second half, but as you say, for now, the revenue 0:02:27.120 --> 0:02:30.720 not quite following that uptick in subscriptions. Let's go back 0:02:30.720 --> 0:02:33.519 to Tesla for a moment, because it is falling hard too, 0:02:33.639 --> 0:02:36.640 warning of more hits to its already shrinking profitability. CEO 0:02:36.680 --> 0:02:39.040 Elon Musk said the company will have to keep lowering 0:02:39.040 --> 0:02:42.760 the prices of its evs is interest rates continues to rise. 0:02:44.639 --> 0:02:46.640 I think it makes it does make sense to sacrifice 0:02:46.720 --> 0:02:50.799 margins in favor of making more vehicles because we think 0:02:50.880 --> 0:02:52.840 in the not to do in the future they will 0:02:52.880 --> 0:02:57.680 have a chromatic valuation increase. I think the Tesla fleet 0:02:57.960 --> 0:02:59.880 value increase of the point which we can upload full 0:03:00.080 --> 0:03:02.799 of you know, full self driving, had it's approved by regulators, 0:03:04.560 --> 0:03:08.760 will be the single biggest step change in asset value 0:03:08.840 --> 0:03:09.639 maybe in history. 0:03:10.400 --> 0:03:13.040 He's got more analysis than mention. Akaine as an Austin 0:03:13.120 --> 0:03:15.799 In Shawn, I don't really understand why the market's so 0:03:15.880 --> 0:03:19.000 surprised by this. These price cuts, This focus on volume 0:03:19.080 --> 0:03:20.400 over profitability has been. 0:03:20.280 --> 0:03:22.600 A theme all year, But were they're hoping for some 0:03:22.760 --> 0:03:23.440 sort of change. 0:03:25.800 --> 0:03:27.520 I think, you know, if you look at the cuts 0:03:27.600 --> 0:03:30.160 that they've made and the subsequent adjustments, there have been 0:03:30.160 --> 0:03:32.320 a couple of little price pumps over the last month 0:03:32.400 --> 0:03:35.480 or so, they have flattened out a bit, certainly not 0:03:35.560 --> 0:03:37.480 as volatile as they were in the first quarter. So 0:03:37.560 --> 0:03:40.240 I think maybe we have some investors who were expecting 0:03:40.320 --> 0:03:42.960 that to be completely closed, and especially given the fact 0:03:42.960 --> 0:03:45.080 that there was a chance maybe we were done with 0:03:45.200 --> 0:03:48.160 interest rates hikes, people were thinking that maybe this was 0:03:48.200 --> 0:03:51.760 all over. But obviously Elon Musk says that if interest 0:03:51.840 --> 0:03:53.800 rates keep going up, they're willing to cut. I mean, 0:03:53.920 --> 0:03:56.080 he said last quarter, and he sort of reiterated it. 0:03:56.080 --> 0:03:56.600 In that clip. 0:03:57.000 --> 0:03:59.520 He's willing to cut even deeper to the bone because 0:03:59.560 --> 0:04:02.480 he believed so much in the ability to deliver full 0:04:02.560 --> 0:04:05.960 autonomy and what that would do to Tesla's margins. You know, 0:04:06.080 --> 0:04:08.720 he's so bought into that idea that he really kind 0:04:08.760 --> 0:04:11.280 of doesn't care about the margins, right now, so I 0:04:11.360 --> 0:04:14.120 think it's part that and also part Remember they've added 0:04:14.160 --> 0:04:16.680 like five hundred billion dollars to their market cap this year. 0:04:17.040 --> 0:04:19.080 They've had a pretty big rise over the last couple 0:04:19.120 --> 0:04:20.920 of weeks and months, and so you know, maybe this 0:04:21.080 --> 0:04:22.760 is just some resetting of expectations. 0:04:22.839 --> 0:04:24.559 I mean, good context there, Sean. 0:04:24.600 --> 0:04:27.600 What's interesting about this focus on autonomous driving is the 0:04:27.680 --> 0:04:30.840 need for compute right now, and of course a supercomputer 0:04:31.040 --> 0:04:33.800 Dojo takes limelight a billion in. 0:04:33.880 --> 0:04:35.479 Terms of investment in that area. 0:04:35.800 --> 0:04:38.480 That seemed to surprise people, even though the CFO tried 0:04:38.560 --> 0:04:39.400 to calm some nerves. 0:04:40.720 --> 0:04:42.440 Yeah, yeah, there was a funny moment. It was probably 0:04:42.440 --> 0:04:45.200 one of the more maybe lively moments of the call, 0:04:45.440 --> 0:04:48.760 which was otherwise pretty straightforward. You know, Elon coming out 0:04:48.760 --> 0:04:52.040 and saying basically about exactly how much or at least 0:04:52.080 --> 0:04:53.560 in the ballpark of what they want to spend on 0:04:53.640 --> 0:04:57.040 a super coupeter over the next year. And you know, 0:04:57.120 --> 0:04:59.839 something important to remember, this is a specific use case 0:05:00.120 --> 0:05:03.280 type of supercomputer in the sense that he's not using 0:05:03.320 --> 0:05:05.320 it to try to be something that they could throw 0:05:05.440 --> 0:05:08.479 at his AI effort. But he just announced last week 0:05:08.520 --> 0:05:10.320 and do large language models on this. He says, this 0:05:10.480 --> 0:05:13.720 is very tailored to processing video and images. It's something 0:05:13.760 --> 0:05:17.360 that is specifically made to help improve the driving software 0:05:17.760 --> 0:05:20.560 Antesla's cars. And so now we finally had a ballpark. 0:05:20.600 --> 0:05:23.200 And yeah, immediately after we got this sort of lawyered 0:05:23.200 --> 0:05:25.040 dep response from the CFO, who said, hey, you know, 0:05:25.360 --> 0:05:27.239 that sounds like a lot of money. But we baked 0:05:27.279 --> 0:05:29.080 this into the guidance that we've been giving you guys, 0:05:29.240 --> 0:05:30.840 so you may have a little bit more clarity on 0:05:30.960 --> 0:05:33.719 exactly how we're spending some of that. But don't get spooked. 0:05:33.760 --> 0:05:35.200 This isn't some sort of new expense. 0:05:36.160 --> 0:05:40.599 Nevertheless, expenses racking up, well, perhaps the profitability that margin 0:05:40.720 --> 0:05:43.719 under pressure at just eighteen point one percent, seawann O Caine. 0:05:43.880 --> 0:05:46.320 Great to get your analysis. We thank you, and let's 0:05:46.360 --> 0:05:48.040 got to invest to Tate now a peace to Welcome 0:05:48.040 --> 0:05:51.400 to the show. Sylvia Jabronski defines ets CEO CIO overseeing 0:05:51.440 --> 0:05:53.520 nine hundred million dollars an assets onder management of course 0:05:53.520 --> 0:05:56.480 Tesla when your key holdings and your pure electric vehicle 0:05:56.560 --> 0:06:00.640 ETF and Sylvia, were you upended by this still focus 0:06:00.720 --> 0:06:04.280 on volume of a profit or had you anticipated so? 0:06:04.480 --> 0:06:07.840 I anticipated that you know, the earnings announcement and call 0:06:08.000 --> 0:06:09.600 was sort of go like this. There was so much 0:06:09.640 --> 0:06:11.920 focus on what will profit margins look like when you 0:06:12.000 --> 0:06:14.440 take out kind of the tax credits and you know, 0:06:14.640 --> 0:06:17.400 different types of incentives coupled with the lowering of prices, 0:06:17.480 --> 0:06:19.800 and you know, the street didn't like it, but I 0:06:19.839 --> 0:06:21.920 actually thought it was a great call, and I would 0:06:21.920 --> 0:06:24.799 have said that there's actually calls for the stock to rally. 0:06:24.960 --> 0:06:27.720 You know, what Elona Musk is doing is continuing to 0:06:27.800 --> 0:06:31.600 corner the EV market by making EV vehicles accessible. You know, 0:06:31.640 --> 0:06:34.560 there is a volume game here, so while you're sacrificing 0:06:34.640 --> 0:06:37.440 some margin in the near term, you're increasing you know, 0:06:37.600 --> 0:06:40.920 capacity to produce more vehicles, interest in purchasing vehicles because 0:06:40.920 --> 0:06:44.200 they're affordable and really you know, taking that stake while 0:06:44.200 --> 0:06:45.760 everybody else is trying to catch up. 0:06:45.920 --> 0:06:48.800 I also think that you know, he has enough of 0:06:49.120 --> 0:06:52.360 kind of you know, shots to fire here. 0:06:52.480 --> 0:06:55.320 He has the cyber talk coming out, and that's arguably 0:06:55.400 --> 0:06:57.920 going to be an expensive type of vehicle that people 0:06:57.960 --> 0:07:00.400 seem to be you know, really seeking and waiting for. 0:07:01.080 --> 0:07:02.960 And you know, so when you have days like this, 0:07:03.120 --> 0:07:06.640 when when a stock like Tesla kind of falls precipitously 0:07:06.720 --> 0:07:08.880 in one day from you know, what looks like bad 0:07:08.960 --> 0:07:10.720 news but is actually really good news. 0:07:10.560 --> 0:07:12.440 And then you know the other EV makers fall in 0:07:12.520 --> 0:07:12.920 line with it. 0:07:13.000 --> 0:07:15.200 I mean, this in my mind is a great kind 0:07:15.200 --> 0:07:17.960 of dollar cost averaging day on you know, the top 0:07:18.040 --> 0:07:18.680 EV stocks. 0:07:18.920 --> 0:07:22.920 Okay, so buying in on the weakness even though it's 0:07:22.960 --> 0:07:27.200 still priced what eighty times forward earnings? 0:07:27.440 --> 0:07:29.080 How do you vindicate that valuation? 0:07:29.240 --> 0:07:32.200 Are you the person who's also in this idea of 0:07:32.280 --> 0:07:35.840 a ROBOTAXI the idea that ultimately there's a big bump 0:07:36.200 --> 0:07:36.800 in valuation. 0:07:37.840 --> 0:07:39.240 I am, and you have to be right. You have 0:07:39.320 --> 0:07:41.040 to be if you're buying the stock at those valuations. 0:07:41.080 --> 0:07:41.800 It's a fair point. 0:07:41.840 --> 0:07:43.720 But there is a whole lot of evidence that, you know, 0:07:43.880 --> 0:07:46.040 the R and D is moving there in the right direction. 0:07:46.160 --> 0:07:48.720 Of course, you know investors want everything to happen more 0:07:48.840 --> 0:07:49.840 quickly than it usually does. 0:07:49.960 --> 0:07:51.760 But this is very much a growth stock. You know, 0:07:51.840 --> 0:07:54.640 they're they're working on things that do not yet exist, 0:07:54.720 --> 0:07:56.560 and this is what you want when you invest. 0:07:56.280 --> 0:07:59.480 In innovation, the future of EV. So there's a few things. 0:07:59.520 --> 0:08:02.760 One TV market was fourteen percent of sales globally. That's 0:08:02.800 --> 0:08:05.440 projected to be thirty percent by twenty six percent. We 0:08:05.560 --> 0:08:07.800 know that Tesla has you know, sixty percent of the market. 0:08:07.880 --> 0:08:10.480 Now that shrinks, but they get more orders, more volume, 0:08:10.520 --> 0:08:12.760 so I think they continue to kind of benefit there. 0:08:12.960 --> 0:08:15.320 Number two is the new you know vehicle, the cyber truck. 0:08:15.400 --> 0:08:18.800 Number three is you know that you mentioned the dojo before, 0:08:19.080 --> 0:08:22.480 the potential for AI their their self you know, kind 0:08:22.520 --> 0:08:26.680 of driving database, data center computer. The technology looks like 0:08:26.720 --> 0:08:28.360 it's kind of being set up to support them. And 0:08:28.600 --> 0:08:30.680 I think the robotaxi thing, if anyone is going to 0:08:30.680 --> 0:08:33.079 get it done, it will be Tesla, and I you know, 0:08:33.280 --> 0:08:34.880 we have no reasonably that he's not going to get 0:08:34.880 --> 0:08:35.160 it done. 0:08:35.760 --> 0:08:39.240 Sylvia, what about the global nature of this company? 0:08:39.360 --> 0:08:41.559 Of course they're talking about perhaps having to slow down 0:08:41.600 --> 0:08:43.960 on some of the factory output as they update them. 0:08:44.000 --> 0:08:46.840 Of Course they've got exposure in Berlin here in the US, 0:08:46.960 --> 0:08:50.760 but also China, and I noted that byd Lee Auto 0:08:50.840 --> 0:08:55.120 Ready managing to ramp up their own deliveries at the moment. 0:08:55.200 --> 0:08:56.560 What's competition like globally? 0:08:57.679 --> 0:08:59.760 Yeah, and I think that you know, when you're in 0:08:59.800 --> 0:09:01.600 bad staying in the EV space. This sort of makes 0:09:01.640 --> 0:09:03.640 the argument for having a basket of all of these 0:09:03.720 --> 0:09:05.520 names right, because you want the test, you want Tesla, 0:09:05.559 --> 0:09:07.760 and then you also want who is the Tesla of China? 0:09:07.840 --> 0:09:07.920 Right? 0:09:08.040 --> 0:09:09.720 Is that Xkig, is that Li Auto? And it's good 0:09:09.760 --> 0:09:12.920 to kind of have that broad based diversification. I think 0:09:12.960 --> 0:09:15.120 the answer is that these are all going to be winners. 0:09:15.160 --> 0:09:15.280 You know. 0:09:15.400 --> 0:09:19.480 The piece of the entire pie of EV again is 0:09:19.559 --> 0:09:20.200 growing globally. 0:09:20.320 --> 0:09:22.800 Right, we talked about that fourteen percent going to thirty percent, 0:09:22.920 --> 0:09:25.600 So massive upside for anyone who sort of gets it right. 0:09:25.640 --> 0:09:26.520 In terms of Tesla. 0:09:26.920 --> 0:09:29.000 The fact that they're talking about building a factory that's 0:09:29.120 --> 0:09:32.760 larger than Volkswagen and BMW in you know, Germany, the 0:09:32.840 --> 0:09:35.360 home of German autos, which is like you know, I mean, 0:09:35.559 --> 0:09:38.160 the Michigan of Europe is just mind boggling to me. 0:09:38.320 --> 0:09:41.000 So that tells you that the demand will continue there 0:09:41.040 --> 0:09:42.920 and the opportunity for car sales continues there. 0:09:42.960 --> 0:09:44.520 There's some amazing stats out there. 0:09:44.640 --> 0:09:47.200 If you look at EV sales last year in China, 0:09:47.280 --> 0:09:49.720 fifty percent of evs sold or fifty percent of car 0:09:49.840 --> 0:09:52.720 sold were EV's and the Nordics, though it was eighty 0:09:52.840 --> 0:09:55.640 nine percent of all vehicles sold and Europe that numbers 0:09:55.679 --> 0:09:59.760 closer For sixty percent, So you know, he's following the 0:10:00.160 --> 0:10:00.839 of interest. 0:10:00.640 --> 0:10:04.240 There at a time where macro headwinds also there. 0:10:04.440 --> 0:10:06.080 Just that's ran out of this conversation a little bit 0:10:06.160 --> 0:10:09.079 with where you know, Musk started to focus on interest 0:10:09.160 --> 0:10:11.520 rates still rising and the impact on the consumer. 0:10:11.600 --> 0:10:14.320 How are you feeling about the macro picture right now? 0:10:15.320 --> 0:10:17.760 Yeah, I'm actually a little more bullish on the macro picture. 0:10:17.960 --> 0:10:20.480 And you know, we've talked Caroline before about some of 0:10:20.520 --> 0:10:22.520 my stock picks that were getting crush last year in 0:10:22.559 --> 0:10:24.720 twenty twenty two with interest rates rising. 0:10:24.600 --> 0:10:26.680 On the tech space, and I think that that's playing 0:10:26.720 --> 0:10:27.000 out now. 0:10:27.040 --> 0:10:28.599 You know, there was a bear market last year and 0:10:28.679 --> 0:10:31.199 tech interest rates were rising, and now we're coming to 0:10:31.280 --> 0:10:32.840 the end of that. So I am in the camp 0:10:32.920 --> 0:10:35.520 of if we get another hiker two, okay, it's it's 0:10:35.760 --> 0:10:38.800 sort of manage what we're already there. I think that, 0:10:39.120 --> 0:10:42.400 you know, the economy has withstood a major recession. Perhaps 0:10:42.400 --> 0:10:44.520 you get a soft landing, but in terms of rates 0:10:44.559 --> 0:10:47.400 specifically towards ev or other goods and services, you know, 0:10:47.480 --> 0:10:50.480 I don't see prices necessarily kind of coming down, but 0:10:50.600 --> 0:10:54.319 inflation is coming down. Prices will probably stabilize and it 0:10:54.440 --> 0:10:57.440 will become you know, kind of easier to borrow money 0:10:57.480 --> 0:11:00.280 to produce more vehicles, to you know, to take on 0:11:00.440 --> 0:11:02.240 debt for innovation for growth companies. 0:11:02.320 --> 0:11:05.320 So I think we'd have you know, some arrange bound volatility. 0:11:05.360 --> 0:11:07.559 It will be kind of a slower year into the 0:11:07.679 --> 0:11:10.760 year end, but if earnings hold up, then I think 0:11:10.840 --> 0:11:12.360 the rally continues. 0:11:12.760 --> 0:11:15.240 A little bit of dissinflation visa v deflation right now, 0:11:15.320 --> 0:11:18.320 Sylvia Jablonsky, really great to have your take across Macro, 0:11:18.480 --> 0:11:20.920 and of course so Micro and Tesla CEO and CIO 0:11:21.360 --> 0:11:22.600 of Defiance ETF. 0:11:31.960 --> 0:11:33.880 Only a small percentage of our members are on the 0:11:33.920 --> 0:11:36.280 ads to here, even with the moves we just mentioned. 0:11:36.400 --> 0:11:38.360 Nice growth in the ads to here, but still off 0:11:38.400 --> 0:11:41.640 a small base, and we're really early in terms of 0:11:41.720 --> 0:11:45.000 paid sharing impacts including extra member for the reasons that 0:11:45.080 --> 0:11:47.640 Greg mentioned, that's going to build up over multiple quarters. 0:11:48.679 --> 0:11:49.400 That's a newman there. 0:11:49.440 --> 0:11:53.000 Netflix is CFO and trying to articulate why they're all 0:11:53.080 --> 0:11:56.079 so early in this shift towards an advertising model. That's 0:11:56.120 --> 0:11:59.200 continuing the conversation with Julie Alexander, director of strategy over 0:11:59.240 --> 0:12:01.400 at Parent Analysts, and it was a really interesting set 0:12:01.440 --> 0:12:04.000 of numbers. The fact that Netflix is down the most 0:12:04.040 --> 0:12:08.400 it's Eightril twenty twenty two. Clearly people had some anxiety 0:12:08.480 --> 0:12:10.360 around the fact that the revenue just doesn't seem to 0:12:10.400 --> 0:12:11.959 be following the uptick in subscriptions. 0:12:13.520 --> 0:12:15.079 Yeah, I think it speaks too. 0:12:15.200 --> 0:12:17.680 I mean, let's be clear, Netflix had a really great 0:12:17.800 --> 0:12:20.120 quarter when we're looking at Netflix's previous quarters. 0:12:20.400 --> 0:12:22.160 This is the kind of uptic that we are hoping 0:12:22.200 --> 0:12:23.000 to see from Netflix. 0:12:23.280 --> 0:12:25.360 But that softer revenue is concerning. 0:12:25.679 --> 0:12:28.040 It's only concerning if we think about this in terms 0:12:28.120 --> 0:12:31.520 of that ARM number, that average revenue permember. Other companies 0:12:31.559 --> 0:12:34.360 refer to this as typical RPO, that average revenue per user. 0:12:34.640 --> 0:12:36.840 And so we see that three percent decline year over year. 0:12:37.200 --> 0:12:39.400 Now that we know that as Netflix tries to onboard 0:12:39.440 --> 0:12:41.760 these new subscribers, right, so we see that nice subscriber 0:12:41.800 --> 0:12:44.000 growth in the most recent quarter. The question is what 0:12:44.120 --> 0:12:46.480 are revenue are they generating for these customers that now 0:12:46.640 --> 0:12:49.280 have different pricing options. They can come in at a 0:12:49.360 --> 0:12:52.240 cheaper add tier, which actually is better for Netflix overall. 0:12:52.320 --> 0:12:54.920 The ARM front because of that advertising revenue alongside the 0:12:54.960 --> 0:12:57.280 subscription review is really strong. But a lot of these 0:12:57.360 --> 0:13:00.319 countries where they're experimenting with the password sharing crack, and 0:13:00.360 --> 0:13:02.280 where they're looking at how to kind of increase their 0:13:02.280 --> 0:13:05.040 subscribers and leading into this immense demand that they see 0:13:05.080 --> 0:13:07.679 across their portfolio. The questions are these members coming in 0:13:07.840 --> 0:13:10.240 at a cheaper plan that maybe does not include subscribers 0:13:10.520 --> 0:13:13.360 We know that Netflix includes options, for example in Latin America, 0:13:13.600 --> 0:13:15.440 for some of these subscribers who are getting kicked off 0:13:15.480 --> 0:13:17.679 their parents' plans, are getting kicked off their friends'. 0:13:17.440 --> 0:13:19.199 Plans to go in and say, hey, I want to 0:13:19.200 --> 0:13:22.280 come in a cheaper tier for the service. 0:13:22.480 --> 0:13:25.240 And so how much revenue is Netflix really generating on 0:13:25.360 --> 0:13:28.160 average across these different subscribers is going to be the 0:13:28.320 --> 0:13:31.120 long term question. I think that's why you see Spencer 0:13:31.480 --> 0:13:34.439 and you see Greg and you see tests Rando's. The 0:13:34.520 --> 0:13:36.880 co CEOs, Greg Peters and teds Rando's speak to this 0:13:37.040 --> 0:13:40.360 really important aspect of pushing people towards the advertising tier, 0:13:40.640 --> 0:13:43.720 taking away certain plans like these basic ad free plans 0:13:43.800 --> 0:13:46.200 right and kind of moving into this idea of having 0:13:46.440 --> 0:13:50.000 a better position pricing power to really generate the revenue 0:13:50.040 --> 0:13:51.240 that they need, especially. 0:13:50.920 --> 0:13:52.640 As they kind of level out content spending. 0:13:52.960 --> 0:13:54.760 So JUDI they did do that of course in the 0:13:54.920 --> 0:13:59.040 UK and the US countries where people, of course canford 0:13:59.360 --> 0:14:01.760 they uptake, can decide Okay, I'll go for the AD 0:14:01.920 --> 0:14:04.240 supported cheap A model, or I'll have to pay more 0:14:04.600 --> 0:14:05.440 to get AD free. 0:14:05.760 --> 0:14:07.440 What do they do about emerging markets? 0:14:07.480 --> 0:14:10.200 How do they ensure that they can have the revenue 0:14:10.240 --> 0:14:12.920 they need from areas that they're still able to grow in. 0:14:13.160 --> 0:14:17.480 Ultimately, I think what's really smart about Netflix's plan, And 0:14:17.559 --> 0:14:19.720 let's be clear, I think there would actually be more 0:14:19.760 --> 0:14:23.800 of a concern if the ARM didn't change, in part 0:14:23.840 --> 0:14:26.680 because Netflix was not experimenting with its pricing power. I 0:14:26.720 --> 0:14:28.480 think the fact that Netflix is saying we're going to 0:14:28.560 --> 0:14:31.520 experiment with pricing power, We're going to experiment in markets 0:14:31.560 --> 0:14:34.080 that we know local content is really important, and we 0:14:34.240 --> 0:14:37.560 know that customers don't necessarily have the disposable income that 0:14:38.000 --> 0:14:41.000 customers in the US, the UK, Canada tend to have. 0:14:41.440 --> 0:14:43.000 We really want to figure out how we can be 0:14:43.120 --> 0:14:46.200 the local, dominant entertainment source and all these different countries 0:14:46.280 --> 0:14:48.880 right where Netflix is trying to monopolize attention is not 0:14:49.040 --> 0:14:51.200 just as the global distributor of one type. 0:14:51.000 --> 0:14:54.240 Of content, but being a local powerhouse and then sitting under. 0:14:54.080 --> 0:14:55.840 This global umbrella that is Netflix. 0:14:56.120 --> 0:14:58.360 And so when we think about that, what Netflix is 0:14:58.400 --> 0:15:00.640 really I think building is the s of having a 0:15:00.840 --> 0:15:03.800 prestige type of platform, a premium platform and then a 0:15:03.920 --> 0:15:07.200 casual platform, and the casual platform and the premium platform, 0:15:07.360 --> 0:15:10.760 unlike in other companies where that might be limited access 0:15:10.840 --> 0:15:12.600 to certain titles, whether that might be. 0:15:14.440 --> 0:15:17.280 The inability to actually access certain things on the platform. 0:15:17.320 --> 0:15:20.680 And think about how Peacock has Premium Plus, how HBO Max, 0:15:20.880 --> 0:15:23.760 how they differentiate between or now max rather how they 0:15:23.840 --> 0:15:27.560 differentiate between the ad free platform and the ad supported platform. 0:15:27.920 --> 0:15:30.600 Netflix is taking this into account of well, if we 0:15:30.680 --> 0:15:33.280 get if we get rid of these basic plants that 0:15:33.280 --> 0:15:35.920 don't have advertising, and we can make up that kind 0:15:36.000 --> 0:15:39.440 of average revenue per member by bringing people into that 0:15:39.520 --> 0:15:42.120 ad free plan, sorry, that ad supported plan, and then 0:15:42.160 --> 0:15:44.960 continuing to build upon that and actually bringing an additional revenue. 0:15:45.160 --> 0:15:45.800 Then in these. 0:15:45.680 --> 0:15:47.960 Markets where we can keep our pricing really low and 0:15:48.120 --> 0:15:52.160 see increased household penetration, especially in markets like in VR 0:15:52.200 --> 0:15:54.600 or parts of Europe where the linear and paid TV 0:15:54.720 --> 0:15:57.040 system is still pretty fundamental. 0:15:57.360 --> 0:15:59.760 These are countries where they don't necessarily need streaming. 0:16:00.200 --> 0:16:02.920 Internet access is still being developed in many ways, or 0:16:02.960 --> 0:16:05.280 they're still kind of moving on to those types of plans. 0:16:05.560 --> 0:16:07.720 Netflix is saying, we know that we need to penetrate, 0:16:07.760 --> 0:16:10.040 and we know that that is our first goal. You'll 0:16:10.040 --> 0:16:12.240 got a country like India where they're seeing strong penetration, 0:16:12.360 --> 0:16:15.080 but they're taking it at a stronger loss on the 0:16:15.120 --> 0:16:15.760 revenue front. 0:16:15.960 --> 0:16:19.520 And unlike Disney, who's who's suggesting with Bob Buyer's recent. 0:16:19.320 --> 0:16:21.560 Comments, we might move out of this market a little bit, 0:16:21.800 --> 0:16:24.080 you have Netflix saying we really want to double down. 0:16:24.360 --> 0:16:28.280 How can we use two different pricing power plans globally 0:16:28.560 --> 0:16:30.680 to ensure that our revenue does not kind of see 0:16:30.720 --> 0:16:33.680 these consistent slowdowns as we bring on these new customers. 0:16:33.840 --> 0:16:38.560 Juday, what about content, Because what's interesting is is perhaps 0:16:38.920 --> 0:16:41.040 Netflix less exposed to some of the strikes here in 0:16:41.040 --> 0:16:43.840 the United States because they can make much more content 0:16:44.080 --> 0:16:46.000 locally in these local markets. 0:16:47.280 --> 0:16:47.480 Yeah. 0:16:47.520 --> 0:16:49.320 I mean, you know, just some quick data points from 0:16:49.360 --> 0:16:51.880 our firm, parent Analytics. You know, Netflix leads the pack 0:16:51.920 --> 0:16:54.600 when it comes to on platform demand share, and what 0:16:54.760 --> 0:16:58.640 that really suggests to us is this ability to retain customers. 0:16:58.840 --> 0:17:01.360 This idea that when people are looking at an entire 0:17:01.440 --> 0:17:05.119 platform across original licensed programming, rarely spending the majority of 0:17:05.160 --> 0:17:05.560 their time. 0:17:05.840 --> 0:17:08.520 Netflix has actually beaten out Hulu in Q one twenty 0:17:08.600 --> 0:17:09.080 twenty three. 0:17:09.320 --> 0:17:11.879 In Q two it beat out HBO Max again now 0:17:11.960 --> 0:17:15.000 Max and with those combined Discovery plus Max assets, and 0:17:15.080 --> 0:17:17.840 so Netflix still is kind of the home in many ways, 0:17:17.960 --> 0:17:20.160 especially in the United States, to a lot of these customers. 0:17:20.760 --> 0:17:24.120 Where Netflix is most insulated is that Netflix has two 0:17:24.640 --> 0:17:27.320 or three main advantages. It has this global pipeline, and 0:17:27.359 --> 0:17:30.080 we've seen demand for global content to increase. Now, I 0:17:30.160 --> 0:17:32.440 want to be very clear here, the story of squid 0:17:32.520 --> 0:17:35.760 games should not be that Netflix can create global hits 0:17:35.800 --> 0:17:37.680 on the fly. It should be that they can create 0:17:37.760 --> 0:17:39.960 really strong local hits that might be able to find 0:17:40.040 --> 0:17:44.040 audiences outside of those territories and therefore increase the revenue 0:17:44.080 --> 0:17:45.760 that they that they originally had planned for that. 0:17:46.440 --> 0:17:48.880 And so if we think about we'll have to wrap 0:17:48.920 --> 0:17:49.159 it up. 0:17:49.240 --> 0:17:51.639 We've loved there's so much meat to the bones of 0:17:51.680 --> 0:17:54.840 everything that you're bringing in terms of your proprietary data 0:17:54.880 --> 0:17:57.480 and analytics, and we'll get into it a lot more later. 0:17:57.640 --> 0:17:59.640 But thank you so much that that was a very 0:18:00.080 --> 0:18:02.480