WEBVTT - Instant Reaction: Netflix Posts Record Quarter

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news, Netflix shares soaring after

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<v Speaker 1>they boosted their revenue out look. Carol, One thing that's

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<v Speaker 1>kind of surprising to me, which part is the first

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<v Speaker 1>quarter outlook doesn't seem to be affecting the way the

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<v Speaker 1>stock is moving. First quarter operating income therefore projecting two

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<v Speaker 1>point nine to four billion, analysts wanted to see three

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<v Speaker 1>point one three billion dollars. First quarter operating margin expected

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<v Speaker 1>to be twenty eight point two percent. Analysts wanted to

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<v Speaker 1>see twenty nine zero point eight percent.

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<v Speaker 2>Maybe they're looking at the twenty twenty two revenue overall

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<v Speaker 2>and looking at the big number versus kind of the breakdown.

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<v Speaker 1>See revenue projections coming in light, first quarter EPs coming

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<v Speaker 1>in light. I guess you are shrugging that off.

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<v Speaker 2>But they see twenty twenty five revenue maybe a little

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<v Speaker 2>bit better than what was initially expected. So maybe that's

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<v Speaker 2>the hope.

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<v Speaker 3>I don't know.

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<v Speaker 2>Let's see what Caroline Hind has to say. She's co

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<v Speaker 2>host of Bloomberg Technology and she joins us. Now, Caroline,

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<v Speaker 2>I mean, there's also the buyback in shares. But Netflix

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<v Speaker 2>just soaring in the aftermark.

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<v Speaker 4>What a way to close out your subscriber numbers, because

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<v Speaker 4>this is the last time we ever get them. The

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<v Speaker 4>last quarter of subscriber numbers an absolute blowout, as you say,

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<v Speaker 4>coming in double where the expectations have been of eighteen million,

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<v Speaker 4>and they've added an on net forty one million.

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<v Speaker 5>More people around the world over the course of this year.

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<v Speaker 4>I mean, this is better than they did during twenty

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<v Speaker 4>twenty in the onset of COVID, when we were all

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<v Speaker 4>suddenly trapped in our homes and had nothing else to.

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<v Speaker 5>Do but to switch on and pay for Netflix.

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<v Speaker 4>Extraordinary numbers, And I think, Carol, what you're saying is

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<v Speaker 4>really president the fact that they're looking to a full

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<v Speaker 4>year that still looks so strong. Operating margin going to

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<v Speaker 4>live up to twenty nine percent. I hear you, Tim

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<v Speaker 4>on the fiscal first quarter perhaps looking a little bit light.

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<v Speaker 4>But remember this is a company that promised us for advertising,

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<v Speaker 4>which has been slow to bear fruit.

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<v Speaker 5>Isn't actually going to give.

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<v Speaker 4>Us a real substantiate and financial hit and oop until

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<v Speaker 4>twenty twenty six.

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<v Speaker 5>But already you're seeing.

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<v Speaker 4>Those dividends, Already you're seeing people pile into the advertising product.

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<v Speaker 4>And thank you to j Paul, to Mike Tyson, to

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<v Speaker 4>be on because this is where it's at.

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<v Speaker 5>It seems to be live programming. What are you winning

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<v Speaker 5>it for?

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<v Speaker 1>Yeah, I was gonna say no boxing matches or Beyonce

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<v Speaker 1>happening during the pandemic either. So maybe that's one of

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<v Speaker 1>the big shifts. Someone, do you want to bring in?

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<v Speaker 1>Getha ranganathen technology and media analysts for Bloomberg Intelligence. Just

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<v Speaker 1>to repeat some of these headlines here, Netflix shares are

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<v Speaker 1>soaring more than a ten percent. They boosted their twenty

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<v Speaker 1>twenty five revenue outlook. They added eighteen point nine one

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<v Speaker 1>million dollars a million excuse me, net paid streaming users

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<v Speaker 1>in the fourth quarter. Estimates were for nine point one

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<v Speaker 1>point eight so more than doubling it there, Githa, You've

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<v Speaker 1>had about ten minutes to look at these results. What

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<v Speaker 1>jumps out to you?

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<v Speaker 5>Yeah?

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<v Speaker 3>Everything? Really everything what you just pointed out. You know,

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<v Speaker 3>the one thing that we were worried about coming into

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<v Speaker 3>this quarter was whether they were going to take down

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<v Speaker 3>their revenue expectations just kind of given the strength and

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<v Speaker 3>the dollar, but they actually boosted that and you know,

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<v Speaker 3>you talked about the live sports being such a big

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<v Speaker 3>part of this eighteen point nine million subscriber blowout, and

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<v Speaker 3>it's going to be interesting to see how they go

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<v Speaker 3>ahead with both criber acquisition and retention. So they do

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<v Speaker 3>have WWE programming that came on, you know, starting January

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<v Speaker 3>of this year, and that's a really interesting retention strategy

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<v Speaker 3>because you do do have that programming kind of come

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<v Speaker 3>in a week in and week out, and so it's

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<v Speaker 3>going to be interesting to see how they kind of

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<v Speaker 3>shape the conversation forward. The one big thing that you know,

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<v Speaker 3>everybody was kind of looking at and you know, we

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<v Speaker 3>still haven't gotten any inkling about is the price hikes.

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<v Speaker 3>So that's again another big positive lever that they have

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<v Speaker 3>to pull sometime through this year, especially kind of given

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<v Speaker 3>that this is going to be their strongest ever content

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<v Speaker 3>pipeline year twenty twenty five with all of their you know,

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<v Speaker 3>hit shows returning.

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<v Speaker 2>Hey, before we go back to Caroline, I have one

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<v Speaker 2>question for you, Geita. I mean this, you know, the

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<v Speaker 2>live sports programming, the live programming in general, it's expensive,

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<v Speaker 2>isn't it. So that's a lot of pressure that I mean,

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<v Speaker 2>Netflix really has to make sure that they've got the

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<v Speaker 2>eyeballs that make it pay off.

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<v Speaker 3>It did pay off for them, so just let's just

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<v Speaker 3>take the NFL for instance, they spent about seventy five

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<v Speaker 3>million dollars per game. We estimate that they brought in

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<v Speaker 3>well over one hundred million just an AD revenue, and

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<v Speaker 3>then think of all of those additional subscribers that they got.

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<v Speaker 3>So this is paying off for them big time. So

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<v Speaker 3>they're making it. The content investments are definitely big, but

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<v Speaker 3>they're pretty disciplined, Carol, and I think the ROI they're

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<v Speaker 3>going to find is really really good as well.

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<v Speaker 1>Hey, Carolyn, to that point, Netflix certainly the early mover

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<v Speaker 1>when it comes to this. I think it's fair to

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<v Speaker 1>say they certainly invented a category here. But since then

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<v Speaker 1>you've had companies like Max, Paramount, Peacock from NBC Universal

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<v Speaker 1>all come out with their own streaming products to much

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<v Speaker 1>less success. Disney, of course, we've got to throw that

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<v Speaker 1>one in there as well. What is Netflix doing so

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<v Speaker 1>well that the other companies are not necessarily doing.

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<v Speaker 5>Very good? Point and leaving them the dust.

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<v Speaker 4>I mean, Leatha's numbers is so stand out when you

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<v Speaker 4>think about this is a company with three hundred million

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<v Speaker 4>subscribers worldwide, leaving Disney just way behind, less than half

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<v Speaker 4>of what they've currently been able to crow about.

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<v Speaker 5>But I think it's just the heavy mix.

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<v Speaker 4>Of being able to offer you the right content at

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<v Speaker 4>the right time and the right price format. They're making

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<v Speaker 4>big inroads into Latin America and into Europe as well

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<v Speaker 4>as into the United States.

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<v Speaker 5>Which really surprised me.

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<v Speaker 4>Was how strong the US and Canada are in the

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<v Speaker 4>face of those price heights. But I think most notably

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<v Speaker 4>it is the fact that they keep on delivering, whereas

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<v Speaker 4>it's carry On is a great movie that people have

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<v Speaker 4>flocked to, whether it's these ongoing franchises that people cannot

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<v Speaker 4>get enough of Wednesdays coming out with more, we're going

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<v Speaker 4>to be getting.

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<v Speaker 5>A new stranger things.

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<v Speaker 4>These are people that a lot loaded on these particular

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<v Speaker 4>types of content and the genre that they feel so

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<v Speaker 4>comfortable with. And I wonder, and it's one more for

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<v Speaker 4>Geetha really is how much we're going to see cyclical

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<v Speaker 4>nature of.

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<v Speaker 5>People signing on and signing off when it comes to sports,

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<v Speaker 5>because that is.

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<v Speaker 4>What is that the behest and what has so been

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<v Speaker 4>the issue for the likes of Warner Brothers and Disney

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<v Speaker 4>is that you basically turn on when it's your season

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<v Speaker 4>and then you switch.

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<v Speaker 5>Off again and you have this huge jump starts in numbers.

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<v Speaker 4>All were going to see that consistency when you do

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<v Speaker 4>have the deals of rule for example, ps my producer

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<v Speaker 4>Jackie absolutely loves.

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<v Speaker 5>The new role. So ass you say they're winning on

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<v Speaker 5>the WWE front, Keitha.

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<v Speaker 2>Come on in on that talk to us about the

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<v Speaker 2>cyclical cyclicality or not nature of sports.

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<v Speaker 5>Yeah.

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<v Speaker 3>No, that's a great point that Caroline brought up, and

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<v Speaker 3>we've seen that happen every time during football season, right,

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<v Speaker 3>people just sign up for all these services and then

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<v Speaker 3>after the Super Bowl you have so much of this

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<v Speaker 3>what is called churn and burned.

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<v Speaker 4>Right.

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<v Speaker 3>But that's where I think Netflix is going to do

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<v Speaker 3>things a little bit differently. So they're going to use

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<v Speaker 3>a combination of these big, splashy events think of you know,

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<v Speaker 3>Tyson versus Paul or even the NFL games where you know,

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<v Speaker 3>you can go out and acquire all this huge bunch

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<v Speaker 3>of subscribers, and then you have you know, consistent weekly

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<v Speaker 3>programming like WWE. The next thing that's really coming up

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<v Speaker 3>for renewal is UFC, which is again year round programming,

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<v Speaker 3>which then you know, forces people to come back week

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<v Speaker 3>after week to watch their favorite shows, and I think

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<v Speaker 3>that's how they're going to They've always kind of strived

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<v Speaker 3>for this nice mix, you know, whether it's English non

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<v Speaker 3>English content, you know, whether it's licensed original content, and

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<v Speaker 3>now it's going to be you know, kind of this

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<v Speaker 3>live sports, the one off events versus you know that

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<v Speaker 3>year round programming.

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<v Speaker 1>Githa, before we let you go, you're an analyst for

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<v Speaker 1>Bloomberg Intelligence. You cover technology and media. You like having

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<v Speaker 1>more data rather than less data. Unfortunately, you're going to

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<v Speaker 1>get less data from Netflix moving forward because they're not

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<v Speaker 1>going to report this customer metric anymore. What are you

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<v Speaker 1>going to use to back out that figure? What should

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<v Speaker 1>we be looking at?

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<v Speaker 3>Yeah, definitely, I mean revenue is how they have been

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<v Speaker 3>kind of training as revenue growth is going to be

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<v Speaker 3>the big number going forward. It's going to be interesting

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<v Speaker 3>to see if they give any metrics tim around advertising

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<v Speaker 3>at all, because we will kind of need that a

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<v Speaker 3>little bit to see if that add our poo number

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<v Speaker 3>is climbing up or not. But yeah, we're going to

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<v Speaker 3>have to make some guestimates in terms of subscriber numbers.

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<v Speaker 3>But yes, revenue and operating margin, I think those are

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<v Speaker 3>going to be the major metrics that investors are going

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<v Speaker 3>to be focused on going forward.

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<v Speaker 2>Hey, before we go, Caroline, I did want to get

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<v Speaker 2>you to weigh in on We are anticipating an announcement

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<v Speaker 2>by President Trump and building artificial intelligence infrastructure here in

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<v Speaker 2>the United State. It's a big joint venture. We've seen

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<v Speaker 2>some stacks like Oracle move on it. What do we

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<v Speaker 2>know or what might we expect?

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<v Speaker 5>It's so interesting, isn't it?

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<v Speaker 4>Because it was but a few weeks ago that Masayoshi's

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<v Speaker 4>son was on stage with Trump congratulating him on his

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<v Speaker 4>presidential win and promising one hundred million dollars into AI infrastructure.

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<v Speaker 4>And here we get it, one hundred million maybe going

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<v Speaker 4>up to five hundred million dollars with soft Bank, open

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<v Speaker 4>Ai and Oracle. There are so many questions here because

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<v Speaker 4>what Oracle is going to be stealing some of Microsoft's

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<v Speaker 4>lunch here? Because remember open Ai tends to depend on

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<v Speaker 4>Microsoft for its cloud infrastructure at the moment. But we

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<v Speaker 4>understand from reporting of our own colleagues that there's been

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<v Speaker 4>some frustration by open Ai and Microsoft not being able

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<v Speaker 4>to build out as quickly as enough as they would

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<v Speaker 4>like and having to go elsewhere for their compute power

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<v Speaker 4>for their latest large language models. This is exactly what

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<v Speaker 4>the President now wants to be laying out money coming in,

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<v Speaker 4>particularly from the foreign investment like SoftBank, and committing to

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<v Speaker 4>building infrastructure here in the United States, and remember it's

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<v Speaker 4>going to have to have the energy that goes alongside it.

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<v Speaker 4>But big move for Oracle Stock, big important cloud growth

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<v Speaker 4>driver for them. But also really interesting tie up between SoftBank,

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<v Speaker 4>which has been taking more and more of a stake

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<v Speaker 4>in open Ai by buying up some of those shares

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<v Speaker 4>on the private market and tender office coming from employees

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<v Speaker 4>and indeed leaving me with questions about Microsoft. But we

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<v Speaker 4>do anticipate that unveiling at the White House today.

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<v Speaker 2>All right, looking forward to that great setup for us

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<v Speaker 2>as we anticipate that in great analysis from both of you.

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<v Speaker 2>When it comes to Netflix, we are watching the stock

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<v Speaker 2>continuing to trade soaring really in the aftermarket, up about

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<v Speaker 2>eleven percent as we speak. Our thanks to Caroline High,

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<v Speaker 2>co host of Bloomberg Technology, and of course our Githa

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<v Speaker 2>Rang andath On. She is technology and media analyst for

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<v Speaker 2>Bloomberg Intelligence. We'll all be reading her research