WEBVTT - Netflix Crushes Subscriber Estimates: Reaction and Analysis 0:00:02.440 --> 0:00:06.800 Bloomberg Audio Studios, podcasts, radio News. 0:00:07.040 --> 0:00:09.039 This was a blowout number. I can feel like it 0:00:09.160 --> 0:00:12.560 shocked all of us. First quarter streaming paid net change 0:00:12.680 --> 0:00:15.200 in terms of the subscribers up nine point three to 0:00:15.320 --> 0:00:18.760 three million. Timmy estimate was four point eight four million. 0:00:18.920 --> 0:00:21.400 That's not the only beat. First quarter EPs coming at 0:00:21.440 --> 0:00:23.639 five dollars and twenty eight cents per share. Estimates were 0:00:23.680 --> 0:00:26.400 for four dollars and fifty two cents. The company also 0:00:26.560 --> 0:00:29.960 out with second quarter EPs the guidance four sixty eight 0:00:30.000 --> 0:00:33.240 versus estimates of four to fifty four, and then another 0:00:33.240 --> 0:00:35.479 big headline. We should note they're going to end reporting 0:00:35.600 --> 0:00:38.320 quarterly membership numbers next year. We got a great group 0:00:38.400 --> 0:00:39.920 of folks with us right now to help us break 0:00:39.920 --> 0:00:42.599 down these numbers. Paul Sweeney is co host of Bloomberg Surveillance. 0:00:42.600 --> 0:00:44.200 He joins us on the phone from New Jersey. Paul 0:00:44.240 --> 0:00:46.760 spent thirty years as a media analyst, also with US 0:00:46.760 --> 0:00:49.760 as Bloomberg News earnings reporter Red Brown. Hey, Paul, I 0:00:49.800 --> 0:00:51.120 want to start with you, because I got to tell you, 0:00:51.360 --> 0:00:54.760 I'm pretty surprised by the reaction to these numbers, considering 0:00:54.800 --> 0:00:57.520 they were it was such a blowout quarter Why do 0:00:57.520 --> 0:00:59.640 you think the stock is moving lower in the after hours. 0:01:00.240 --> 0:01:02.120 Yeah, I think it's a little bit by the rumor. Still, 0:01:02.160 --> 0:01:04.200 the news people have been hyping up this quarter as 0:01:04.200 --> 0:01:07.280 a really big quarter because you know, the paid subscription 0:01:07.480 --> 0:01:09.959 was going to fuel subscriber growth. Yet again, you're that 0:01:10.040 --> 0:01:12.640 a big beat on subs last quarter. Some the stock 0:01:12.720 --> 0:01:15.959 was up about twenty five percent since they reported in January, 0:01:15.959 --> 0:01:17.880 so it's probably just taking back some of those games. 0:01:17.880 --> 0:01:20.559 But you know, across the board, the subscriber numbers really 0:01:20.640 --> 0:01:23.840 really were impressive. One thing to note about that big 0:01:23.880 --> 0:01:25.920 subscriber beat to the last couple of quarters. These are 0:01:26.000 --> 0:01:29.400 kind of short term phenomena, as you know, they the 0:01:29.400 --> 0:01:32.720 people that were sharing accounts now are paying for their owns, 0:01:32.560 --> 0:01:35.560 and that'll fade out over the next several quarters and 0:01:35.800 --> 0:01:38.479 then the focus will become, i think, on the advertising 0:01:38.560 --> 0:01:40.240 side of the business as well. 0:01:40.520 --> 0:01:42.840 Yeah, it's interesting. Do you care, Paul to hear that 0:01:42.840 --> 0:01:45.600 they're going to end reporting quarterly membership numbers next year? 0:01:45.920 --> 0:01:47.480 It feels like it's something we focus on. 0:01:47.600 --> 0:01:50.680 Yeah, yeah, it really is, and that quite frankly, that 0:01:50.720 --> 0:01:54.160 had been the primary driver of this stock really since 0:01:54.240 --> 0:01:57.600 it switched to this digital streaming format. That was the 0:01:57.760 --> 0:02:00.600 metric that moved this stock. The company really wants to 0:02:00.640 --> 0:02:03.600 get away from that and get more towards Hey, guys, 0:02:03.680 --> 0:02:06.840 just view us as you would any other company stock. 0:02:06.880 --> 0:02:09.880 Look at revenue, look at cash flow, look at profitability, 0:02:10.240 --> 0:02:12.320 all those types of things, and let's focus less on 0:02:12.440 --> 0:02:15.640 subscriber growth because quite frankly, we pretty much got pretty 0:02:15.720 --> 0:02:17.920 much everybody that's out there, So it's really not so 0:02:17.960 --> 0:02:20.359 much as a subscriber story. It's more how much money 0:02:20.360 --> 0:02:21.519 can we make off each subscriber? 0:02:21.600 --> 0:02:23.040 Paul one one more to you. And then I want 0:02:23.040 --> 0:02:25.360 to bring in Red Brown, our earnings reporter, who's been 0:02:25.360 --> 0:02:28.800 watching these numbers closely. Why would a company? Is there 0:02:28.840 --> 0:02:31.680 any positive way to read into a company like Netflix? 0:02:31.760 --> 0:02:34.519 No longer reporting this? I mean, no question, the more 0:02:34.600 --> 0:02:37.560 data for investors the better. Is this a negative? This 0:02:37.639 --> 0:02:38.520 is a negative sign? 0:02:38.560 --> 0:02:38.640 No? 0:02:39.400 --> 0:02:41.720 Oh yeah, I think I think for an investor in 0:02:41.760 --> 0:02:45.359 an analyst, you always want more information, particularly when it's 0:02:45.400 --> 0:02:49.080 critical information in terms of what drives the growth of 0:02:49.120 --> 0:02:51.480 the business. And it's obviously just it's subscribers and how 0:02:51.560 --> 0:02:54.480 much revenue you dandergenerate off each subscriber. It's pretty simple. 0:02:54.639 --> 0:02:56.240 So I need take one of those data points away. 0:02:56.480 --> 0:02:59.360 But we've seen other companies in other industries do that, 0:03:01.000 --> 0:03:04.200 subscriber based industries. They try to get you away from 0:03:04.200 --> 0:03:07.200 that number and get you back to where are Look 0:03:07.480 --> 0:03:09.799 how they are managing the business, and what they're telling 0:03:09.880 --> 0:03:12.560 you is we're not managing the business to maximize subscriber 0:03:12.639 --> 0:03:15.120 with We're managing the business to maximize revenue and profit 0:03:15.600 --> 0:03:19.399 per user. That's our management focus and that's how we 0:03:19.440 --> 0:03:20.920 look at it, and that's how we think you should 0:03:20.960 --> 0:03:21.360 look at it. 0:03:21.480 --> 0:03:23.320 Red Brown, come on in on it. We talk earnings 0:03:23.320 --> 0:03:25.800 with you all the time. You know, I'm watching Netflix 0:03:25.840 --> 0:03:29.320 shares that have been bouncing around in the aftermarket, a 0:03:29.320 --> 0:03:31.400 lot of moves right now. The stocks still lower down 0:03:31.400 --> 0:03:32.560 about three and a half percent. 0:03:33.200 --> 0:03:35.480 Yeah, I mean, I think what might be explaining a 0:03:35.480 --> 0:03:37.240 little bit of the negative movement too, is we saw 0:03:37.280 --> 0:03:41.040 them actually boost their full year outlook for operating margin. 0:03:41.360 --> 0:03:44.880 They beat EPs in the first quarter. They their guidance 0:03:44.880 --> 0:03:46.920 to the second quarter was ahead of estimates as well. 0:03:47.640 --> 0:03:49.000 But it seems like there's a little bit of a 0:03:49.000 --> 0:03:51.800 disconnect between the full year number. If you know, those 0:03:51.840 --> 0:03:54.720 two pretty healthy beats are not translating to the full year, 0:03:55.720 --> 0:03:59.280 analysts investors might start to question maybe where in the 0:03:59.440 --> 0:04:01.200 back half of the year is are things starting to 0:04:01.200 --> 0:04:03.720 slow down as well? So I think that might also 0:04:03.760 --> 0:04:05.600 be factoring in here a little bit to the to 0:04:05.640 --> 0:04:07.280 the negative price movement we're seeing. 0:04:07.400 --> 0:04:08.960 Let's speak a little bit to what Paul was saying, 0:04:08.960 --> 0:04:10.760 and I think it's a good point that we talked 0:04:10.800 --> 0:04:13.240 about it earlier. Just you know, this stock has been 0:04:13.280 --> 0:04:16.320 on fire this year, and you know, it looks like 0:04:16.360 --> 0:04:19.040 the numbers are are pretty upbeat, but it has been 0:04:19.120 --> 0:04:22.960 such an outperformer this year, and I just do wonder 0:04:22.960 --> 0:04:24.360 how much of that is at play as well. 0:04:24.680 --> 0:04:27.120 Yeah, I mean, if you look at what analysts are 0:04:27.720 --> 0:04:29.680 rating for the stock, that it's kind of topped out 0:04:29.720 --> 0:04:33.000 at the analyst ratings point at this point. So you know, 0:04:33.360 --> 0:04:36.960 even with these really impressive numbers, maybe the it's just 0:04:37.040 --> 0:04:39.719 kind of a hit hit its ceiling for the time being. 0:04:40.000 --> 0:04:42.560 Hey, Red, it's so interesting, you know, I was saying 0:04:42.560 --> 0:04:44.760 as we were going into our Beyond the Bell our 0:04:45.480 --> 0:04:47.880 coverage with TV as we you know, waited for these 0:04:47.880 --> 0:04:50.520 Netflix earnings, I was saying, you know, this could really 0:04:50.560 --> 0:04:52.839 set the tone for the quarter for a lot of 0:04:52.839 --> 0:04:54.960 the consumer tech companies that are set to report in 0:04:55.000 --> 0:04:58.359 the coming weeks, and yet yet we get a blowout 0:04:58.440 --> 0:05:00.880 number pretty much across the board, and we see a 0:05:00.920 --> 0:05:02.720 negative reaction like this, and I'm wondering how we can 0:05:02.760 --> 0:05:04.320 extrapolate this beyond Netflix. 0:05:04.760 --> 0:05:07.440 Yeah, it's a good question. I mean, people have been 0:05:07.480 --> 0:05:09.880 really focused on earnings this quarter, and a lot of 0:05:09.960 --> 0:05:12.159 analysts are saying, you know, focus on the numbers, don't 0:05:12.160 --> 0:05:15.320 buy unto the hype and has really big implications for 0:05:15.480 --> 0:05:19.200 the stock market at general at the moment. So I 0:05:19.200 --> 0:05:21.760 don't know if people kind of are on edge and 0:05:21.800 --> 0:05:25.000 looking for any excuse to sell at the moment. Yeah, 0:05:25.000 --> 0:05:28.599 it could paint a pessimistic picture for the remainder of 0:05:28.640 --> 0:05:29.920 the quarter here, probably for us. 0:05:30.000 --> 0:05:31.880 Paul Sweenie, come on back in here. I'm just thinking, 0:05:31.920 --> 0:05:33.560 you know, we're getting ready for the analyst calls, and 0:05:33.560 --> 0:05:34.799 I feel like there's going to be a fair amount 0:05:34.800 --> 0:05:37.359 of questions, especially as you see the stock kind of 0:05:37.360 --> 0:05:39.600 bouncing around here. What's kind of the top one or 0:05:39.600 --> 0:05:41.520 two questions that you would want to be putting up 0:05:41.839 --> 0:05:42.480 on that call. 0:05:43.480 --> 0:05:46.200 Yeah, one revenue and one cost question. The revenue side 0:05:46.240 --> 0:05:50.119 is talk to us about the advertising component how well 0:05:50.200 --> 0:05:53.240 is that catching on with subscribers. How many subscribers are 0:05:53.320 --> 0:05:56.400 going to the advertising tier and that's a big thing 0:05:56.360 --> 0:05:58.200 because that's gonna be one of the drivers going forward. 0:05:58.400 --> 0:05:59.960 And then a second one on the call side is 0:06:00.279 --> 0:06:02.919 where are we on our programming budget? You need to 0:06:02.920 --> 0:06:06.120 spend more to drive more subscriber growth? Or or is 0:06:06.160 --> 0:06:08.040 a company and a good level of spend because if 0:06:08.040 --> 0:06:10.359 they are at a good level of spend, boy, the 0:06:10.400 --> 0:06:13.719 profits just really start churning for this company and the 0:06:13.760 --> 0:06:14.760 free cash flow as well. 0:06:14.800 --> 0:06:16.440 I do want to bring in some of the advertising 0:06:16.480 --> 0:06:19.240 information that you mentioned, Paul in the letter. The company 0:06:19.520 --> 0:06:21.720 did come out and say that ADS membership grew sixty 0:06:21.720 --> 0:06:24.880 five percent quarter on quarter after rising nearly seventy percent 0:06:24.920 --> 0:06:27.800 sequentially in each of Q three twenty three and Q 0:06:27.880 --> 0:06:31.000 four twenty three. They're also saying that over forty percent 0:06:31.040 --> 0:06:33.360 of all sign ups in our ads markets, remember it's 0:06:33.400 --> 0:06:36.320 not fully rolled out, are coming from our ads plan 0:06:36.920 --> 0:06:40.840 for advertisers. The companies focusing on measurement solutions, including new 0:06:40.839 --> 0:06:44.600 partnerships with Kantar and Lucid for brand awareness and recall, 0:06:44.640 --> 0:06:47.480 and then Nielsen Catalina solutions for sales lift Paul, I 0:06:47.520 --> 0:06:49.000 don't have to tell you because you've been covering this 0:06:49.040 --> 0:06:51.640 for years. How wild is it for us to talk 0:06:51.640 --> 0:06:54.039 about Netflix and measurement because this is a company that 0:06:54.120 --> 0:06:56.400 for years was like, we don't care about ratings, We're 0:06:56.400 --> 0:06:58.120 never going to share any numbers. We're never going to 0:06:58.120 --> 0:07:00.520 do ads, never, never, never, And here they are talking 0:07:00.520 --> 0:07:03.880 about yis Yeah, exactly, this is crazy. 0:07:04.560 --> 0:07:06.960 It's a great point. They're going to have to start 0:07:07.279 --> 0:07:11.160 the disclosing audience levels of some degree. But we already 0:07:11.200 --> 0:07:13.720 know that the advertising video on demand model is a 0:07:13.840 --> 0:07:18.600 very successful model. Advertisers are switching some linear TV broadcasting 0:07:18.600 --> 0:07:22.440 cable to the more digital platforms, and they've been itching 0:07:22.600 --> 0:07:26.000 to get to the streaming base of Netflix. So there 0:07:26.040 --> 0:07:29.720 will be a lot of advertisers demand. And you know, 0:07:30.280 --> 0:07:32.520 Netflix is going to have to provide the advertisers and 0:07:32.560 --> 0:07:35.000 their agencies with some data the consistent they can just 0:07:35.040 --> 0:07:36.960 get a sense of pricing and value. 0:07:37.240 --> 0:07:37.640 Yeah, you know. 0:07:37.680 --> 0:07:40.080 And the other thing is like I'm thinking about content, right, 0:07:40.160 --> 0:07:42.720 you know, original content versus licensing. And when we were 0:07:42.720 --> 0:07:44.680 talking with Githa rang an ant On earlier, she said, 0:07:44.680 --> 0:07:47.360 you know, one of the upsides is that they are 0:07:47.440 --> 0:07:48.840 you know, doing a lot of licensing deals. 0:07:48.840 --> 0:07:49.480 They had suits. 0:07:49.760 --> 0:07:51.600 They just did something with Sex and the City that's 0:07:51.680 --> 0:07:53.720 just coming out. I mean, when you think about it, 0:07:53.800 --> 0:07:56.120 Paul as an analyst and somebody who understands the space, 0:07:56.200 --> 0:07:59.080 I mean, cheaper to do a licensing deal versus creating 0:07:59.080 --> 0:08:00.000 that original content. 0:08:01.160 --> 0:08:04.920 It is generally speaking, it is much cheaper to license 0:08:05.000 --> 0:08:07.480 the show than to create it, particularly the shows that 0:08:07.600 --> 0:08:11.600 they make, which are extraordinarily high quality, and they have 0:08:11.800 --> 0:08:14.800 very big budgets and other good and that's the that's 0:08:14.840 --> 0:08:17.400 the investment part. The good is is it does drive 0:08:17.480 --> 0:08:20.240 subscriber growth. So I think most investors would say that's 0:08:20.240 --> 0:08:23.000 a good investment to make in original programming. But you 0:08:23.080 --> 0:08:25.480 got to find a balance here and so, and that's 0:08:25.440 --> 0:08:26.920 the same. And that's true for the media companies. They 0:08:26.920 --> 0:08:29.680 have to find a balance on what they licensed to 0:08:29.680 --> 0:08:31.680 Netflix and what they keep on their own streaming services. 0:08:32.320 --> 0:08:34.640 Red Let's say you had a chance to ask management 0:08:34.679 --> 0:08:36.960 a question today on the call that's coming up. What 0:08:37.080 --> 0:08:37.720 do you want to hear about. 0:08:37.800 --> 0:08:39.680 Yeah, I mean we're talking about programming and what's going 0:08:39.760 --> 0:08:41.440 to be driving growth in the future. I think there's 0:08:41.440 --> 0:08:44.440 a big question around sports. Yeah, what what what level 0:08:44.480 --> 0:08:47.200 of investment are they planning on putting in that that area. 0:08:47.320 --> 0:08:51.280 We know it's highly competitive, it's really crowded, it's very expensive. 0:08:52.000 --> 0:08:53.920 They are kind of stipping their toe in with some 0:08:53.960 --> 0:08:56.640 of these combat sports. But yeah, it would be w 0:08:56.880 --> 0:08:59.960 E WWE the Jake Paul and Mike Tyson fight later 0:09:00.040 --> 0:09:02.600 this summer. We will want to hear kind of what 0:09:02.679 --> 0:09:04.800 is their strategy. They've been on the sidelines for a 0:09:04.840 --> 0:09:08.040 while now, and you know, have they been able to 0:09:08.080 --> 0:09:11.960 see the mess that sports streaming has been from, you know, 0:09:12.000 --> 0:09:14.000 paying billions and millions of dollars? Do they have a 0:09:14.000 --> 0:09:16.640 different strategy like they have in so many other cases 0:09:16.880 --> 0:09:17.640 in the market. 0:09:18.120 --> 0:09:20.640 I do wonder too, And I'm just looking at something 0:09:20.679 --> 0:09:23.400 like a Walt Disney in the aftermarket, and obviously it's 0:09:23.400 --> 0:09:25.800 not just about streaming. It's just down slightly down about 0:09:25.800 --> 0:09:30.400 one tenth of one percent here, Warner Brothers, Discovery, same story. 0:09:30.440 --> 0:09:32.080 I mean, Paul, is there anything that you kind of 0:09:32.080 --> 0:09:35.040 extrapolgalate when you look at something like a Netflix and 0:09:35.080 --> 0:09:36.640 then what it means for some of the other streaming 0:09:36.720 --> 0:09:37.839 services that are out there. 0:09:38.600 --> 0:09:41.320 I think it's actually all net positive, which is it 0:09:41.440 --> 0:09:44.920 just shows you the strength of the streaming business model. 0:09:44.920 --> 0:09:47.520 We now know when you look at Netflix's financials that 0:09:47.559 --> 0:09:52.319 it can be extraordinarily profitable generate really high returns. So 0:09:52.440 --> 0:09:55.720 now the question is who else can join Netflix with 0:09:55.800 --> 0:10:00.920 those types of financial metrics Ken Disney do it, Warner Brothers, Discovery, 0:10:00.960 --> 0:10:03.480 Ken Powermount. That's kind of the question a lot of 0:10:03.520 --> 0:10:06.680 those investors are asking themselves, but they can be done 0:10:06.720 --> 0:10:08.360 here if you look at Netflix. 0:10:08.640 --> 0:10:11.479 Listen, Paul Sweeney, thank you so much. We so appreciated 0:10:11.559 --> 0:10:14.480 our own Paul Sweeney, who has covered the media industry 0:10:14.480 --> 0:10:16.920 and did as a banker for many years, thirty years 0:10:16.920 --> 0:10:19.480 as a media analyst, so really great to get his insight. 0:10:20.160 --> 0:10:22.040 We're going to continue with Red Brown. We're also going 0:10:22.080 --> 0:10:24.720 to roll into it our Githa Ranganathan, who covers the 0:10:24.760 --> 0:10:27.680 media space for our Bloomberg intelligence team. You know, getha 0:10:27.760 --> 0:10:30.160 you called it on the subscriber number. 0:10:30.280 --> 0:10:32.240 She did, she really did. Can you remind everyone what 0:10:32.320 --> 0:10:33.440 she told us a couple hours ago? 0:10:33.600 --> 0:10:35.640 You said it was going to be a much higher number. 0:10:35.720 --> 0:10:38.599 It is a much higher number. Walk us through the 0:10:38.679 --> 0:10:40.199 quarter and why is it that? 0:10:40.240 --> 0:10:40.560 Though? 0:10:40.720 --> 0:10:43.160 First of all, are you I'm assuming you're watching the 0:10:43.200 --> 0:10:45.600 stock in the aftermarket, it's down about two point six percent. 0:10:45.679 --> 0:10:48.560 It just has been bouncing around a lot. Walk us 0:10:48.559 --> 0:10:50.800 through the quarter, maybe why you think, I mean, should 0:10:50.800 --> 0:10:52.240 investors be disappointed here? 0:10:53.600 --> 0:10:57.079 So absolutely, right, Carol, it was a blowout quarter. I mean, 0:10:57.280 --> 0:10:59.160 I think it came in much higher than expected. We 0:10:59.160 --> 0:11:02.240 were kind of thinking maybe six seven million dollar seven 0:11:02.320 --> 0:11:06.480 million subscriber ads net ads range. This was of course 0:11:06.559 --> 0:11:08.480 way above that. But I think what is really kind 0:11:08.520 --> 0:11:11.360 of causing a little bit of concern here is that 0:11:11.440 --> 0:11:16.120 they are going to stop reporting subscriber metrics altogether, and 0:11:16.240 --> 0:11:18.000 that I think is coming as a little bit of 0:11:18.040 --> 0:11:21.640 a disappointment. I mean, Netflix is out and out a 0:11:21.679 --> 0:11:25.720 subscriber story, or at least it always has been, and 0:11:25.760 --> 0:11:27.960 so this is kind of going to require a complete 0:11:28.320 --> 0:11:31.480 change in the mindset of investors, right. You know, this 0:11:31.520 --> 0:11:34.000 is this was always such an easy model to follow. 0:11:34.320 --> 0:11:37.200 You know, you just multiply subscribers by the monthly price 0:11:37.240 --> 0:11:39.000 that you pay, and you you, you know, you kind 0:11:39.040 --> 0:11:41.160 of have your whole model. But now they're going to 0:11:41.160 --> 0:11:44.600 stop reporting subscriber numbers. They're going to stop reporting the 0:11:44.720 --> 0:11:47.640 average revenue per user. So it's kind of going to 0:11:47.760 --> 0:11:52.400 it's it's definitely becoming. It's I would say, it's gone 0:11:52.440 --> 0:11:56.440 from kind of high growth to now more you know, uh, 0:11:56.880 --> 0:12:00.480 definitely a very profitable company. But obviously they do seem 0:12:00.480 --> 0:12:03.520 to be kind of signaling that subscriber growth that the 0:12:03.559 --> 0:12:05.160 party is going to be over at some point. 0:12:05.320 --> 0:12:08.280 Correct me if I'm wrong, getha. But did Netflix used 0:12:08.320 --> 0:12:11.800 to report churn and then they stopped reporting churn and 0:12:11.880 --> 0:12:14.800 that was a really big deal to investors when that happened. 0:12:15.640 --> 0:12:18.760 That was a very very long time ago. Yes, they did, 0:12:19.040 --> 0:12:21.520 they would, they would mention it, and yeah, they did 0:12:21.520 --> 0:12:25.200 stop reporting it. But subscribers, again, this is the bread 0:12:25.280 --> 0:12:28.360 and butter of this whole streaming business. So I think 0:12:28.360 --> 0:12:31.080 it's it's definitely going to require people are going to 0:12:31.080 --> 0:12:32.360 take some time to kind of digest that. 0:12:33.240 --> 0:12:35.480 Getha. We've seen them, they have started to give us 0:12:35.480 --> 0:12:39.480 a little bit more viewership on information over the past 0:12:39.559 --> 0:12:42.160 year or so. Do you think that that is part 0:12:42.240 --> 0:12:44.480 of or them kind of trying to signal that, you know, 0:12:44.559 --> 0:12:46.840 ads are going to become a bigger part of our business, 0:12:46.880 --> 0:12:49.360 and you know how big of a part of their business. 0:12:49.400 --> 0:12:51.040 Do you think that will be in the next couple 0:12:51.080 --> 0:12:51.520 of years. 0:12:52.720 --> 0:12:54.920 Yeah, so right now, they haven't really given us any 0:12:55.000 --> 0:12:58.400 concrete metrics around advertising, I mean, other than the first 0:12:58.480 --> 0:13:00.360 number that they gave us in January, which was roughly 0:13:00.400 --> 0:13:04.319 about twenty five million active users. They did report something 0:13:04.360 --> 0:13:06.760 today by saying, you know that they've seen like forty 0:13:06.760 --> 0:13:08.840 percent of their new signups are actually on the ad tyear, 0:13:08.920 --> 0:13:10.960 but we don't actually have a concrete number. 0:13:11.720 --> 0:13:12.280 That said. 0:13:12.360 --> 0:13:14.800 I think what they're doing, they're they're they're still kind 0:13:14.800 --> 0:13:19.040 of taking pretty a pretty measured approach, but there are 0:13:19.080 --> 0:13:22.400 signals that they really are looking to get or to 0:13:22.440 --> 0:13:24.880 scale up their advertising business, and I think sports is 0:13:24.880 --> 0:13:26.760 obviously a big way that they're going to do that. 0:13:27.520 --> 0:13:29.920 You know, you obviously saw that the WWE deal. There 0:13:29.960 --> 0:13:31.560 are a few more things that are out there on 0:13:31.559 --> 0:13:34.920 the horizon, obviously the NBA being a big one, and 0:13:35.000 --> 0:13:37.120 if they if they make an aggressive bid for that, 0:13:37.160 --> 0:13:40.200 then that really tells us how serious they are about advertising. 0:13:40.240 --> 0:13:42.000 And I think potentially what they're what we're looking at 0:13:42.040 --> 0:13:44.560 in terms of advertising dollars, if they get everything right. 0:13:45.200 --> 0:13:48.440 It has been a little bit underwhelming so far, but 0:13:48.600 --> 0:13:50.760 if they you know, if they're able to execute with 0:13:51.559 --> 0:13:55.480 the sports and the other live events expected to be 0:13:55.600 --> 0:13:59.160 at least ten to fifteen percent of their revenue by 0:13:59.200 --> 0:14:01.120 twenty twenty five. So you know, you're looking at a 0:14:01.200 --> 0:14:03.840 forty forty five billion dollar business. I think you're going 0:14:03.880 --> 0:14:06.520 to see four to five billion at least in advertising. 0:14:06.640 --> 0:14:09.040 It is kind of interesting, you know, Githa, We all 0:14:09.120 --> 0:14:10.800 kind of kid. It's like, I only have so many 0:14:10.840 --> 0:14:12.800 hours to watch all this stuff, and so we're picking 0:14:12.800 --> 0:14:14.800 and choosing, and it seems like there's so much out there. 0:14:14.840 --> 0:14:17.200 I mean, the company said in their letter to shareholders, 0:14:17.400 --> 0:14:19.920 with more than two people per household on average, we 0:14:19.960 --> 0:14:22.920 have an audience of over half a billion. And then 0:14:22.960 --> 0:14:25.280 they go on to say no entertainment companies ever programmed 0:14:25.280 --> 0:14:27.600 at this scale and with this ambition before. But it 0:14:28.120 --> 0:14:30.560 does feel like, you know, and listening to you talk about, 0:14:30.600 --> 0:14:34.200 you know, them not reporting their quarterly membership numbers in 0:14:34.240 --> 0:14:38.240 the future, that they are conceding that there is just 0:14:38.280 --> 0:14:40.560 a point that we're going to max out. We can 0:14:40.640 --> 0:14:43.400 just only sign up so many people. And that means 0:14:43.400 --> 0:14:45.480 even on a global scale, right. 0:14:46.280 --> 0:14:48.560 Yes, on a global scale. So back in the day, 0:14:48.640 --> 0:14:50.760 you know, maybe even about three four years ago, they 0:14:50.800 --> 0:14:53.520 would always talk about this one billion number as their 0:14:53.840 --> 0:14:57.120 total addressable market about two years ago. That's when the 0:14:57.120 --> 0:14:59.400 great Netflix reset and the Great Correction happened. 0:14:59.520 --> 0:15:00.880 They kind of toned that down. 0:15:00.880 --> 0:15:03.160 They said, you know, it's probably closer to about four 0:15:03.240 --> 0:15:06.360 hundred five hundred million as the total addressable market looks 0:15:06.360 --> 0:15:09.040 like it's you know, probably even slightly smaller than that. 0:15:09.240 --> 0:15:12.920 You know, so they definitely are conceding that there is 0:15:13.000 --> 0:15:15.480 an upper limit, There is a ceiling to kind of 0:15:16.480 --> 0:15:17.200 the growth here. 0:15:17.680 --> 0:15:19.640 But is there something like I always laugh about this 0:15:19.680 --> 0:15:21.920 sometimes when we talk about some of these big tech names. 0:15:21.960 --> 0:15:23.360 We used to talk about this a lot. By Apple, 0:15:23.400 --> 0:15:25.520 We'd be like, Oh, it's a disappointing number. Yet they 0:15:25.560 --> 0:15:27.760 still sell a lot of stuff, And I understand it's 0:15:27.800 --> 0:15:30.600 growth trends and trajectory. Can we still, though, can see 0:15:30.640 --> 0:15:33.240 that Netflix still is kind of the big behemoth in 0:15:33.280 --> 0:15:33.800 this space. 0:15:34.600 --> 0:15:35.480 They absolutely are. 0:15:35.520 --> 0:15:39.320 They They have completely cemented their dominance when it comes 0:15:39.360 --> 0:15:41.120 to this whole streaming wars. I mean, I think the 0:15:41.120 --> 0:15:44.320 streaming wars are pretty much over. They are the winner, 0:15:44.400 --> 0:15:44.880 there's no. 0:15:44.840 --> 0:15:45.480 Doubt about that. 0:15:45.560 --> 0:15:48.080 And now it's just about them kind of you know, 0:15:48.160 --> 0:15:52.320 getting into different verticals, kind of becoming that you know 0:15:52.360 --> 0:15:54.640 that one service they probably will you know, kind of 0:15:54.720 --> 0:15:58.240 absorb absorb a lot of the other smaller streaming services, 0:15:58.280 --> 0:16:01.000 I think just because they're licensing so much of content 0:16:01.080 --> 0:16:04.640 from them and they you know, it's just but at 0:16:04.640 --> 0:16:06.800 this point, it's definitely going to become you know, how 0:16:06.880 --> 0:16:09.440 much pricing power do they have? So right now we 0:16:09.480 --> 0:16:11.400 are at about fifteen and a half dollars for a 0:16:11.400 --> 0:16:15.120 standard plan in the US. How much upside is there? 0:16:15.200 --> 0:16:17.840 Can that go to twenty twenty five dollars? That is 0:16:17.920 --> 0:16:18.880 kind of the big question. 0:16:19.280 --> 0:16:21.640 So it's funny as you're saying this, I'm thinking to myself, Okay, well, 0:16:21.680 --> 0:16:23.760 you know, twenty years ago, all we wanted was it 0:16:23.840 --> 0:16:25.680 all the card options for TV, and we kind of 0:16:25.680 --> 0:16:27.160 got that now. And I think a lot of us 0:16:27.160 --> 0:16:29.400 are spending more on all a combination of all these 0:16:29.440 --> 0:16:32.360 services given that you know, it's Paramount, it's Hulu, It's Max, 0:16:32.400 --> 0:16:34.880 it's Disney Plus, it's Netflix, just to name a few. 0:16:35.920 --> 0:16:38.640 I do wonder, Githa, where the growth is for Netflix 0:16:38.680 --> 0:16:40.480 at this point. Is it is it in the ad 0:16:40.480 --> 0:16:44.040 supported model, is it outside of the United States? Where 0:16:44.200 --> 0:16:46.480 where is that growth coming from? As the company matures? 0:16:47.080 --> 0:16:48.120 Is it raising prices? 0:16:49.000 --> 0:16:52.280 Yeah, it's actually Jim, it's all of the above, and 0:16:52.320 --> 0:16:53.840 it's just you know, it's going to be a very 0:16:54.320 --> 0:16:56.760 it's a very tough balancing act for them because they 0:16:56.760 --> 0:16:59.000 don't want to do anything too quickly and too rashly, 0:16:59.320 --> 0:17:01.440 which is why when they were kind of implementing their 0:17:01.440 --> 0:17:04.159 whole password sharing crackdown, they were very careful not to 0:17:04.280 --> 0:17:07.159 raise prices because you know, they didn't want to anger 0:17:07.520 --> 0:17:10.520 you know, existing customers. So again, it's going to be 0:17:10.800 --> 0:17:12.560 it's going to be tricky. They're kind of walking a 0:17:12.640 --> 0:17:15.600 tight trope here, but yeah, they are going to use 0:17:15.680 --> 0:17:17.840 all the different levers that they have to kind of 0:17:18.560 --> 0:17:21.919 keep profitability, which is their main metric right now, profitability 0:17:21.920 --> 0:17:23.920 and margins kind of climbing up. 0:17:24.760 --> 0:17:27.520 Githa. Before the report and the analyst I was speaking 0:17:27.520 --> 0:17:29.720 to a lot of them made a big deal about 0:17:29.760 --> 0:17:33.520 the T Mobile partnership that they were working on. How 0:17:33.560 --> 0:17:35.760 do you see that factoring into the future. Do you 0:17:35.840 --> 0:17:38.439 think that that has been a successful program and do 0:17:38.200 --> 0:17:40.639 you can you expect to see them maybe do some 0:17:40.640 --> 0:17:43.080 some more types of those partnerships. 0:17:44.040 --> 0:17:46.240 Absolutely, I think that is going to become a critical 0:17:47.160 --> 0:17:50.359