Latest / Bloomberg Intelligence / Netflix Crushes Subscriber Estimates: Reaction and Analysis

Transcript

Netflix Crushes Subscriber Estimates: Reaction and Analysis · Bloomberg Intelligence

0:02
Speaker 1: Bloomberg Audio Studios, podcasts, radio News.
0:07
Speaker 2: This was a blowout number. I can feel like it
0:09
Speaker 2: shocked all of us. First quarter streaming paid net change
0:12
Speaker 2: in terms of the subscribers up nine point three to
0:15
Speaker 2: three million. Timmy estimate was four point eight four million.
0:18
Speaker 3: That's not the only beat. First quarter EPs coming at
0:21
Speaker 3: five dollars and twenty eight cents per share. Estimates were
0:23
Speaker 3: for four dollars and fifty two cents. The company also
0:26
Speaker 3: out with second quarter EPs the guidance four sixty eight
0:30
Speaker 3: versus estimates of four to fifty four, and then another
0:33
Speaker 3: big headline. We should note they're going to end reporting
0:35
Speaker 3: quarterly membership numbers next year. We got a great group
0:38
Speaker 3: of folks with us right now to help us break
0:39
Speaker 3: down these numbers. Paul Sweeney is co host of Bloomberg Surveillance.
0:42
Speaker 3: He joins us on the phone from New Jersey. Paul
0:44
Speaker 3: spent thirty years as a media analyst, also with US
0:46
Speaker 3: as Bloomberg News earnings reporter Red Brown. Hey, Paul, I
0:49
Speaker 3: want to start with you, because I got to tell you,
0:51
Speaker 3: I'm pretty surprised by the reaction to these numbers, considering
0:54
Speaker 3: they were it was such a blowout quarter Why do
0:57
Speaker 3: you think the stock is moving lower in the after hours.
1:00
Speaker 4: Yeah, I think it's a little bit by the rumor. Still,
1:02
Speaker 4: the news people have been hyping up this quarter as
1:04
Speaker 4: a really big quarter because you know, the paid subscription
1:07
Speaker 4: was going to fuel subscriber growth. Yet again, you're that
1:10
Speaker 4: a big beat on subs last quarter. Some the stock
1:12
Speaker 4: was up about twenty five percent since they reported in January,
1:15
Speaker 4: so it's probably just taking back some of those games.
1:17
Speaker 4: But you know, across the board, the subscriber numbers really
1:20
Speaker 4: really were impressive. One thing to note about that big
1:23
Speaker 4: subscriber beat to the last couple of quarters. These are
1:26
Speaker 4: kind of short term phenomena, as you know, they the
1:29
Speaker 4: people that were sharing accounts now are paying for their owns,
1:32
Speaker 4: and that'll fade out over the next several quarters and
1:35
Speaker 4: then the focus will become, i think, on the advertising
1:38
Speaker 4: side of the business as well.
1:40
Speaker 2: Yeah, it's interesting. Do you care, Paul to hear that
1:42
Speaker 2: they're going to end reporting quarterly membership numbers next year?
1:45
Speaker 2: It feels like it's something we focus on.
1:47
Speaker 4: Yeah, yeah, it really is, and that quite frankly, that
1:50
Speaker 4: had been the primary driver of this stock really since
1:54
Speaker 4: it switched to this digital streaming format. That was the
1:57
Speaker 4: metric that moved this stock. The company really wants to
2:00
Speaker 4: get away from that and get more towards Hey, guys,
2:03
Speaker 4: just view us as you would any other company stock.
2:06
Speaker 4: Look at revenue, look at cash flow, look at profitability,
2:10
Speaker 4: all those types of things, and let's focus less on
2:12
Speaker 4: subscriber growth because quite frankly, we pretty much got pretty
2:15
Speaker 4: much everybody that's out there, So it's really not so
2:17
Speaker 4: much as a subscriber story. It's more how much money
2:20
Speaker 4: can we make off each subscriber?
2:21
Speaker 3: Paul one one more to you. And then I want
2:23
Speaker 3: to bring in Red Brown, our earnings reporter, who's been
2:25
Speaker 3: watching these numbers closely. Why would a company? Is there
2:28
Speaker 3: any positive way to read into a company like Netflix?
2:31
Speaker 3: No longer reporting this? I mean, no question, the more
2:34
Speaker 3: data for investors the better. Is this a negative? This
2:37
Speaker 3: is a negative sign?
2:38
Speaker 2: No?
2:39
Speaker 4: Oh yeah, I think I think for an investor in
2:41
Speaker 4: an analyst, you always want more information, particularly when it's
2:45
Speaker 4: critical information in terms of what drives the growth of
2:49
Speaker 4: the business. And it's obviously just it's subscribers and how
2:51
Speaker 4: much revenue you dandergenerate off each subscriber. It's pretty simple.
2:54
Speaker 4: So I need take one of those data points away.
2:56
Speaker 4: But we've seen other companies in other industries do that,
3:01
Speaker 4: subscriber based industries. They try to get you away from
3:04
Speaker 4: that number and get you back to where are Look
3:07
Speaker 4: how they are managing the business, and what they're telling
3:09
Speaker 4: you is we're not managing the business to maximize subscriber
3:12
Speaker 4: with We're managing the business to maximize revenue and profit
3:15
Speaker 4: per user. That's our management focus and that's how we
3:19
Speaker 4: look at it, and that's how we think you should
3:20
Speaker 4: look at it.
3:21
Speaker 2: Red Brown, come on in on it. We talk earnings
3:23
Speaker 2: with you all the time. You know, I'm watching Netflix
3:25
Speaker 2: shares that have been bouncing around in the aftermarket, a
3:29
Speaker 2: lot of moves right now. The stocks still lower down
3:31
Speaker 2: about three and a half percent.
3:33
Speaker 1: Yeah, I mean, I think what might be explaining a
3:35
Speaker 1: little bit of the negative movement too, is we saw
3:37
Speaker 1: them actually boost their full year outlook for operating margin.
3:41
Speaker 1: They beat EPs in the first quarter. They their guidance
3:44
Speaker 1: to the second quarter was ahead of estimates as well.
3:47
Speaker 1: But it seems like there's a little bit of a
3:49
Speaker 1: disconnect between the full year number. If you know, those
3:51
Speaker 1: two pretty healthy beats are not translating to the full year,
3:55
Speaker 1: analysts investors might start to question maybe where in the
3:59
Speaker 1: back half of the year is are things starting to
4:01
Speaker 1: slow down as well? So I think that might also
4:03
Speaker 1: be factoring in here a little bit to the to
4:05
Speaker 1: the negative price movement we're seeing.
4:07
Speaker 2: Let's speak a little bit to what Paul was saying,
4:08
Speaker 2: and I think it's a good point that we talked
4:10
Speaker 2: about it earlier. Just you know, this stock has been
4:13
Speaker 2: on fire this year, and you know, it looks like
4:16
Speaker 2: the numbers are are pretty upbeat, but it has been
4:19
Speaker 2: such an outperformer this year, and I just do wonder
4:22
Speaker 2: how much of that is at play as well.
4:24
Speaker 1: Yeah, I mean, if you look at what analysts are
4:27
Speaker 1: rating for the stock, that it's kind of topped out
4:29
Speaker 1: at the analyst ratings point at this point. So you know,
4:33
Speaker 1: even with these really impressive numbers, maybe the it's just
4:37
Speaker 1: kind of a hit hit its ceiling for the time being.
4:40
Speaker 3: Hey, Red, it's so interesting, you know, I was saying
4:42
Speaker 3: as we were going into our Beyond the Bell our
4:45
Speaker 3: coverage with TV as we you know, waited for these
4:47
Speaker 3: Netflix earnings, I was saying, you know, this could really
4:50
Speaker 3: set the tone for the quarter for a lot of
4:52
Speaker 3: the consumer tech companies that are set to report in
4:55
Speaker 3: the coming weeks, and yet yet we get a blowout
4:58
Speaker 3: number pretty much across the board, and we see a
5:00
Speaker 3: negative reaction like this, and I'm wondering how we can
5:02
Speaker 3: extrapolate this beyond Netflix.
5:04
Speaker 1: Yeah, it's a good question. I mean, people have been
5:07
Speaker 1: really focused on earnings this quarter, and a lot of
5:09
Speaker 1: analysts are saying, you know, focus on the numbers, don't
5:12
Speaker 1: buy unto the hype and has really big implications for
5:15
Speaker 1: the stock market at general at the moment. So I
5:19
Speaker 1: don't know if people kind of are on edge and
5:21
Speaker 1: looking for any excuse to sell at the moment. Yeah,
5:25
Speaker 1: it could paint a pessimistic picture for the remainder of
5:28
Speaker 1: the quarter here, probably for us.
5:30
Speaker 2: Paul Sweenie, come on back in here. I'm just thinking,
5:31
Speaker 2: you know, we're getting ready for the analyst calls, and
5:33
Speaker 2: I feel like there's going to be a fair amount
5:34
Speaker 2: of questions, especially as you see the stock kind of
5:37
Speaker 2: bouncing around here. What's kind of the top one or
5:39
Speaker 2: two questions that you would want to be putting up
5:41
Speaker 2: on that call.
5:43
Speaker 4: Yeah, one revenue and one cost question. The revenue side
5:46
Speaker 4: is talk to us about the advertising component how well
5:50
Speaker 4: is that catching on with subscribers. How many subscribers are
5:53
Speaker 4: going to the advertising tier and that's a big thing
5:56
Speaker 4: because that's gonna be one of the drivers going forward.
5:58
Speaker 4: And then a second one on the call side is
6:00
Speaker 4: where are we on our programming budget? You need to
6:02
Speaker 4: spend more to drive more subscriber growth? Or or is
6:06
Speaker 4: a company and a good level of spend because if
6:08
Speaker 4: they are at a good level of spend, boy, the
6:10
Speaker 4: profits just really start churning for this company and the
6:13
Speaker 4: free cash flow as well.
6:14
Speaker 3: I do want to bring in some of the advertising
6:16
Speaker 3: information that you mentioned, Paul in the letter. The company
6:19
Speaker 3: did come out and say that ADS membership grew sixty
6:21
Speaker 3: five percent quarter on quarter after rising nearly seventy percent
6:24
Speaker 3: sequentially in each of Q three twenty three and Q
6:27
Speaker 3: four twenty three. They're also saying that over forty percent
6:31
Speaker 3: of all sign ups in our ads markets, remember it's
6:33
Speaker 3: not fully rolled out, are coming from our ads plan
6:36
Speaker 3: for advertisers. The companies focusing on measurement solutions, including new
6:40
Speaker 3: partnerships with Kantar and Lucid for brand awareness and recall,
6:44
Speaker 3: and then Nielsen Catalina solutions for sales lift Paul, I
6:47
Speaker 3: don't have to tell you because you've been covering this
6:49
Speaker 3: for years. How wild is it for us to talk
6:51
Speaker 3: about Netflix and measurement because this is a company that
6:54
Speaker 3: for years was like, we don't care about ratings, We're
6:56
Speaker 3: never going to share any numbers. We're never going to
6:58
Speaker 3: do ads, never, never, never, And here they are talking
7:00
Speaker 3: about yis Yeah, exactly, this is crazy.
7:04
Speaker 4: It's a great point. They're going to have to start
7:07
Speaker 4: the disclosing audience levels of some degree. But we already
7:11
Speaker 4: know that the advertising video on demand model is a
7:13
Speaker 4: very successful model. Advertisers are switching some linear TV broadcasting
7:18
Speaker 4: cable to the more digital platforms, and they've been itching
7:22
Speaker 4: to get to the streaming base of Netflix. So there
7:26
Speaker 4: will be a lot of advertisers demand. And you know,
7:30
Speaker 4: Netflix is going to have to provide the advertisers and
7:32
Speaker 4: their agencies with some data the consistent they can just
7:35
Speaker 4: get a sense of pricing and value.
7:37
Speaker 5: Yeah, you know.
7:37
Speaker 2: And the other thing is like I'm thinking about content, right,
7:40
Speaker 2: you know, original content versus licensing. And when we were
7:42
Speaker 2: talking with Githa rang an ant On earlier, she said,
7:44
Speaker 2: you know, one of the upsides is that they are
7:47
Speaker 2: you know, doing a lot of licensing deals.
7:48
Speaker 5: They had suits.
7:49
Speaker 2: They just did something with Sex and the City that's
7:51
Speaker 2: just coming out. I mean, when you think about it,
7:53
Speaker 2: Paul as an analyst and somebody who understands the space,
7:56
Speaker 2: I mean, cheaper to do a licensing deal versus creating
7:59
Speaker 2: that original content.
8:01
Speaker 4: It is generally speaking, it is much cheaper to license
8:05
Speaker 4: the show than to create it, particularly the shows that
8:07
Speaker 4: they make, which are extraordinarily high quality, and they have
8:11
Speaker 4: very big budgets and other good and that's the that's
8:14
Speaker 4: the investment part. The good is is it does drive
8:17
Speaker 4: subscriber growth. So I think most investors would say that's
8:20
Speaker 4: a good investment to make in original programming. But you
8:23
Speaker 4: got to find a balance here and so, and that's
8:25
Speaker 4: the same. And that's true for the media companies. They
8:26
Speaker 4: have to find a balance on what they licensed to
8:29
Speaker 4: Netflix and what they keep on their own streaming services.
8:32
Speaker 3: Red Let's say you had a chance to ask management
8:34
Speaker 3: a question today on the call that's coming up. What
8:37
Speaker 3: do you want to hear about.
8:37
Speaker 1: Yeah, I mean we're talking about programming and what's going
8:39
Speaker 1: to be driving growth in the future. I think there's
8:41
Speaker 1: a big question around sports. Yeah, what what what level
8:44
Speaker 1: of investment are they planning on putting in that that area.
8:47
Speaker 1: We know it's highly competitive, it's really crowded, it's very expensive.
8:52
Speaker 1: They are kind of stipping their toe in with some
8:53
Speaker 1: of these combat sports. But yeah, it would be w
8:56
Speaker 1: E WWE the Jake Paul and Mike Tyson fight later
9:00
Speaker 1: this summer. We will want to hear kind of what
9:02
Speaker 1: is their strategy. They've been on the sidelines for a
9:04
Speaker 1: while now, and you know, have they been able to
9:08
Speaker 1: see the mess that sports streaming has been from, you know,
9:12
Speaker 1: paying billions and millions of dollars? Do they have a
9:14
Speaker 1: different strategy like they have in so many other cases
9:16
Speaker 1: in the market.
9:18
Speaker 2: I do wonder too, And I'm just looking at something
9:20
Speaker 2: like a Walt Disney in the aftermarket, and obviously it's
9:23
Speaker 2: not just about streaming. It's just down slightly down about
9:25
Speaker 2: one tenth of one percent here, Warner Brothers, Discovery, same story.
9:30
Speaker 2: I mean, Paul, is there anything that you kind of
9:32
Speaker 2: extrapolgalate when you look at something like a Netflix and
9:35
Speaker 2: then what it means for some of the other streaming
9:36
Speaker 2: services that are out there.
9:38
Speaker 4: I think it's actually all net positive, which is it
9:41
Speaker 4: just shows you the strength of the streaming business model.
9:44
Speaker 4: We now know when you look at Netflix's financials that
9:47
Speaker 4: it can be extraordinarily profitable generate really high returns. So
9:52
Speaker 4: now the question is who else can join Netflix with
9:55
Speaker 4: those types of financial metrics Ken Disney do it, Warner Brothers, Discovery,
10:00
Speaker 4: Ken Powermount. That's kind of the question a lot of
10:03
Speaker 4: those investors are asking themselves, but they can be done
10:06
Speaker 4: here if you look at Netflix.
10:08
Speaker 2: Listen, Paul Sweeney, thank you so much. We so appreciated
10:11
Speaker 2: our own Paul Sweeney, who has covered the media industry
10:14
Speaker 2: and did as a banker for many years, thirty years
10:16
Speaker 2: as a media analyst, so really great to get his insight.
10:20
Speaker 2: We're going to continue with Red Brown. We're also going
10:22
Speaker 2: to roll into it our Githa Ranganathan, who covers the
10:24
Speaker 2: media space for our Bloomberg intelligence team. You know, getha
10:27
Speaker 2: you called it on the subscriber number.
10:30
Speaker 3: She did, she really did. Can you remind everyone what
10:32
Speaker 3: she told us a couple hours ago?
10:33
Speaker 2: You said it was going to be a much higher number.
10:35
Speaker 2: It is a much higher number. Walk us through the
10:38
Speaker 2: quarter and why is it that?
10:40
Speaker 5: Though?
10:40
Speaker 2: First of all, are you I'm assuming you're watching the
10:43
Speaker 2: stock in the aftermarket, it's down about two point six percent.
10:45
Speaker 2: It just has been bouncing around a lot. Walk us
10:48
Speaker 2: through the quarter, maybe why you think, I mean, should
10:50
Speaker 2: investors be disappointed here?
10:53
Speaker 6: So absolutely, right, Carol, it was a blowout quarter. I mean,
10:57
Speaker 6: I think it came in much higher than expected. We
10:59
Speaker 6: were kind of thinking maybe six seven million dollar seven
11:02
Speaker 6: million subscriber ads net ads range. This was of course
11:06
Speaker 6: way above that. But I think what is really kind
11:08
Speaker 6: of causing a little bit of concern here is that
11:11
Speaker 6: they are going to stop reporting subscriber metrics altogether, and
11:16
Speaker 6: that I think is coming as a little bit of
11:18
Speaker 6: a disappointment. I mean, Netflix is out and out a
11:21
Speaker 6: subscriber story, or at least it always has been, and
11:25
Speaker 6: so this is kind of going to require a complete
11:28
Speaker 6: change in the mindset of investors, right. You know, this
11:31
Speaker 6: is this was always such an easy model to follow.
11:34
Speaker 6: You know, you just multiply subscribers by the monthly price
11:37
Speaker 6: that you pay, and you you, you know, you kind
11:39
Speaker 6: of have your whole model. But now they're going to
11:41
Speaker 6: stop reporting subscriber numbers. They're going to stop reporting the
11:44
Speaker 6: average revenue per user. So it's kind of going to
11:47
Speaker 6: it's it's definitely becoming. It's I would say, it's gone
11:52
Speaker 6: from kind of high growth to now more you know, uh,
11:56
Speaker 6: definitely a very profitable company. But obviously they do seem
12:00
Speaker 6: to be kind of signaling that subscriber growth that the
12:03
Speaker 6: party is going to be over at some point.
12:05
Speaker 3: Correct me if I'm wrong, getha. But did Netflix used
12:08
Speaker 3: to report churn and then they stopped reporting churn and
12:11
Speaker 3: that was a really big deal to investors when that happened.
12:15
Speaker 6: That was a very very long time ago. Yes, they did,
12:19
Speaker 6: they would, they would mention it, and yeah, they did
12:21
Speaker 6: stop reporting it. But subscribers, again, this is the bread
12:25
Speaker 6: and butter of this whole streaming business. So I think
12:28
Speaker 6: it's it's definitely going to require people are going to
12:31
Speaker 6: take some time to kind of digest that.
12:33
Speaker 1: Getha. We've seen them, they have started to give us
12:35
Speaker 1: a little bit more viewership on information over the past
12:39
Speaker 1: year or so. Do you think that that is part
12:42
Speaker 1: of or them kind of trying to signal that, you know,
12:44
Speaker 1: ads are going to become a bigger part of our business,
12:46
Speaker 1: and you know how big of a part of their business.
12:49
Speaker 1: Do you think that will be in the next couple
12:51
Speaker 1: of years.
12:52
Speaker 6: Yeah, so right now, they haven't really given us any
12:55
Speaker 6: concrete metrics around advertising, I mean, other than the first
12:58
Speaker 6: number that they gave us in January, which was roughly
13:00
Speaker 6: about twenty five million active users. They did report something
13:04
Speaker 6: today by saying, you know that they've seen like forty
13:06
Speaker 6: percent of their new signups are actually on the ad tyear,
13:08
Speaker 6: but we don't actually have a concrete number.
13:11
Speaker 5: That said.
13:12
Speaker 6: I think what they're doing, they're they're they're still kind
13:14
Speaker 6: of taking pretty a pretty measured approach, but there are
13:19
Speaker 6: signals that they really are looking to get or to
13:22
Speaker 6: scale up their advertising business, and I think sports is
13:24
Speaker 6: obviously a big way that they're going to do that.
13:27
Speaker 6: You know, you obviously saw that the WWE deal. There
13:29
Speaker 6: are a few more things that are out there on
13:31
Speaker 6: the horizon, obviously the NBA being a big one, and
13:35
Speaker 6: if they if they make an aggressive bid for that,
13:37
Speaker 6: then that really tells us how serious they are about advertising.
13:40
Speaker 6: And I think potentially what they're what we're looking at
13:42
Speaker 6: in terms of advertising dollars, if they get everything right.
13:45
Speaker 6: It has been a little bit underwhelming so far, but
13:48
Speaker 6: if they you know, if they're able to execute with
13:51
Speaker 6: the sports and the other live events expected to be
13:55
Speaker 6: at least ten to fifteen percent of their revenue by
13:59
Speaker 6: twenty twenty five. So you know, you're looking at a
14:01
Speaker 6: forty forty five billion dollar business. I think you're going
14:03
Speaker 6: to see four to five billion at least in advertising.
14:06
Speaker 2: It is kind of interesting, you know, Githa, We all
14:09
Speaker 2: kind of kid. It's like, I only have so many
14:10
Speaker 2: hours to watch all this stuff, and so we're picking
14:12
Speaker 2: and choosing, and it seems like there's so much out there.
14:14
Speaker 2: I mean, the company said in their letter to shareholders,
14:17
Speaker 2: with more than two people per household on average, we
14:19
Speaker 2: have an audience of over half a billion. And then
14:22
Speaker 2: they go on to say no entertainment companies ever programmed
14:25
Speaker 2: at this scale and with this ambition before. But it
14:28
Speaker 2: does feel like, you know, and listening to you talk about,
14:30
Speaker 2: you know, them not reporting their quarterly membership numbers in
14:34
Speaker 2: the future, that they are conceding that there is just
14:38
Speaker 2: a point that we're going to max out. We can
14:40
Speaker 2: just only sign up so many people. And that means
14:43
Speaker 2: even on a global scale, right.
14:46
Speaker 6: Yes, on a global scale. So back in the day,
14:48
Speaker 6: you know, maybe even about three four years ago, they
14:50
Speaker 6: would always talk about this one billion number as their
14:53
Speaker 6: total addressable market about two years ago. That's when the
14:57
Speaker 6: great Netflix reset and the Great Correction happened.
14:59
Speaker 5: They kind of toned that down.
15:00
Speaker 6: They said, you know, it's probably closer to about four
15:03
Speaker 6: hundred five hundred million as the total addressable market looks
15:06
Speaker 6: like it's you know, probably even slightly smaller than that.
15:09
Speaker 6: You know, so they definitely are conceding that there is
15:13
Speaker 6: an upper limit, There is a ceiling to kind of
15:16
Speaker 6: the growth here.
15:17
Speaker 2: But is there something like I always laugh about this
15:19
Speaker 2: sometimes when we talk about some of these big tech names.
15:21
Speaker 2: We used to talk about this a lot. By Apple,
15:23
Speaker 2: We'd be like, Oh, it's a disappointing number. Yet they
15:25
Speaker 2: still sell a lot of stuff, And I understand it's
15:27
Speaker 2: growth trends and trajectory. Can we still, though, can see
15:30
Speaker 2: that Netflix still is kind of the big behemoth in
15:33
Speaker 2: this space.
15:34
Speaker 5: They absolutely are.
15:35
Speaker 6: They They have completely cemented their dominance when it comes
15:39
Speaker 6: to this whole streaming wars. I mean, I think the
15:41
Speaker 6: streaming wars are pretty much over. They are the winner,
15:44
Speaker 6: there's no.
15:44
Speaker 5: Doubt about that.
15:45
Speaker 6: And now it's just about them kind of you know,
15:48
Speaker 6: getting into different verticals, kind of becoming that you know
15:52
Speaker 6: that one service they probably will you know, kind of
15:54
Speaker 6: absorb absorb a lot of the other smaller streaming services,
15:58
Speaker 6: I think just because they're licensing so much of content
16:01
Speaker 6: from them and they you know, it's just but at
16:04
Speaker 6: this point, it's definitely going to become you know, how
16:06
Speaker 6: much pricing power do they have? So right now we
16:09
Speaker 6: are at about fifteen and a half dollars for a
16:11
Speaker 6: standard plan in the US. How much upside is there?
16:15
Speaker 6: Can that go to twenty twenty five dollars? That is
16:17
Speaker 6: kind of the big question.
16:19
Speaker 3: So it's funny as you're saying this, I'm thinking to myself, Okay, well,
16:21
Speaker 3: you know, twenty years ago, all we wanted was it
16:23
Speaker 3: all the card options for TV, and we kind of
16:25
Speaker 3: got that now. And I think a lot of us
16:27
Speaker 3: are spending more on all a combination of all these
16:29
Speaker 3: services given that you know, it's Paramount, it's Hulu, It's Max,
16:32
Speaker 3: it's Disney Plus, it's Netflix, just to name a few.
16:35
Speaker 3: I do wonder, Githa, where the growth is for Netflix
16:38
Speaker 3: at this point. Is it is it in the ad
16:40
Speaker 3: supported model, is it outside of the United States? Where
16:44
Speaker 3: where is that growth coming from? As the company matures?
16:47
Speaker 3: Is it raising prices?
16:49
Speaker 6: Yeah, it's actually Jim, it's all of the above, and
16:52
Speaker 6: it's just you know, it's going to be a very
16:54
Speaker 6: it's a very tough balancing act for them because they
16:56
Speaker 6: don't want to do anything too quickly and too rashly,
16:59
Speaker 6: which is why when they were kind of implementing their
17:01
Speaker 6: whole password sharing crackdown, they were very careful not to
17:04
Speaker 6: raise prices because you know, they didn't want to anger
17:07
Speaker 6: you know, existing customers. So again, it's going to be
17:10
Speaker 6: it's going to be tricky. They're kind of walking a
17:12
Speaker 6: tight trope here, but yeah, they are going to use
17:15
Speaker 6: all the different levers that they have to kind of
17:18
Speaker 6: keep profitability, which is their main metric right now, profitability
17:21
Speaker 6: and margins kind of climbing up.
17:24
Speaker 1: Githa. Before the report and the analyst I was speaking
17:27
Speaker 1: to a lot of them made a big deal about
17:29
Speaker 1: the T Mobile partnership that they were working on. How
17:33
Speaker 1: do you see that factoring into the future. Do you
17:35
Speaker 1: think that that has been a successful program and do
17:38
Speaker 1: you can you expect to see them maybe do some
17:40
Speaker 1: some more types of those partnerships.
17:44
Speaker 6: Absolutely, I think that is going to become a critical
17:47
Speaker 6: critical factor for Netflix if it really kind of wants
17:50
Speaker 6: to grow its subscribers. So what they did with T
17:52
Speaker 6: Mobile was kind of they're offering their ad supported plan,
17:55
Speaker 6: which is a seven dollars monthly plan to you know,
17:58
Speaker 6: select T Mobile members for free, and they're going to
18:00
Speaker 6: do a lot more of that. The having a low
18:03
Speaker 6: priced plan kind of really gives them a lot of
18:05
Speaker 6: flexibility because they can add subscribers. But then again, they're
18:10
Speaker 6: not necessarily losing our poop because remember they're the greater
18:13
Speaker 6: the subscribers they have, they can always kind of appeal
18:16
Speaker 6: to advertise the advertising community, so and kind of makeup
18:19
Speaker 6: or offset for any of that ar foo differential from
18:23
Speaker 6: from their advertising dollars. So I think that's going to definitely,
18:25
Speaker 6: uh play a much bigger role, not just in the US,
18:28
Speaker 6: but of course across the world as well. They're going
18:30
Speaker 6: to have lots of those kinds of telecom partnerships.
18:32
Speaker 2: Keetha, what do we you know, kind of pull from
18:34
Speaker 2: this when it means to like Disney Streaming and Warner
18:37
Speaker 2: Brothers Discovery and some of the other services that are
18:39
Speaker 2: out there.
18:41
Speaker 6: So for all of those other services, I think subscriber
18:44
Speaker 6: growth is not the primary focus anymore.
18:46
Speaker 5: It's kind of moved now.
18:48
Speaker 6: Carol to profitability, where obviously, again Netflix leads the back.
18:53
Speaker 6: A lot of these other services have made good progress,
18:57
Speaker 6: I would say really good progress when it comes to
19:00
Speaker 6: at least they're not profitable yet, but they're you know,
19:03
Speaker 6: moderating their losses. Disney obviously is the big one to
19:05
Speaker 6: watch for there, and now they have the model in place.
19:08
Speaker 6: You know, you've seen exactly what Netflix has accomplished. They
19:11
Speaker 6: all know exactly what they have to do. It's just
19:13
Speaker 6: going to be a question of how well they do
19:15
Speaker 6: it and can they get there quick enough.
19:17
Speaker 3: Githa, do you think there's any consumer confusion? I mean, okay,
19:20
Speaker 3: I know the answer to this is yes, and I
19:22
Speaker 3: just don't know how to solve it. The consumer confusion
19:24
Speaker 3: about where to watch something. Yeah, I mentioned Sex and
19:26
Speaker 3: the City and I was shocked to hear that that's
19:28
Speaker 3: on Netflix. It's an HBO show. Somebody in our simulcast
19:31
Speaker 3: chat mentioned in the office, Well, I think that's now
19:33
Speaker 3: on Peacock, but it was on Netflix. Friends, a former
19:36
Speaker 3: NBC show or No Seinfeld is now on Netflix. I
19:39
Speaker 3: believe it's confusing, is that right? I don't know, like
19:43
Speaker 3: you know it is.
19:44
Speaker 6: How Discovery is the biggest's not content anymore. It's really
19:47
Speaker 6: just discovery is the biggest problem right now in the
19:50
Speaker 6: whole of you know, the streaming space. And at the
19:53
Speaker 6: end of the day, we're kind of looking for that
19:55
Speaker 6: one or what we're waiting for is that one aggregator
20:00
Speaker 6: or reaggregator that can kind of take all the shows
20:03
Speaker 6: that you really want to watch and do it.
20:04
Speaker 5: I don't know who it's going to be. Is it
20:06
Speaker 5: going to be YouTube? Maybe it is.
20:07
Speaker 6: It could be Amazon, it could be Apple, but but
20:09
Speaker 6: we're all waiting for that. Again, I'm not sure when
20:12
Speaker 6: exactly it's going to happen.
20:14
Speaker 3: Roku doesn't Okay, Roku does a really good job of that,
20:16
Speaker 3: but you've got to have be signed into everything on
20:19
Speaker 3: your Roku and plus that means you're only watching on TV.
20:21
Speaker 3: You're not watching it on the iPad or on like
20:23
Speaker 3: your phone, and.
20:24
Speaker 5: It's there's still is friction.
20:26
Speaker 3: Yeheah, there is still a lot of friction.
20:27
Speaker 2: Final thought, Githa, I'm just thinking of our investor audience
20:31
Speaker 2: as we work through this. Netflix share is still down
20:33
Speaker 2: about three and a quarter percent here.
20:37
Speaker 6: Yeah, So I think the big question is really going
20:38
Speaker 6: to be, you know, on the call of you know
20:41
Speaker 6: what how many subscribers do or how many you know
20:44
Speaker 6: subscribers you think you've captured from the whole password sharing initiative.
20:48
Speaker 6: I think the numbers that they're originally identified was one
20:50
Speaker 6: hundred million households. I think people will definitely want to
20:53
Speaker 6: know what percentage of that has already been kind of captured,
20:57
Speaker 6: just given the strong subscriber metrics, and then they'll kind
20:59
Speaker 6: of try to figure out how much more runway is
21:02
Speaker 6: left Rockstar.
21:03
Speaker 2: As always, Githa Ringing Athen thank you so much. Tech
21:05
Speaker 2: and media analyst a Bloomberg Intelligence Red Brown, final thoughts
21:07
Speaker 2: for you just twenty seconds here. I mean stocks down
21:09
Speaker 2: in the aftermarket, but we'll see what happens tomorrow.
21:11
Speaker 1: Yeah, we'll see what happens tomorrow. And for the remainder
21:14
Speaker 1: of the year. I think, you know, they put up
21:15
Speaker 1: strong financials and that could easily bounce back. You know,
21:18
Speaker 1: this quick reaction, but the investors love the short term.
21:21
Speaker 3: It depends on what they say.
21:22
Speaker 2: On the call exactly, and it'll be interesting to do
21:25
Speaker 2: if some investors may say, well, wait, it's a little
21:27
Speaker 2: bit cheaper than it was and I want the exposure.
21:30
Speaker 2: Red Brown, thank you so Also a rock Star, Yes, yes,
21:33
Speaker 2: rock Crease here right now.
21:34
Speaker 3: Yeah, we had a great group.