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Instant Reaction: Netflix Posts Record Quarter · Bloomberg Intelligence

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  Speaker 1: Bloomberg Audio Studios, podcasts, radio news, Netflix shares soaring after
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  Speaker 1: they boosted their revenue out look. Carol, One thing that's
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  Speaker 1: kind of surprising to me, which part is the first
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  Speaker 1: quarter outlook doesn't seem to be affecting the way the
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  Speaker 1: stock is moving. First quarter operating income therefore projecting two
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  Speaker 1: point nine to four billion, analysts wanted to see three
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  Speaker 1: point one three billion dollars. First quarter operating margin expected
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  Speaker 1: to be twenty eight point two percent. Analysts wanted to
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  Speaker 1: see twenty nine zero point eight percent.
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  Speaker 2: Maybe they're looking at the twenty twenty two revenue overall
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  Speaker 2: and looking at the big number versus kind of the breakdown.
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  Speaker 1: See revenue projections coming in light, first quarter EPs coming
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  Speaker 1: in light. I guess you are shrugging that off.
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  Speaker 2: But they see twenty twenty five revenue maybe a little
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  Speaker 2: bit better than what was initially expected. So maybe that's
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  Speaker 2: the hope.
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  Speaker 3: I don't know.
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  Speaker 2: Let's see what Caroline Hind has to say. She's co
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  Speaker 2: host of Bloomberg Technology and she joins us. Now, Caroline,
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  Speaker 2: I mean, there's also the buyback in shares. But Netflix
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  Speaker 2: just soaring in the aftermark.
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  Speaker 4: What a way to close out your subscriber numbers, because
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  Speaker 4: this is the last time we ever get them. The
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  Speaker 4: last quarter of subscriber numbers an absolute blowout, as you say,
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  Speaker 4: coming in double where the expectations have been of eighteen million,
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  Speaker 4: and they've added an on net forty one million.
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  Speaker 5: More people around the world over the course of this year.
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  Speaker 4: I mean, this is better than they did during twenty
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  Speaker 4: twenty in the onset of COVID, when we were all
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  Speaker 4: suddenly trapped in our homes and had nothing else to.
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  Speaker 5: Do but to switch on and pay for Netflix.
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  Speaker 4: Extraordinary numbers, And I think, Carol, what you're saying is
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  Speaker 4: really president the fact that they're looking to a full
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  Speaker 4: year that still looks so strong. Operating margin going to
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  Speaker 4: live up to twenty nine percent. I hear you, Tim
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  Speaker 4: on the fiscal first quarter perhaps looking a little bit light.
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  Speaker 4: But remember this is a company that promised us for advertising,
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  Speaker 4: which has been slow to bear fruit.
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  Speaker 5: Isn't actually going to give.
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  Speaker 4: Us a real substantiate and financial hit and oop until
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  Speaker 4: twenty twenty six.
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  Speaker 5: But already you're seeing.
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  Speaker 4: Those dividends, Already you're seeing people pile into the advertising product.
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  Speaker 4: And thank you to j Paul, to Mike Tyson, to
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  Speaker 4: be on because this is where it's at.
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  Speaker 5: It seems to be live programming. What are you winning
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  Speaker 5: it for?
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  Speaker 1: Yeah, I was gonna say no boxing matches or Beyonce
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  Speaker 1: happening during the pandemic either. So maybe that's one of
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  Speaker 1: the big shifts. Someone, do you want to bring in?
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  Speaker 1: Getha ranganathen technology and media analysts for Bloomberg Intelligence. Just
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  Speaker 1: to repeat some of these headlines here, Netflix shares are
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  Speaker 1: soaring more than a ten percent. They boosted their twenty
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  Speaker 1: twenty five revenue outlook. They added eighteen point nine one
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  Speaker 1: million dollars a million excuse me, net paid streaming users
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  Speaker 1: in the fourth quarter. Estimates were for nine point one
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  Speaker 1: point eight so more than doubling it there, Githa, You've
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  Speaker 1: had about ten minutes to look at these results. What
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  Speaker 1: jumps out to you?
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  Speaker 5: Yeah?
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  Speaker 3: Everything? Really everything what you just pointed out. You know,
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  Speaker 3: the one thing that we were worried about coming into
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  Speaker 3: this quarter was whether they were going to take down
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  Speaker 3: their revenue expectations just kind of given the strength and
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  Speaker 3: the dollar, but they actually boosted that and you know,
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  Speaker 3: you talked about the live sports being such a big
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  Speaker 3: part of this eighteen point nine million subscriber blowout, and
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  Speaker 3: it's going to be interesting to see how they go
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  Speaker 3: ahead with both criber acquisition and retention. So they do
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  Speaker 3: have WWE programming that came on, you know, starting January
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  Speaker 3: of this year, and that's a really interesting retention strategy
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  Speaker 3: because you do do have that programming kind of come
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  Speaker 3: in a week in and week out, and so it's
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  Speaker 3: going to be interesting to see how they kind of
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  Speaker 3: shape the conversation forward. The one big thing that you know,
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  Speaker 3: everybody was kind of looking at and you know, we
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  Speaker 3: still haven't gotten any inkling about is the price hikes.
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  Speaker 3: So that's again another big positive lever that they have
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  Speaker 3: to pull sometime through this year, especially kind of given
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  Speaker 3: that this is going to be their strongest ever content
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  Speaker 3: pipeline year twenty twenty five with all of their you know,
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  Speaker 3: hit shows returning.
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  Speaker 2: Hey, before we go back to Caroline, I have one
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  Speaker 2: question for you, Geita. I mean this, you know, the
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  Speaker 2: live sports programming, the live programming in general, it's expensive,
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  Speaker 2: isn't it. So that's a lot of pressure that I mean,
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  Speaker 2: Netflix really has to make sure that they've got the
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  Speaker 2: eyeballs that make it pay off.
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  Speaker 3: It did pay off for them, so just let's just
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  Speaker 3: take the NFL for instance, they spent about seventy five
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  Speaker 3: million dollars per game. We estimate that they brought in
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  Speaker 3: well over one hundred million just an AD revenue, and
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  Speaker 3: then think of all of those additional subscribers that they got.
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  Speaker 3: So this is paying off for them big time. So
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  Speaker 3: they're making it. The content investments are definitely big, but
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  Speaker 3: they're pretty disciplined, Carol, and I think the ROI they're
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  Speaker 3: going to find is really really good as well.
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  Speaker 1: Hey, Carolyn, to that point, Netflix certainly the early mover
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  Speaker 1: when it comes to this. I think it's fair to
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  Speaker 1: say they certainly invented a category here. But since then
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  Speaker 1: you've had companies like Max, Paramount, Peacock from NBC Universal
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  Speaker 1: all come out with their own streaming products to much
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  Speaker 1: less success. Disney, of course, we've got to throw that
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  Speaker 1: one in there as well. What is Netflix doing so
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  Speaker 1: well that the other companies are not necessarily doing.
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  Speaker 5: Very good? Point and leaving them the dust.
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  Speaker 4: I mean, Leatha's numbers is so stand out when you
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  Speaker 4: think about this is a company with three hundred million
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  Speaker 4: subscribers worldwide, leaving Disney just way behind, less than half
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  Speaker 4: of what they've currently been able to crow about.
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  Speaker 5: But I think it's just the heavy mix.
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  Speaker 4: Of being able to offer you the right content at
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  Speaker 4: the right time and the right price format. They're making
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  Speaker 4: big inroads into Latin America and into Europe as well
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  Speaker 4: as into the United States.
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  Speaker 5: Which really surprised me.
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  Speaker 4: Was how strong the US and Canada are in the
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  Speaker 4: face of those price heights. But I think most notably
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  Speaker 4: it is the fact that they keep on delivering, whereas
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  Speaker 4: it's carry On is a great movie that people have
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  Speaker 4: flocked to, whether it's these ongoing franchises that people cannot
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  Speaker 4: get enough of Wednesdays coming out with more, we're going
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  Speaker 4: to be getting.
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  Speaker 5: A new stranger things.
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  Speaker 4: These are people that a lot loaded on these particular
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  Speaker 4: types of content and the genre that they feel so
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  Speaker 4: comfortable with. And I wonder, and it's one more for
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  Speaker 4: Geetha really is how much we're going to see cyclical
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  Speaker 4: nature of.
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  Speaker 5: People signing on and signing off when it comes to sports,
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  Speaker 5: because that is.
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  Speaker 4: What is that the behest and what has so been
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  Speaker 4: the issue for the likes of Warner Brothers and Disney
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  Speaker 4: is that you basically turn on when it's your season
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  Speaker 4: and then you switch.
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  Speaker 5: Off again and you have this huge jump starts in numbers.
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  Speaker 4: All were going to see that consistency when you do
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  Speaker 4: have the deals of rule for example, ps my producer
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  Speaker 4: Jackie absolutely loves.
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  Speaker 5: The new role. So ass you say they're winning on
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  Speaker 5: the WWE front, Keitha.
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  Speaker 2: Come on in on that talk to us about the
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  Speaker 2: cyclical cyclicality or not nature of sports.
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  Speaker 5: Yeah.
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  Speaker 3: No, that's a great point that Caroline brought up, and
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  Speaker 3: we've seen that happen every time during football season, right,
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  Speaker 3: people just sign up for all these services and then
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  Speaker 3: after the Super Bowl you have so much of this
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  Speaker 3: what is called churn and burned.
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  Speaker 4: Right.
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  Speaker 3: But that's where I think Netflix is going to do
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  Speaker 3: things a little bit differently. So they're going to use
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  Speaker 3: a combination of these big, splashy events think of you know,
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  Speaker 3: Tyson versus Paul or even the NFL games where you know,
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  Speaker 3: you can go out and acquire all this huge bunch
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  Speaker 3: of subscribers, and then you have you know, consistent weekly
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  Speaker 3: programming like WWE. The next thing that's really coming up
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  Speaker 3: for renewal is UFC, which is again year round programming,
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  Speaker 3: which then you know, forces people to come back week
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  Speaker 3: after week to watch their favorite shows, and I think
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  Speaker 3: that's how they're going to They've always kind of strived
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  Speaker 3: for this nice mix, you know, whether it's English non
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  Speaker 3: English content, you know, whether it's licensed original content, and
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  Speaker 3: now it's going to be you know, kind of this
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  Speaker 3: live sports, the one off events versus you know that
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  Speaker 3: year round programming.
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  Speaker 1: Githa, before we let you go, you're an analyst for
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  Speaker 1: Bloomberg Intelligence. You cover technology and media. You like having
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  Speaker 1: more data rather than less data. Unfortunately, you're going to
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  Speaker 1: get less data from Netflix moving forward because they're not
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  Speaker 1: going to report this customer metric anymore. What are you
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  Speaker 1: going to use to back out that figure? What should
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  Speaker 1: we be looking at?
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  Speaker 3: Yeah, definitely, I mean revenue is how they have been
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  Speaker 3: kind of training as revenue growth is going to be
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  Speaker 3: the big number going forward. It's going to be interesting
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  Speaker 3: to see if they give any metrics tim around advertising
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  Speaker 3: at all, because we will kind of need that a
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  Speaker 3: little bit to see if that add our poo number
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  Speaker 3: is climbing up or not. But yeah, we're going to
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  Speaker 3: have to make some guestimates in terms of subscriber numbers.
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  Speaker 3: But yes, revenue and operating margin, I think those are
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  Speaker 3: going to be the major metrics that investors are going
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  Speaker 3: to be focused on going forward.
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  Speaker 2: Hey, before we go, Caroline, I did want to get
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  Speaker 2: you to weigh in on We are anticipating an announcement
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  Speaker 2: by President Trump and building artificial intelligence infrastructure here in
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  Speaker 2: the United State. It's a big joint venture. We've seen
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  Speaker 2: some stacks like Oracle move on it. What do we
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  Speaker 2: know or what might we expect?
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  Speaker 5: It's so interesting, isn't it?
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  Speaker 4: Because it was but a few weeks ago that Masayoshi's
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  Speaker 4: son was on stage with Trump congratulating him on his
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  Speaker 4: presidential win and promising one hundred million dollars into AI infrastructure.
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  Speaker 4: And here we get it, one hundred million maybe going
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  Speaker 4: up to five hundred million dollars with soft Bank, open
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  Speaker 4: Ai and Oracle. There are so many questions here because
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  Speaker 4: what Oracle is going to be stealing some of Microsoft's
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  Speaker 4: lunch here? Because remember open Ai tends to depend on
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  Speaker 4: Microsoft for its cloud infrastructure at the moment. But we
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  Speaker 4: understand from reporting of our own colleagues that there's been
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  Speaker 4: some frustration by open Ai and Microsoft not being able
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  Speaker 4: to build out as quickly as enough as they would
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  Speaker 4: like and having to go elsewhere for their compute power
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  Speaker 4: for their latest large language models. This is exactly what
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  Speaker 4: the President now wants to be laying out money coming in,
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  Speaker 4: particularly from the foreign investment like SoftBank, and committing to
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  Speaker 4: building infrastructure here in the United States, and remember it's
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  Speaker 4: going to have to have the energy that goes alongside it.
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  Speaker 4: But big move for Oracle Stock, big important cloud growth
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  Speaker 4: driver for them. But also really interesting tie up between SoftBank,
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  Speaker 4: which has been taking more and more of a stake
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  Speaker 4: in open Ai by buying up some of those shares
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  Speaker 4: on the private market and tender office coming from employees
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  Speaker 4: and indeed leaving me with questions about Microsoft. But we
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  Speaker 4: do anticipate that unveiling at the White House today.
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  Speaker 2: All right, looking forward to that great setup for us
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  Speaker 2: as we anticipate that in great analysis from both of you.
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  Speaker 2: When it comes to Netflix, we are watching the stock
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  Speaker 2: continuing to trade soaring really in the aftermarket, up about
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  Speaker 2: eleven percent as we speak. Our thanks to Caroline High,
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  Speaker 2: co host of Bloomberg Technology, and of course our Githa
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  Speaker 2: Rang andath On. She is technology and media analyst for
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  Speaker 2: Bloomberg Intelligence. We'll all be reading her research