July 17, 2025 • 16 mins
While rival media companies are unloading assets and cutting costs, Netflix Inc. continues to thrive.
The owner of the world’s most popular paid streaming service on Thursday reported second-quarter results that exceeded investor expectations in every major metric, saying revenue grew to $11.1 billion and earnings jumped to $7.19 a share. The company also raised its forecast for full-year sales and profit margins.
The second quarter is historically slow for Netflix, which typically adds more customers at the beginning and end of the year. But the company released a steady slate of popular shows, including two of the most-watched titles of the year — the third season of Ginny & Georgia and the final season of Squid Game. The company also benefited from a weaker dollar. More than two-thirds of its customers live outside the US.
For instant reaction and analysis, hosts Tim Stenovec and Norah Mulinda speak with Geetha Ranganathan, Bloomberg Intelligence Senior Media Analyst and Mark Douglas, CEO of MNTN.
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Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news. This is a breaking
news update from Bloomberg instant reaction and analysis from our
three thousand journalists and analysts around the world. Netflix reported
second quarter results that exceeded investor expectations. It raised its
(00:24):
forecast as well. I want to bring in Getha Ranganathan.
She's Bloomberg Intelligence senior media analyst. She joins us from
New Jersey at Bloomberg Intelligence headquarters. What is the most
important metric that you watch now that Netflix no longer
reports subscribers or gives guidance on subscribers.
Speaker 2 (00:42):
Yeah, the focus tim has obviously changed from the subscriber
metrics and ARM or average revenue per member to broader
financial metrics. So really the two most I think important
numbers that everybody looks for right now is revenue growth
and operating margin. And as you write pointed out the
two Q numbers, Netflix surpassed expectations or they exceeded guidance
(01:05):
on both those accounts.
Speaker 3 (01:08):
So of course we see that they did beat on
multiple metrics, even some of the loftiest of expectations, raising
their forecast. But we're still seeing the street selling off
on and do you think maybe this is some profit
taking or was there anything in the report that you
saw that was particularly concerning.
Speaker 2 (01:24):
Absolutely not. I think the report was definitely solid, So
I would characterize this as a solid report, but maybe
not spectacular. So I think even in terms of the
guidance RaSE, yes, we did have the revenue guidance raised
from about thirteen percent to fifteen percent for the full year,
which I think is really solid. Mid teen's revenue growth
is really solid for a mature company like Netflix. But
(01:46):
I think with the operating margin, and I think this
is where maybe investors are slightly disappointed. You know, they
raised the guidance from twenty nine percent only a smidge
to twenty nine point five. I think a lot of
the investment community was looking at something and excess of
thirty percent. But again, they're operating margin guidance for three
Q seems really strong. I think they're taking a little
(02:08):
bit of a conservative approach. Of course, they do point
out that they do have all of their big content
releases coming out in the second half, which is obviously
going to crimp that margin, but I think still it
is a little bit conservative conservative, and I think eventually
they can go above thirty percent for this year.
Speaker 1 (02:25):
Expectations were so high going into this This is a
I was shocked when I looked this morning that Netflix's
market cap is up to five hundred and forty two
billion dollars. It's up forty three percent this year. The
value has pretty much doubled over the last year. It's
pretty remarkable that even though expectations were so high, they
were still able to beat and raise.
Speaker 2 (02:44):
Oh absolutely, I mean, and remember Tim, you know, they
have set not just expectations for this quarter or this year,
they have expectations going out till twenty thirty. So their
whole goal by the time of twenty thirty is to
reach the trillion dollar market market cap club. And they
have so many other different metrics. You know, they want
to across the four hundred and ten million subscriber mark
(03:07):
right now they're somewhere right above three hundred million. They
want to get an operating margin of somewhere around thirty
eight to close to almost forty percent. They want to
double revenue, and then most importantly, they want to get
their advertising business really growing at nine billions. So you know,
there are multiple metrics, there are multiple catalysts. Twenty twenty
four obviously was the biggest year in terms of subscriber numbers.
(03:30):
They gained something like over forty million new subscribers. This
year is all about price increases. We already saw them
take those price increases, and then next year is all
about building their advertising business. So they do have multiple catalysts,
you know, through twenty twenty five through twenty twenty six.
I think the street is going to those start to
wonder what happens after that, and so we do need
(03:51):
some strategic direction from them, you know, sooner rather than later.
Speaker 3 (03:55):
Jitha, I remember back when Netflix used to be options
to get DVDs? Do you remember that? To him? I
used to go and actually go get a DVD. Then
there weren't any commercials at the time.
Speaker 1 (04:04):
Really did I did that?
Speaker 3 (04:07):
Hey, you know I can hang with the big dogs,
say okay, but we used to have DVDs. Then there
was no commercials. Now we're seeing commercials. We're seeing a
lot of these competitors coming out and doing the ad
tier version as well. How is Netflix settling in this
entire thing? Are they still the front runner here or
do we see the likes of Peacock and Disney Plus
and all these other streaming services coming in to compete.
Speaker 2 (04:31):
So they are definitely not the front runner. Nora, So
they might have won the streaming wars, the streaming subscription wars,
but they're definitely a late entrant to the whole advertising party.
I would say the front runner there in terms of
streaming ad dollars is definitely Disney. They have an absolutely
fantastic business. They have Hulu, they have Disney Plus, they
have all of their ad infrastructure up and running from
(04:54):
their linear TV business. So Netflix definitely late to the game,
but I think they can still make a dent here
because we're seeing a whole huge shift, an industry wide
shift away from linear TV, which used to be about
a fifty five sixty billion dollar industry, to what is
called connected TV digital advertising, and Netflix is kind of
putting everything in place. So they're making sure that they
have the right type of content because this type of
(05:16):
on demand content doesn't necessarily really play well to advertising.
You really need to have more of a live event
or a sports type of content where you have you know,
a huge audience tuning and at the same time to
really appeal to advertisers. And they're making you know, they're
definitely making those investments. So we know that they went
after WWE, They're going after NFL. There's more and more
live programming that they're adding every day. And then of
(05:38):
course it is building on the tech side, right they
need all of the ad inventory capability. They just recently
partnered with Yahoo. They set up their own proprietary, proprietary
ad tech platform, so they're you know, kind of getting
all the infrastructure, all the plumbing in place for the
ad business to take off in a pretty big way.
And even this year, you know, they expected to double
from last year, and while they didn't give any numbers,
(06:00):
we think that even this year it will approach about
two and a half to three billion dollars in revenue,
which is pretty significant considering that, you know, they just
introduced advertising about two years ago.
Speaker 3 (06:10):
What is international programming looking like?
Speaker 2 (06:14):
Very strong? I mean, quarter after quarter we see you know,
some of their biggest titles being non English titles. I mean,
the greatest example, of course, is Squid Game, which is
their biggest title ever in the history of Netflix. And
they have multiple, you know, titles that they highlighted in
their investor newsletter for the second quarter. I mean, whether
(06:34):
it was X Territorial, which is a German movie. You know,
so many there was a big animation series from Korea.
You know, multiple series across the globe playing really really
well and scoring on par or even better with the
English titles. So you know, this has been a really
good strategy for them, you know, localizing a lot of
(06:55):
the content, going after international content in all of the
different territories, and that really health drive subscriber numbers as well.
You know, seventy percent of Netflix a subscriber bases outside
the United States.
Speaker 1 (07:05):
Getha, Since it's your job to know what Netflix has?
Can you just sit at work all day watch Netflix?
Speaker 2 (07:10):
I wish I could, damn all.
Speaker 1 (07:12):
Right, Well, it sounds like you know what you're doing,
so you're doing something right, and we really appreciate you
joining us on Netflix earnings Day. It's always great to
have you on the program. Getha Ranganath and she's Bloomberg
Intelligence senior media analyst joining us on Netflix. Check out
her research. It's going to be updated soon if it's
not already, it's on the Bloomberg terminal. We are seeing
shares of Netflix actually move lower in the after hours
(07:34):
after an initial bounts hired. The company did report results
that exceeded investor expectations in every major metric, revenue growing
to eleven point one billion dollars, earnings jumping from seven,
earn is jumping two rather seven dollars, and nineteen cents
per share. The company also raised its forecast for full
year sales and profit margins. It expects to generate up
(07:55):
to forty five point two billion dollars in sales and
have an operating margin of twenty nine point five percent.
Let's bring in Mark Douglass, the CEO of the publicly
traded advertising and marketing company Mountain ticker MNTN. He joins
us from Miami. Mark, always good to check in with you.
I want to focus specifically with you on the ads
(08:16):
supported element of this. I was telling Nora earlier. You know,
I'm old enough to remember when Netflix said they would
never do ads, they would never do live content, they
would never do news, they would never do sports. Now
they do all of those things, And is the and
more is the ads business working?
Speaker 4 (08:33):
I think the ad business is off to a start.
It can grow so much bigger, and you know it's
obviously growing. I think they're they're saying that they expect
a lot more growth, but it's also in a competitive space.
They're competing with Disney, with Peacock, with Paramount, Warner Brothers,
and you know those big spenders, those big brands, they
(08:56):
don't really increase their budget, So if you want to
come into that space, you have to take market share
from someone else. Netflix is what I would expect over time,
is that whatever percentage of viewership they have is what
percentage of the ad market they can get, So they
have a lot of room to grow. It is working,
but it's still relatively small compared to where it can be.
Speaker 3 (09:18):
I find it really interesting. We were discussing how people
are willing to pay for these subscriptions even if they
do contain ads. I can literally remember when you would
watch Netflix all the way through, no gaps at all.
But it seems as though this is a really thriving
part of their business here.
Speaker 4 (09:34):
Yeah. Well, I mean why did they add the ads?
Because their customers wanted a lower price point, and so
it's a simple trade off. We'll give you the lower
price point if you'll let advertisers pay for part of
your subscription. That's effectively what's happening. And so the customer
is getting what they want and Netflix is getting the
(09:54):
revenue they need know in order to make that possible.
So it is a win win. I'm not sure sure
everyone that gets ads thinks it's a win, but it's
certainly a win that they don't have to pay as
much to get the content.
Speaker 1 (10:07):
So I'm looking at the different plans and pricing for
Netflix here in the US. There's the standard with ads.
There's standard, there's premium, so it starts with seven to
ninety nine a month. You can go for premium up
to twenty five dollars a month. Again, this is here
in the US. There are different intricacies to this because
you can pay for extra members and the like. Netflix
has gotten really good at as my brother likes to
(10:29):
remind our entire family understanding if you're sharing an account
and now everybody kind of needs their own accounts. Is
there from the perspective of actual growth here in a
saturated market in the US, is there a concern or
is this by design that if Netflix raises the premium
price then there will be a small portion of the
(10:50):
folks who don't want to pay twenty five dollars a
month or whatever, and instead they'll drop down to that
ad supported model. Is that the strategy?
Speaker 4 (10:58):
I think yeah. I think worldwide Netflix maybe last quarter,
the quarter before Essential, the last time they were reporting
subscriber numbers, they said the number one, you know, kind
of tier that people were buying was the ad supported tier.
I think it was as much as half of all
new subscribers. And so people want it. They want that
(11:21):
price point. I think what's really interesting is the way
to think of it is Netflix is building a backlog
of future revenue. So, in other words, they bring on
the subscribers that they are essentially under moonetizing. They're charging
them seven ninety nine, and they're getting relatively few ads.
And as Netflix increases the ad load and essentially makes
(11:43):
more money, that is just like pure like that's going
to flow directly a bottom line. I would expect Netflix's
earnings to outstrip their revenue growth literally for years to come.
It's somewhat similar to the password backlog, where they knew
all these people were sharing the password, and at any
time they can just kind of kind of get more
(12:04):
serious about that and all of a sudden it produced
all this additional revenue. That's what's going to happen with
Netflix is advertising and I think I have never seen
a company this large that I would say should be
treated as a high growth stock. That's the potential in
the at business right Mark.
Speaker 3 (12:21):
One thing that was interesting to me as we're parsing
through this earnings was the fact that Netflix boosted its
full year revenue primarily due to US dollar depreciation. What's
your takeaway from.
Speaker 4 (12:31):
That, Well, I mean their global business. I mean, I
think that's for financial analysts to really look at. I mean,
obviously they don't want to be fluctuating their price points
based on the way financial markets are valuing the dollar
and other things. But I think the I think most
(12:53):
investors are going to look at the growth in revenue,
growth in earnings, continue expansion in national and I think
the most important value for Netflix, which is not really
explicitly measured in numbers, is they, through surveys, they are
the first place people go when they turn on their TV.
Is they turn on Netflix. And the amount of power
(13:15):
that gives this company is it's almost hard to state
that that's how they can turn you know, like fights
into like numbers that rival some of the biggest sporting events,
or turn wwee into you know, a big show on
Netflix where one has been as big as another channel.
And if I'm gonna invest, I'm going to be as
(13:36):
long as Netflix is the first place people go, It's
going to be the first stock I want to invest
in that. I think that's the biggest correlation.
Speaker 1 (13:44):
Hey, hey, Mark, since you are focused on the ads business,
in your view, what's a more profitable subscriber for Netflix?
Is it the one who's paying seven to ninety nine
a month for the ad supported version, or is it
the premium subscriber at twenty five or the standard subscriber
at eighteen bucks.
Speaker 4 (14:02):
I think the premium is probably the most profitable, but
I think then the ad supported has the potential to
become the second most profitable. I don't think it's there
yet because they simply are not monetizing all those entertainment
consumers at the level they could be. But when they are,
they're doing seven ninety nine on that price point, who knows,
(14:24):
it might be eight ninety nine next year something like that,
and they can make probably equal to that in terms
of AD dollars per user, and maybe even a bit
more than equal to that in AD dollars per user.
And you see that's what Amazon did were Prime where
they just flipped the entire customer base and the AD supported,
So that ad supported in terms of volume because most
(14:45):
of the subscribers I think will be AD supported over time.
Is the most profitable in terms of just share dollars
right now, it's probably the premium at twenty five dollars mark.
Speaker 3 (14:54):
I mean, when you think about Netflix historically, they were
initially felt like the leader, but you're seeing a lot
of these other companies any here trying to additionally monopolize
the space. But that being said, we did see some
news earlier that Comcast is raising the price of his
Peacock streaming service by three dollars a month. Very fitting
today when we have Netflix earnings. How are you thinking
about Netflix as a potential leader right now in this space?
Speaker 4 (15:16):
Yeah, I mean that losing that leadership position is going
to be hard for them because they just have to
keep investing in content, and they're profitable and very profitable,
so they can afford to keep doing that. But I
think what you're seeing happening is the other networks are
fighting back. Peacock with Love Island just massive show over
the last month from what I know, did incredibly well
(15:40):
advertise in terms of revenue generation. I think it's the
number one reality show in the world. Plus they have
Bravo and others. You have Disney with all the children's content,
Star Wars content, ESPN now going into live sports. I
think all the networks have gotten way more serious about
competing and they're bringing out their own hit content. But
(16:01):
as long as Netflix is number one, I think it's
hard for them to lose that spot. Probably the only
company that can really truly challenge them is Disney.
Speaker 3 (16:09):
Absolutely. It's interesting. We were just talking about Love Island.
Speaker 4 (16:13):
I am.
Speaker 3 (16:13):
I'm a watcher of Love Island, so I see how
they were able to skyrocket.
Speaker 1 (16:17):
Here somebody who I'm co anchoring with today went to
like a Love Island premiere, a watch party, watch party, or.
Speaker 3 (16:23):
That you hosted a watch party of my own two
days later.
Speaker 1 (16:27):
Meanwhile, I've never even seen an episode of whatever you
guys are talking about. Mark Douglas, always good to see
you fly on up here to New York next time
so we can hang out in the studio. Mark Douglas
is CEO of the publicly traded advertising and marketing company
Mountain
Bloomberg Audio Studios, podcasts, radio news. This is a breaking
news update from Bloomberg instant reaction and analysis from our
three thousand journalists and analysts around the world. Netflix reported
second quarter results that exceeded investor expectations. It raised its
(00:24):
forecast as well. I want to bring in Getha Ranganathan.
She's Bloomberg Intelligence senior media analyst. She joins us from
New Jersey at Bloomberg Intelligence headquarters. What is the most
important metric that you watch now that Netflix no longer
reports subscribers or gives guidance on subscribers.
Speaker 2 (00:42):
Yeah, the focus tim has obviously changed from the subscriber
metrics and ARM or average revenue per member to broader
financial metrics. So really the two most I think important
numbers that everybody looks for right now is revenue growth
and operating margin. And as you write pointed out the
two Q numbers, Netflix surpassed expectations or they exceeded guidance
(01:05):
on both those accounts.
Speaker 3 (01:08):
So of course we see that they did beat on
multiple metrics, even some of the loftiest of expectations, raising
their forecast. But we're still seeing the street selling off
on and do you think maybe this is some profit
taking or was there anything in the report that you
saw that was particularly concerning.
Speaker 2 (01:24):
Absolutely not. I think the report was definitely solid, So
I would characterize this as a solid report, but maybe
not spectacular. So I think even in terms of the
guidance RaSE, yes, we did have the revenue guidance raised
from about thirteen percent to fifteen percent for the full year,
which I think is really solid. Mid teen's revenue growth
is really solid for a mature company like Netflix. But
(01:46):
I think with the operating margin, and I think this
is where maybe investors are slightly disappointed. You know, they
raised the guidance from twenty nine percent only a smidge
to twenty nine point five. I think a lot of
the investment community was looking at something and excess of
thirty percent. But again, they're operating margin guidance for three
Q seems really strong. I think they're taking a little
(02:08):
bit of a conservative approach. Of course, they do point
out that they do have all of their big content
releases coming out in the second half, which is obviously
going to crimp that margin, but I think still it
is a little bit conservative conservative, and I think eventually
they can go above thirty percent for this year.
Speaker 1 (02:25):
Expectations were so high going into this This is a
I was shocked when I looked this morning that Netflix's
market cap is up to five hundred and forty two
billion dollars. It's up forty three percent this year. The
value has pretty much doubled over the last year. It's
pretty remarkable that even though expectations were so high, they
were still able to beat and raise.
Speaker 2 (02:44):
Oh absolutely, I mean, and remember Tim, you know, they
have set not just expectations for this quarter or this year,
they have expectations going out till twenty thirty. So their
whole goal by the time of twenty thirty is to
reach the trillion dollar market market cap club. And they
have so many other different metrics. You know, they want
to across the four hundred and ten million subscriber mark
(03:07):
right now they're somewhere right above three hundred million. They
want to get an operating margin of somewhere around thirty
eight to close to almost forty percent. They want to
double revenue, and then most importantly, they want to get
their advertising business really growing at nine billions. So you know,
there are multiple metrics, there are multiple catalysts. Twenty twenty
four obviously was the biggest year in terms of subscriber numbers.
(03:30):
They gained something like over forty million new subscribers. This
year is all about price increases. We already saw them
take those price increases, and then next year is all
about building their advertising business. So they do have multiple catalysts,
you know, through twenty twenty five through twenty twenty six.
I think the street is going to those start to
wonder what happens after that, and so we do need
(03:51):
some strategic direction from them, you know, sooner rather than later.
Speaker 3 (03:55):
Jitha, I remember back when Netflix used to be options
to get DVDs? Do you remember that? To him? I
used to go and actually go get a DVD. Then
there weren't any commercials at the time.
Speaker 1 (04:04):
Really did I did that?
Speaker 3 (04:07):
Hey, you know I can hang with the big dogs,
say okay, but we used to have DVDs. Then there
was no commercials. Now we're seeing commercials. We're seeing a
lot of these competitors coming out and doing the ad
tier version as well. How is Netflix settling in this
entire thing? Are they still the front runner here or
do we see the likes of Peacock and Disney Plus
and all these other streaming services coming in to compete.
Speaker 2 (04:31):
So they are definitely not the front runner. Nora, So
they might have won the streaming wars, the streaming subscription wars,
but they're definitely a late entrant to the whole advertising party.
I would say the front runner there in terms of
streaming ad dollars is definitely Disney. They have an absolutely
fantastic business. They have Hulu, they have Disney Plus, they
have all of their ad infrastructure up and running from
(04:54):
their linear TV business. So Netflix definitely late to the game,
but I think they can still make a dent here
because we're seeing a whole huge shift, an industry wide
shift away from linear TV, which used to be about
a fifty five sixty billion dollar industry, to what is
called connected TV digital advertising, and Netflix is kind of
putting everything in place. So they're making sure that they
have the right type of content because this type of
(05:16):
on demand content doesn't necessarily really play well to advertising.
You really need to have more of a live event
or a sports type of content where you have you know,
a huge audience tuning and at the same time to
really appeal to advertisers. And they're making you know, they're
definitely making those investments. So we know that they went
after WWE, They're going after NFL. There's more and more
live programming that they're adding every day. And then of
(05:38):
course it is building on the tech side, right they
need all of the ad inventory capability. They just recently
partnered with Yahoo. They set up their own proprietary, proprietary
ad tech platform, so they're you know, kind of getting
all the infrastructure, all the plumbing in place for the
ad business to take off in a pretty big way.
And even this year, you know, they expected to double
from last year, and while they didn't give any numbers,
(06:00):
we think that even this year it will approach about
two and a half to three billion dollars in revenue,
which is pretty significant considering that, you know, they just
introduced advertising about two years ago.
Speaker 3 (06:10):
What is international programming looking like?
Speaker 2 (06:14):
Very strong? I mean, quarter after quarter we see you know,
some of their biggest titles being non English titles. I mean,
the greatest example, of course, is Squid Game, which is
their biggest title ever in the history of Netflix. And
they have multiple, you know, titles that they highlighted in
their investor newsletter for the second quarter. I mean, whether
(06:34):
it was X Territorial, which is a German movie. You know,
so many there was a big animation series from Korea.
You know, multiple series across the globe playing really really
well and scoring on par or even better with the
English titles. So you know, this has been a really
good strategy for them, you know, localizing a lot of
(06:55):
the content, going after international content in all of the
different territories, and that really health drive subscriber numbers as well.
You know, seventy percent of Netflix a subscriber bases outside
the United States.
Speaker 1 (07:05):
Getha, Since it's your job to know what Netflix has?
Can you just sit at work all day watch Netflix?
Speaker 2 (07:10):
I wish I could, damn all.
Speaker 1 (07:12):
Right, Well, it sounds like you know what you're doing,
so you're doing something right, and we really appreciate you
joining us on Netflix earnings Day. It's always great to
have you on the program. Getha Ranganath and she's Bloomberg
Intelligence senior media analyst joining us on Netflix. Check out
her research. It's going to be updated soon if it's
not already, it's on the Bloomberg terminal. We are seeing
shares of Netflix actually move lower in the after hours
(07:34):
after an initial bounts hired. The company did report results
that exceeded investor expectations in every major metric, revenue growing
to eleven point one billion dollars, earnings jumping from seven,
earn is jumping two rather seven dollars, and nineteen cents
per share. The company also raised its forecast for full
year sales and profit margins. It expects to generate up
(07:55):
to forty five point two billion dollars in sales and
have an operating margin of twenty nine point five percent.
Let's bring in Mark Douglass, the CEO of the publicly
traded advertising and marketing company Mountain ticker MNTN. He joins
us from Miami. Mark, always good to check in with you.
I want to focus specifically with you on the ads
(08:16):
supported element of this. I was telling Nora earlier. You know,
I'm old enough to remember when Netflix said they would
never do ads, they would never do live content, they
would never do news, they would never do sports. Now
they do all of those things, And is the and
more is the ads business working?
Speaker 4 (08:33):
I think the ad business is off to a start.
It can grow so much bigger, and you know it's
obviously growing. I think they're they're saying that they expect
a lot more growth, but it's also in a competitive space.
They're competing with Disney, with Peacock, with Paramount, Warner Brothers,
and you know those big spenders, those big brands, they
(08:56):
don't really increase their budget, So if you want to
come into that space, you have to take market share
from someone else. Netflix is what I would expect over time,
is that whatever percentage of viewership they have is what
percentage of the ad market they can get, So they
have a lot of room to grow. It is working,
but it's still relatively small compared to where it can be.
Speaker 3 (09:18):
I find it really interesting. We were discussing how people
are willing to pay for these subscriptions even if they
do contain ads. I can literally remember when you would
watch Netflix all the way through, no gaps at all.
But it seems as though this is a really thriving
part of their business here.
Speaker 4 (09:34):
Yeah. Well, I mean why did they add the ads?
Because their customers wanted a lower price point, and so
it's a simple trade off. We'll give you the lower
price point if you'll let advertisers pay for part of
your subscription. That's effectively what's happening. And so the customer
is getting what they want and Netflix is getting the
(09:54):
revenue they need know in order to make that possible.
So it is a win win. I'm not sure sure
everyone that gets ads thinks it's a win, but it's
certainly a win that they don't have to pay as
much to get the content.
Speaker 1 (10:07):
So I'm looking at the different plans and pricing for
Netflix here in the US. There's the standard with ads.
There's standard, there's premium, so it starts with seven to
ninety nine a month. You can go for premium up
to twenty five dollars a month. Again, this is here
in the US. There are different intricacies to this because
you can pay for extra members and the like. Netflix
has gotten really good at as my brother likes to
(10:29):
remind our entire family understanding if you're sharing an account
and now everybody kind of needs their own accounts. Is
there from the perspective of actual growth here in a
saturated market in the US, is there a concern or
is this by design that if Netflix raises the premium
price then there will be a small portion of the
(10:50):
folks who don't want to pay twenty five dollars a
month or whatever, and instead they'll drop down to that
ad supported model. Is that the strategy?
Speaker 4 (10:58):
I think yeah. I think worldwide Netflix maybe last quarter,
the quarter before Essential, the last time they were reporting
subscriber numbers, they said the number one, you know, kind
of tier that people were buying was the ad supported tier.
I think it was as much as half of all
new subscribers. And so people want it. They want that
(11:21):
price point. I think what's really interesting is the way
to think of it is Netflix is building a backlog
of future revenue. So, in other words, they bring on
the subscribers that they are essentially under moonetizing. They're charging
them seven ninety nine, and they're getting relatively few ads.
And as Netflix increases the ad load and essentially makes
(11:43):
more money, that is just like pure like that's going
to flow directly a bottom line. I would expect Netflix's
earnings to outstrip their revenue growth literally for years to come.
It's somewhat similar to the password backlog, where they knew
all these people were sharing the password, and at any
time they can just kind of kind of get more
(12:04):
serious about that and all of a sudden it produced
all this additional revenue. That's what's going to happen with
Netflix is advertising and I think I have never seen
a company this large that I would say should be
treated as a high growth stock. That's the potential in
the at business right Mark.
Speaker 3 (12:21):
One thing that was interesting to me as we're parsing
through this earnings was the fact that Netflix boosted its
full year revenue primarily due to US dollar depreciation. What's
your takeaway from.
Speaker 4 (12:31):
That, Well, I mean their global business. I mean, I
think that's for financial analysts to really look at. I mean,
obviously they don't want to be fluctuating their price points
based on the way financial markets are valuing the dollar
and other things. But I think the I think most
(12:53):
investors are going to look at the growth in revenue,
growth in earnings, continue expansion in national and I think
the most important value for Netflix, which is not really
explicitly measured in numbers, is they, through surveys, they are
the first place people go when they turn on their TV.
Is they turn on Netflix. And the amount of power
(13:15):
that gives this company is it's almost hard to state
that that's how they can turn you know, like fights
into like numbers that rival some of the biggest sporting events,
or turn wwee into you know, a big show on
Netflix where one has been as big as another channel.
And if I'm gonna invest, I'm going to be as
(13:36):
long as Netflix is the first place people go, It's
going to be the first stock I want to invest
in that. I think that's the biggest correlation.
Speaker 1 (13:44):
Hey, hey, Mark, since you are focused on the ads business,
in your view, what's a more profitable subscriber for Netflix?
Is it the one who's paying seven to ninety nine
a month for the ad supported version, or is it
the premium subscriber at twenty five or the standard subscriber
at eighteen bucks.
Speaker 4 (14:02):
I think the premium is probably the most profitable, but
I think then the ad supported has the potential to
become the second most profitable. I don't think it's there
yet because they simply are not monetizing all those entertainment
consumers at the level they could be. But when they are,
they're doing seven ninety nine on that price point, who knows,
(14:24):
it might be eight ninety nine next year something like that,
and they can make probably equal to that in terms
of AD dollars per user, and maybe even a bit
more than equal to that in AD dollars per user.
And you see that's what Amazon did were Prime where
they just flipped the entire customer base and the AD supported,
So that ad supported in terms of volume because most
(14:45):
of the subscribers I think will be AD supported over time.
Is the most profitable in terms of just share dollars
right now, it's probably the premium at twenty five dollars mark.
Speaker 3 (14:54):
I mean, when you think about Netflix historically, they were
initially felt like the leader, but you're seeing a lot
of these other companies any here trying to additionally monopolize
the space. But that being said, we did see some
news earlier that Comcast is raising the price of his
Peacock streaming service by three dollars a month. Very fitting
today when we have Netflix earnings. How are you thinking
about Netflix as a potential leader right now in this space?
Speaker 4 (15:16):
Yeah, I mean that losing that leadership position is going
to be hard for them because they just have to
keep investing in content, and they're profitable and very profitable,
so they can afford to keep doing that. But I
think what you're seeing happening is the other networks are
fighting back. Peacock with Love Island just massive show over
the last month from what I know, did incredibly well
(15:40):
advertise in terms of revenue generation. I think it's the
number one reality show in the world. Plus they have
Bravo and others. You have Disney with all the children's content,
Star Wars content, ESPN now going into live sports. I
think all the networks have gotten way more serious about
competing and they're bringing out their own hit content. But
(16:01):
as long as Netflix is number one, I think it's
hard for them to lose that spot. Probably the only
company that can really truly challenge them is Disney.
Speaker 3 (16:09):
Absolutely. It's interesting. We were just talking about Love Island.
Speaker 4 (16:13):
I am.
Speaker 3 (16:13):
I'm a watcher of Love Island, so I see how
they were able to skyrocket.
Speaker 1 (16:17):
Here somebody who I'm co anchoring with today went to
like a Love Island premiere, a watch party, watch party, or.
Speaker 3 (16:23):
That you hosted a watch party of my own two
days later.
Speaker 1 (16:27):
Meanwhile, I've never even seen an episode of whatever you
guys are talking about. Mark Douglas, always good to see
you fly on up here to New York next time
so we can hang out in the studio. Mark Douglas
is CEO of the publicly traded advertising and marketing company
Mountain
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