Netflix Q4 earnings call notes; shares are trading up 8.5% in after-hours trading
- Very excited about range of opportunities ahead, the improvement in technology has provided incremental benefits, and they see much more runway in front of them.
- Sees value in experimentation, in unscripted television, they hire great people with great talent, and they get out of their way.
- International expansion has been phenomenal.
- They are investing in shows from around the world, and they will have more international shows in Q1. Moving forward they will be more of a global company for consumers, and for content producers.
-
Their cautious guidance was based on price increases that didn't seem to affect performance.
- Saw very little effect in sign-ups and growth, their takeaway is that content is the primary focus; the goal is to take this increase in revenue and use it to create even better content.
- They are seeing success in different markets, pleased with progress in Latin America, India, Southeast Asia, Japan, all across the board they are seeing growth patterns similar to Latin America, which has worked out very well for the company.
- For many markets there is still relative youth for how long we've been in the market. They have been in Latin America for 6 years and Europe for 5 years.
-
Q: What about growth in the U.S.? Who is left to subscribe to Netflix? Who are these people?
- A: 5 years ago they thought the total market in the U.S. would be between 60 and 90 mln, and they are currently at 55 mln. The key is to make bigger titles bigger, people hear about their friends talking about a show (word-of-mouth), that is the dominate accelerator for growth.
- Content spending is $8 bln this year and will 'definitely' be higher' in 2019 and 2020.
- Bright is one of the most watched pieces of content they've ever had on Netflix, critics are important, but they are disconnected from the commercial prospects of the film.
- The increase in marketing spend is embedded in guidance.
-
On the Disney (DIS) 21st Century Fox (FOXA) deal
- Surprised Fox was willing to sell.
- Thinks Disney's direct to consumer services will be successful because they have great brands, but they don't see Disney as a threat.
- Doesn't think Disney removing content from Netflix is risky, one of the reasons Netflix entered into original programming was to create their own original programming if they networks wouldn't sell them programming.
- The $17.7 bln in content commitments is tied to licensing deals with companies like Disney.
- Q: What if Warner Bros (TWX), Universal (CMCSA), and other licensing partners rethink their licensing agreements with you?
- A: It comes down to whether they think they can make more money licensing to Netflix, or monetizing their own services, which remains to be seen,
- A: A lot of the focus over the last 4-5 years has been is to go directly to producers and talent, and they feel very good about the path they are on.
- They believe the total streaming market will grow faster because of competition.
- Surprised Fox was willing to sell.
- Not having advertising is a core differentiator, commercial free services are so popular that consumers appreciate Netflix.
Shares of Netflix are trading up 8.5% at $246.90/share in after-hours trading