The Netflix episode "Woooooo!" This week, we discuss Netflix’s record Q4 earnings, their free cash flow of $6.9 billion for 2023, their growing AVOD business and their off-the-top rope deal with the WWE as they continue to dominate the industry. We discuss how the WWE deal with "scripted entertainment” differs from sports content, how it will expand Netflix’s advertising business, and what it might mean for a more significant content deal with the WWE when Peacock’s domestic WWE Network deal expires in March 2026.
We highlight new data from Netflix showing that 40% of all Netflix sign-ups are for their AVOD plan in markets where it is offered and the reason why Netflix plans to retire their Basic plan in some of their ad countries. We debate the growth Netflix could have with AVOD in the short and long term, especially with T-Mobile having just converted Netflix’s users to the ads plan in their "Netflix On Us" bundle.
Finally, we discuss what Netflix said about their shift in the mix of content spend, their historical bias to build and not buy content assets, why they are not interested in some of the big linear assets being shopped and the work they are doing to improve ad targeting, relevance and measurement.
Podcast produced by Security Halt Media
The Netflix episode "Woooooo!" This week, we discuss Netflix’s record Q4 earnings, their free cash flow of $6.9 billion for 2023, their growing AVOD business and their off-the-top rope deal with the WWE as they continue to dominate the industry. We discuss how the WWE deal with "scripted entertainment” differs from sports content, how it will expand Netflix’s advertising business, and what it might mean for a more significant content deal with the WWE when Peacock’s domestic WWE Network deal expires in March 2026.
We highlight new data from Netflix showing that 40% of all Netflix sign-ups are for their AVOD plan in markets where it is offered and the reason why Netflix plans to retire their Basic plan in some of their ad countries. We debate the growth Netflix could have with AVOD in the short and long term, especially with T-Mobile having just converted Netflix’s users to the ads plan in their "Netflix On Us" bundle.
Finally, we discuss what Netflix said about their shift in the mix of content spend, their historical bias to build and not buy content assets, why they are not interested in some of the big linear assets being shopped and the work they are doing to improve ad targeting, relevance and measurement.
Podcast produced by Security Halt Media
Welcome to this week's edition of the Dan Rayburn podcast, the show that curates the streaming media industry news that matters most, unvarnished, unscripted and providing you with the factual data you need to know, without any of the hype, the pulse of the streaming media industry.
Speaker 2:Welcome to the Dan Rayburn podcast. I'm Dan Rayburn, along with co-host Mark Donaghan For another long week of news, but today we are going to do a little something different and we are going to make this the all Netflix all the time.
Speaker 3:That's right, all about Netflix. We've got an up to cover Netflix 24-7.
Speaker 2:So many interesting things coming out this past week, mark, I think I did I have to look it up, but I think I did six TV appearances in radio shows, us and Canada. Incredible, just how much also the news is interested in this, and more so because of WWE. The traditional news outlets don't really pick up too much on Netflix earnings, other than like, oh, they gained a bunch of subscribers, but it was all about the WWE, which was kind of cool for them to pick up on and see because they were asking some. I thought they were asking some really good questions. That's great.
Speaker 2:So I think today, mark, what we'll do is we'll break down not only some of the numbers from earnings, which are kind of straightforward, but I think it's important because not only is it Q4 2023 calendar year, but it's a full year. So adding up some numbers is pretty interesting, and then we'll go into the WWE. You know I have to laugh, mark, because I did an interview TV yesterday for Scripps and in all the years I've done live TV, I've never been asked a question about Ric Flair. So I got asked a question about.
Speaker 3:Ric Flair and you said, oh, I love him.
Speaker 2:He's my favorite guy.
Speaker 3:That's my boy.
Speaker 2:And something about wrestling with how come this woman with blue hair never loses or something, but it was a good segment. It was Del.
Speaker 3:Oaks, who did you? Just sort of go I don't know.
Speaker 2:I did. I laughed during the whole, the whole piece it was. It was entertaining, though, and it was good because we chatted for five or six minutes, so we got to cover a lot, but there's there's a lot of pieces here in the WWE side. I think some are missing. And then we've got to go into just a few things here with the goofballs in the industry Like oh, this definitely means Netflix is getting into sports and NBA, which clearly means they didn't listen to.
Speaker 2:Netflix's call, who came right out and said we're not doing that. But you know that's the way it works. So let's just run through the numbers real quickly For those that don't know. Netflix added 13.1 million subs, so they end with 260.2 million at the end of 2023. This is the second largest net ads in the history of the company and it's the largest net ads in Q4 history of the company Incredible. For 2024, netflix expects $6 billion in free cash flow to spend up to 17 billion on content. Free cash flow for all last year was 6.9 billion.
Speaker 2:Arm was flat, so Arm was what they refer to as average revenue per member. Also, we refer to it as ARPU average revenue per user, so Arm was flat at 1%. Not surprising if you look at and that's an overall global number. If you add up all the regions globally, obviously pricing is different. The ad tier is different. Netflix did not come out and say how many subscribers or monthly active users they had for the AVOD plan other than the number they gave us recently. The new number we did get from them, though, on AVOD is they said the ad plans now account for 40% of all new Netflix signups in ad markets where it's being offered and originally the number they gave us, I believe, was 25%. It was 20 or 25%, but they still were not willing to give out any numbers, even on the artist's call of any kind.
Speaker 3:I wonder yeah, I found the comment interesting and maybe you're going to touch on this next, but that in some of these markets they're looking to retire the basic plan in these ad countries and I guess the basic plan would be ads I mean, that's how you get started. Does that mean that the revenue they're getting from an advertising user member, I guess they say, is more than what they're able to charge? I wonder.
Speaker 2:No, we don't have a breakdown of any of that yet. So what they're looking to do is retire the ad. I believe it's the ad free tier, not ads, but the ad free tier. So they're looking to retire that only in certain areas outside the US, but they didn't say all the countries that they're going to do that in?
Speaker 2:Yeah, exactly just that ad country, but Netflix has not. Yeah, netflix has not broken out anything in terms of what is the breakdown of subscriptions versus percentage that comes from ads. We just don't know what Netflix is doing. Is they're going to retire their cheapest ad free plan? What they said was quote in some of our countries we know that they said in the second quarter of this year they listed or highlighted Canada and the UK, so they mentioned those two regions specifically and then they said quote we will take it from there. So the cheapest ad free plan is going to disappear, in which case, no doubt they're going to be pushing users to the ads plan.
Speaker 2:And I think this makes sense because they need to get scale which we'll talk about in a minute. Wwe will help put second.
Speaker 2:They're playing the long game, obviously, and they know over time the money they're going to make. On CPMs, they can make more money in that if they do better targeting, which they talked about. On the earnings call, which we're also going to get into Very interesting comments from them in the earnings call, which I did break out and publish on LinkedIn today, on Friday, january 26th. All the key takeaways. So let's go mark. Next is the WWE deal. So I Think this is a really good deal. I think at the price point. So Netflix announced in January of 2025 that will be the home for the WD WWE show called raw, and they'll be the home for it in US, canada, latin American, latin America and the UK. Now, outside the US, netflix will also be the home of other series or shows a Smackdown, nxt and WWE's premium live events. So WrestleMania, royal Rumble. It's a. Netflix is spending five billion dollars on this over ten years. They have an option for Netflix to extend the pack for an additional ten years or they can also opt out after five years. Now the five billion dollar number we know is accurate because there was a regulatory filing from the company that owns WWE that put it out in terms of the actual number. So the good news is we know the number.
Speaker 2:Now let's talk sports for a minute. It was good to see that a lot of people got this accurate when talking about it, but some still have not. So Netflix isn't getting into sports. I mean what they called this and what this really is a scripted entertainment. But what Netflix specifically called this out is sports adjacent content. That's right. It made huge references to formula one and some of the other sports things that they're doing, but they made it really clear they don't view this as quote sports. It's scripted entertainment and that is what they're good at and they're absolutely right. Yeah, and the W.
Speaker 3:I think the point. Wwe is about as scripted a sport as you get Very definition. Do they even call?
Speaker 1:themselves a sport.
Speaker 3:Yeah, I don't know but yeah, yeah, I think that is that, that so that's actually very good point, dan, is you know people are confusing or they're just you know. You know they're sort of mixing it here, you know, oh, but these are live events and you know they are quote athletes out there. So therefore, netflix is getting into sports. You know it's like, well, no, they are not telling us they're gonna go license, you know, do a deal with a league, you know.
Speaker 2:Or do a deal with a team and now mark, let's, let's say exactly what they said here. So the WWE deal, which Netflix, on their earnings, called called they use different, different term, they called it sports storytelling yeah.
Speaker 2:Yeah, doesn't change how they look at sports license and same content. When they were asked that in the earnings call, this is what they said quote I would not look at this as a signal of any other change or any change to our sports strategy. They said they need to. They plan to stay quote very disciplined in terms of our overall content spend in our business performance. So for those out there saying, well, this is an indication they're getting into sports, someone said this is now assigned. They're gonna bid on MBA. You're delusional, I don't know what you're talking about. They're very clear with their messaging here. They also made it very clear in terms of the content.
Speaker 2:License costs with actual sports content Would be hard for them to monetize and if we think about the, five billion dollar number, that's five billion dollars over ten years, five hundred five hundred million, and you know five hundred million a year, but that's, you know.
Speaker 3:They have 17 billion planned for for this. You know this year 24. So yes, you know, I guess, do the math, you can figure out a percentage basis. It's not insignificant, but it's not insignificant, but it helps us know it's not, but think of NFL billion. Exactly.
Speaker 2:That's night and day and mark. You brought up the number so we'll cover it now. We'll just cover it now. When they were asked on the earning call, they said the content licensing costs with the WWE quote fits inside of our 17 billion programming spend now. So in other words, their programming spends not going up based on this deal. So Very, very clear of the Wall Street in terms of well, wall loves it now Ripping.
Speaker 3:I mean ripping. You know, meeting up likes almost 17%.
Speaker 2:It was up over $60 day after earnings like yeah investors love this deal and as it should be. I mean frankly, look at their balance sheet. Oh, but Dan now let's talk about we have to buy Netflix because they're in peril.
Speaker 3:Remember it was like nine months ago.
Speaker 2:They're reading their market cap now. Let's see. Microsoft passed three trillion dollars in market cap so you know crazy. So I was thinking. Programming here for a minute Raw is currently three hours alive programming per week. Now, if listeners don't know, for those that don't know me, I don't know much about it.
Speaker 2:Do I it's just not content. Yeah, I've really been into, but I did a lot of research, looked up the history here. So raw used to be a two-hour live show. The many years ago it was added, an hour was added. So currently, today, it's three hours of live programming. And the way I think of this for Amazon, for Netflix, is it gives viewers a reason to come back to the platform every week on a regular basis, which is very similar to what Amazon does with Thursday night football. So that's that's not too surprising. Now what I wonder, mark, is how involved will Netflix be with WWE In terms of the product next year? In the time written total number of live hours per week or per month? It's three hours now how do we know?
Speaker 3:it's not four hours or two hours, it would be so they didn't talk about what say they have. You know, I would.
Speaker 2:Or maybe the metrics show that if we have fewer hours, we can have higher.
Speaker 1:Yeah, I don't know.
Speaker 2:But there's one thing we know Netflix does make decisions on and that's data, so that will be interesting to watch. I want to see how much content they have now. For the folks that don't know Raw it's currently the number one show in USA Network and it brings in 17.5 million unique viewers over the year. Now, this is something I didn't know. That Netflix said, which was WWE, is the second most popular sport in India after cricket.
Speaker 1:Really and in new yeah.
Speaker 2:Wow places.
Speaker 3:I was thinking yeah, yeah, really I would, I would guess that, but interesting.
Speaker 2:So the the global audience here is one thing that Netflix is talking about. They say they always felt that WWE and a lot of their content was not as well represented as it could be Internationally and they were interested about that. They also said that the WWE content will allow them to scale their advertising business much faster, which will lead to higher arm average revenue permit for over time. So there's there's a lot of benefits here. Now let's talk WWE content. I honestly never thought I I know as much about wrestling as I do right now. I never saw much and beyond the list of things I'd have to learn.
Speaker 2:No, I don't think we're gonna go that far, but I had to go raw. I had to look up all the other shows that they have. So they've got NXT, they've got Smackdown, they obviously have the WrestleMania and all those. They've got the bump. So we're gonna break this down really quick and this is a lot to sort of here, but it's it's all on LinkedIn. So Raw is currently on USA Network until October of 2024, so this year. So what's interesting is there's a three month gap Between when it ends on USA Network, october, and when it starts on Netflix, january. What's gonna happen for those three months? No one has said. Now. In 2025, we're all will be in Netflix, on Netflix in US, canada, at the UK, latin America and other territories. You know we're all gonna be in Netflix on Netflix in US, canada, at the UK, latin America and other territories.
Speaker 2:All WWE said it will impact other additional countries and regions over time. Now Peacock domestic as WWE Network until March 2026. So Peacock is gonna remain WWE's main home for a lot of the legacy content and the the catalog. But the question is, what happens after 2026? Because With things already in motion to make Netflix the destination for WWC's, it would be logical that the two companies would want to do the same in the US and the WWE. I think this is the big part marked that a lot of people are missing. They're talking Netflix live and getting it alive and live, live, live. Yeah, but we know Netflix makes their money based on the cataract. The WWE has a really deep library of A lot of reach watchable content. So the way to think about that is Peacock is really on the clock now and they've got to figure out a plan in the event WWE departs From them in to in 2026. Very good, because of that back catalog goes to Netflix and think about what does does for their ad business.
Speaker 2:Yeah, now to continue here. In October of this year, nbc will replace Fox as the US broadcaster of WWE's Friday Night SmackDown. That's a five-year deal worth 1.4 billion. It also includes four prime-time specials in NBC. So I have seen some people say like WWE is coming off TV linear and it's now going to Only Netflix. That's not the case. He got to break all this down Now. I also looked up UFC. The reason I looked up UFC is the company that owns WWE now owns UFC. Ufc domestically has that deal with ESPN for where you can see an ESPN plus that ends in 2025, so interesting to see what might happen there in another just under two years Now in the US.
Speaker 2:Okay, to make this more complicated, smackdown one of their shows, is headed to the USA Network in October and NXT is Going to make its debut the same month on CW network on pay TV.
Speaker 2:And then, finally, wwe's weekly talk show, which is called the bump, and their post press conferences Also air on YouTube, in addition to peacock, and their YouTube channel has 99 million subscribers. So what does all this mean? It means that Netflix is getting some very unique content With the potential to get a deep catalog Down the line of VOD content, it's going to accelerate their ad business. It's a very targeted demographic. If you look at who Raw is reaching Netflix I don't have it in front of me, but actually broke out the demographics in terms of who it's reaching it's obviously reaching a very younger, male demographic, so it's targeted for advertisers. So very interesting how Netflix has found a unique piece of content in the market and was willing to pay more for it. Well, we heard and what's been reported just and when I say we, the industry has been reported for a while that the peacock deal With WWE was for about two hundred twenty five million dollars.
Speaker 2:If that's numbers true, it means Netflix is basically willing to pay double. What I'd like to know is did NBC you slash peacock Also bid on this and get out bid, or they did? Did they decide not to bid at all? Mm-hmm, we haven't heard anything about anyone else bidding on this content, which I thought was interesting. After deals like this, we usually hear like so-and-so like we saw Disney with cricket right. They came out and said well, we decided not to bid any further. I'm too expensive. We've not heard anything.
Speaker 2:I Thought that's interesting. So now let's get into the IR call. The investor relations call was really interesting. Netflix was really specific about their tech stack for advertising, some other things. So what they said was advertising revenue as far as it contributing to a higher Arm every month, said quote ads will will not be a primary driver in 24 With regards to increasing the average revenue per member per month, and that's because they have to get the scale. Now, one thing that some people know and I saw them talk about, but most didn't is, starting January 24th two days ago T-Mobile's Netflix on us package is converting all users automatically and it looks exactly.
Speaker 2:We don't know exactly how many that is, but if you look up the T-Mobile numbers and you make a little bit of an estimate, it could be as high as 30 million. So what does that do for scale? Well, that helps, even if you said, okay, yeah, those are gonna use it. And then if you add in WWE next year, it's additional scale. And then if Netflix is also getting rid of the ad-free base plan, where the majority of users right now 40% are gonna go for the ad plan, they're gonna get the scale very quickly.
Speaker 2:Now Netflix was asked some really specific questions and they answered them with details which kind of surprised me. Around their advertising tech stack, we saw Multiple reports in the market saying the partnership with Microsoft, they want to bring it in house, they're gonna get it rid of Microsoft. So they were asked do they plan to build or take More of the advertising tech stack and business in house? This is what they said. Quote we are already in partnership with Microsoft developing part of the technology that supports our ads experience. So they've got a large team working on some of those features that I just mentioned, but we've got a smaller but growing team Working on the areas where we can differentially contribute to and then In a similar, similar way on the ad sales and go to market side of things. We're building out our own teams that cover a portion of the sales and operations activities and quote so they're not dropping Netflix.
Speaker 1:I mean sorry, they're not dropping.
Speaker 2:Microsoft. But interesting that they want to control more of the sales and operations.
Speaker 3:That totally yeah exactly that totally makes sense, because that's that's one of the. The points of tension or weak points, you know, in the way that the advertising Ecosystem works is is that you have these partnerships and in some cases, the publisher or the streaming service has Zero ability to influence, to go out and, you know, even choose who they sell to you and and and it sets up and not only the economics potentially not as good because you've got a hand in the middle, you know is obviously taking some, some money off the table, but you don't have control.
Speaker 3:So I mean that just makes a lot of sense. And then you think about, you know, the Open AI partnership with Microsoft and you can only imagine that this technology and this experience you know that they reference building out, it's probably gonna be heavily infused with some really really interesting things that are literally being built, brand new that don't exist, that but Microsoft can bring to the table, you know.
Speaker 2:With open a to when they announced they said that their ad Experience was gonna look very different in three years.
Speaker 2:That was the number. That gave three years and it's been a little over a year. We've had it Leading up on some of those things you said, mark. They were asked with regards to what they think they need to do to be more successful with their, with their ad plan and their ad stack. They said quote growing the technical advertising features and growing our go-to-market capabilities. And these features are like targeting, improved ad relevance. We've got to. We've got tons to do on improved measurement Interesting, we call that measurement. They say we want to launch more ad products. We've got binge ad sponsorships now and we have to build Increasingly the capability to do better, to be better partners with advertisers and serve their needs. They just laid out what they're working on targeting measurement and make sure that we can sell more ads with advertisers through third parties.
Speaker 2:But interesting, they called out some actual features. So more to come on the ad side, for sure, it's only a matter of time before they start breaking out revenue based on advertising. Maybe not this year, since they said it's not going to have a material impact, I guess is the word we could use. Phrase Now, interesting things going on with them licensing as we've seen before, and talked about content like suits and band of brothers from Warner Bros, discovery, formerly HBO. Somebody asked how is this going to impact their spend next year and their shift, because we've seen some analysts say well, with everybody cutting back on content, removing catalog, now some content from catalog.
Speaker 2:Netflix is in the driver's seats because they're just licensing more and more content from competitors. That's actually not the case. From a financial standpoint. Netflix was asked about that right, how does your content spend change, specifically when you're licensing second run content? And Netflix said quote I don't see any meaningful change in that mix and the current margin outlook contemplates a healthy mix between originals and licensed titles. However, what we can think about in that regard is Netflix knows exactly what pieces of content from competitors works on their platform. Yeah, that's right. It is extremely focused and yet competitors are still trying to figure out what's the best content that we should really create. That's a huge advantage that they have and while we're not going to cover other earnings on this one Mark, we'll save that. Peacock just put out Q4 in full year numbers. Peacock streaming service lost $2.75 billion for the year. Netflix had $6.9 billion of free cash flow and is going to spend $17 billion on very targeted content, including licensing from some competitors.
Speaker 3:They're just there in a hole in the middle of the platform. It's very clear there's Netflix and there's everyone else. I mean, it's just you know, it's just incredible. I mean, well done.
Speaker 2:Incredible it's gone. Now a couple of other things here. Every time there's a price hike somewhere, you know we got all these goofballs and put out these. You know, surveyed. We surveyed the customers and they said they're going to cancel Going to canceling, isn't the? Same. Netflix actually came out and said quote we're seeing very healthy organic growth as a result of quote, better than forecasted churn and better than expected impact from the recent price increases we did. Now those aren't numbers. If anyone wants to argue that, I agree.
Speaker 2:We don't know what better than expected means, better than forecasted, but you have to remember this is a public company and they have to be very careful.
Speaker 2:the wording they use with Wall Street Afterwards a material impact to their business because of price increases, in terms of them losing subscribers. They would have to disclose that or they would have to say we don't really have any comment on that. They can't come out and say the wording that they did. So again, it gives us another insight into the business. Now let's go into all this merger and acquisition speculation in the market. We've been hearing about Warner Bros, discovery, paramount, whatnot. So they had something in there where they said we don't comment on that, but then they said quote as you know, our historical bias is to build and not buy. We're not interested in some of the big linear assets that may or not be available. End quote. No surprise to me, to you, to most people in the industry. That is focused.
Speaker 2:And yet we've got some comments from analysts that are just you wonder, I don't know, mark. I wonder how they put this stuff up and don't feel embarrassed. Netflix needs to look at getting into real sports like the NFL or NBA, even though that may not make sense financially. What, yeah, then why would they do it? That makes no sense. Another person said this is Netflix foray into sports, like we've all wanted, and they are now going to be the front runner for some live NBA content in the new licensing deal that is being discussed. No wrong, I mean. No. Netflix didn't come out in their comments and say we're not bidding an NBA but they made it very clear.
Speaker 2:Our strategy has not changed as it pertains to sports. So focus, people focus. Hey, look at what they're saying here. This isn't rocket science, so very, very interesting in terms of what they said on the earnings call. The last thing there Mark in the earnings call is they said they expect the WWE deal, to quote add some fuel to our new and growing ad base. Sorry, ad business, because we believe the WWE has been historically under distributed outside of North America, so it's going to be fascinating to watch. We'll get an infrastructure minute mark. But then just a quick highlight here.
Speaker 2:I did see a couple of news sites running headlines that Netflix is getting another price increase. I got a couple of these. I did a radio interview where they asked me that and I said well, sorry, I'm going to have to correct you here. Netflix did not announce that they're raising prices. Now here's what they're picking up on.
Speaker 2:Netflix said quote as we invest in and improve Netflix, we'll occasionally ask our members to pay a little extra to reflect those improvements, which in turn helps drive the positive flywheel of additional investment to further improve and grow our service. True, and frankly, they didn't need to tell us that. We already know that Netflix has not raised the price of their ad tier from the $6.99 per month since it launched in 2022. So Netflix has not announced a price increase, but they have announced that they do. Sorry, not announced, but they have commented again not the first time that they do believe that they have some pricing freedom when it comes to raising the cost to increase their spend on content and, with them, getting rid of some of the mid tier packages, the ad free ones. It's only a matter of time, mark, before the $6.99 ad free plan goes to $7.99.
Speaker 2:Absolutely, they haven't said anything, but if they don't do that, this year I would be shocked, especially because it's going to come with scale over the next year as they add in T-Mobile and they add in more subscribers on the AVOD side, and then next year adding in WWE. Right now you're really going to need scale. One could also argue that Netflix will wait until 2025 to raise rates, because then they can say, well, yeah, we raised it, but, by the way, we just brought you all this WWE content. That's only relevant if you watch WWE, but it has a large follow-up.
Speaker 2:It does. So a lot of interesting things here. And then, Mark, just finally, while we have no details on this, I have seen a couple of people comment what does this mean for Netflix infrastructure? What does this mean for them now having to support live events and events like WrestleMania and whatnot? Yeah, it's a good question because some of those events have some pretty high concurrent three to four million concurrent viewers for some of those events so, and it's good quality video too.
Speaker 2:So I am not concerned in terms of what Netflix will have to support in the new year. They continue to build out their live events operations team for OpenConnect. There's still a couple open positions very senior open positions on their website.
Speaker 3:Yeah, they've been posting very publicly on LinkedIn. I mean, we're connected and all the same people and they're getting reposted and there's a lot of focus on building that team.
Speaker 2:And one of them I noticed this week. Mark from that team posted a photo on.
Speaker 1:LinkedIn, where the team had gotten together for some sort of meeting or whatnot. That team has grown a lot.
Speaker 2:Exactly, there wasn't three or four people in that photo anymore. I mean quick glance, I think there was probably 20.
Speaker 3:And in that photo are the most senior, not only from just like a leadership perspective, but like principal engineering architects building out as some involved in the SVOD side. But the point is that picture was a real indicator. This is a heavy duty focus and Netflix is going to put as much care, attention and innovation behind this live platform as they have over the many, many, many years for the SVOD platform. You know it's yeah as they would have to do.
Speaker 3:But you know, I don't think anybody necessarily thought they wouldn't do that. But you know, having some experience, you know, with the company and then knowing some of the folks in the picture, right away I said, wow, okay, you know, this is a big deal.
Speaker 2:Yeah, and they have time to put in place right Additional capacity, what they need to do. They have time and that's the key. Now, at the same time, do they have to execute like everybody else? Yes, we can't give them a pass. They've obviously had one hiccup with a live event already, so I'm not concerned For some people that were reaching out to me like oh, like this is going to be just a nightmare for them. I don't see why it would be. I don't see that being a problem.
Speaker 3:But I do have a question for you though, and this would be just you know, in your opinion. Correct me if I'm wrong. In their primary markets they are essentially completely off a public commercial CDN right. They are delivering over.
Speaker 2:They have not been on a third party commercial CDN since. Oh, I'd have to look back, but it's been seven or eight years now.
Speaker 3:The live traffic? Are they going to need to leverage, or are they today or no? Third, party.
Speaker 2:no, no, for all the live stuff they're going to.
Speaker 3:they're still 100% open connected. Yeah, yeah.
Speaker 2:They're not using any third party CDN specifically.
Speaker 3:Let's make this clear for the delivery of video.
Speaker 2:Yeah, I understand there could be. There could be.
Speaker 1:I know there are some people here for catching caching of images or not, they probably are still using CDNs.
Speaker 2:I haven't looked at that stuff. But no video.
Speaker 1:they haven't used third party in the longest time, and I do not expect them to for this either.
Speaker 2:So it's one we have to watch. And then finally, just on Netflix, is debt. Obviously, they still do have debt, but this year they have 400 million in senior notes that are maturing Q1 of this year, so they plan to pay that down with their cash. So everything for them financially is looking good. So there's really nothing to complain about here, or I think even to be concerned about with Netflix, in terms of where they're going and man, what a difference two years makes.
Speaker 2:The amount of people saying man, you're late to the game with your ad playing you're not going to be out of the space, Everyone's going to come on man Reality. So in the last 12 months not year to date, but the last 12 months, january to January stocks up 58% Year to date. It's only a month, but it's up 21, almost 22%, and in five years, even with some of the hits they took to the stock in 2022 when it was below 200, in five years they still have a return of almost 68%. So in the last five years their peak was six looks to be 690, right about 690. And they're at 570, they closed on Friday, 26. So they're still not at their peak. We did see a couple upgrades from Wall Street, not surprisingly well above 600. So I wouldn't be surprised if we can continue to see this, the star climb. Then the next thing you have to wonder, mark, is just at what point do they feel?
Speaker 2:like they need to do a split yeah exactly yeah, because now you're getting in the range of where it's getting a little expensive to buy the stock for an average person. I didn't look at how many shares are outstanding. There's a lot of variables that go into when a company splits their stock or not why they do it, how many shares, who's holding them, the class of shares. I haven't looked at any of that yet. However, if the stock continues to climb, how many people are going to be buying a $657, $800 stock? You're going to all of a sudden now remove yourself from a portion of the market that they just can't afford that. So that'd be interesting if they then end up doing split-wise.
Speaker 2:I don't know if they are. That's just speculation on my part. That is my opinion. That's not a fact. Netflix has not mentioned that. But Netflix quite the earnings and amazing to see how much information they're now giving out on their earning calls Coming from a company who, a couple years ago, would say almost nothing to Wall Street or give them really any indication about their business. At one point, mark, I don't know if you remember Netflix wouldn't even tell Wall Street how much they were spending on content.
Speaker 3:Yeah, I do remember that.
Speaker 2:You kind of could figure it out maybe if you looked at the balance sheet made some assumptions, but you didn't know. Now, the final piece I'd love for Netflix at some point to break out is what are you spending on year over year? How is it changing what you're spending on out of that 17 million or more kids content, documentaries, drama, romantic comedies, or? I'd love to see the genres broken.
Speaker 3:Well, I think that would be yeah. I think that'd be interesting, but I just wonder how dynamic some of those sectors are.
Speaker 3:Meaning like yeah, you know, and what I think about is like the shelf life of children's content, and I might be wrong. I mean I have kids, but they are way past being, they're grown and you know. But some of those shows, you know they have a very, very, very, very, very long shelf life because you know, look, you know my kids outgrow it, but then you know the next kids behind them watch it, and so on and so forth, and you know some of that program material can be 20 years old and still be, you know, get a lot of active views. So I just wonder if in some of those sectors there's years or there's periods where they need to invest, almost to kind of build back the catalog.
Speaker 2:There is, and you know how. We know that If you want to submit your content to Netflix to be reviewed because you want to license it to them, there's a website you go to and what I notice is every year they change what the language is, and it was a couple of years ago they had language that said something like if you're looking to license us documentaries or kids programming, like, please do not contact us?
Speaker 3:Okay, yeah, like the store is full, we have enough on this shelf.
Speaker 2:I assume that's what they're saying they have enough, or they have enough on the hopper. But the reason I'd like to know that, mark, is because now we have a little bit of data in terms of what people are watching. Now we could also see okay, based on what is most popular, are you putting the majority of your money where it should be, based on the genre of content based on what people are watching? Because if you are doing that and you get that right now, what's happening to your turn of retention? Wow, it's going to be incredible. The impact is going to be in retaining users and reducing churn, because now you really know where to put your money.
Speaker 2:And we would see that for the first time. So I think there's more interesting things to come on Netflix. That's all we got, mark. We'll cover some of the other things that came out this week. Next week we did have earnings from Comcast Verizon, but next week, for the next podcast, we also have earnings from Google, amazon, apple, meta Charter, microsoft and probably a one or two there.
Speaker 2:That's going to be a long one, yeah, so we'll do a wrap up next week and then the week after that another big one because we'll have Fox, disney, amc and then a couple of vendors as well, but more to come. But, yeah, interesting week for Netflix. It's been a good week in terms of covering this and just seeing the discussions take place online too, I've really liked. People are starting to think about the business impact more overall, which I think is a great thing. That's all we got, so let's see, it's just under 40 minutes here. That's good.
Speaker 2:Anyone has any questions? Please reach out to Mark and I, as usual, anytime. We're available on LinkedIn and I've posted everything we talked about today already up there. I did also put up all the other things from Peacock and court cutting at Comcast and Verizon pay TV court cutting. That's all up on LinkedIn as well, so check out my LinkedIn. You can see all that and we'll be back next week. In the meantime, we appreciate everyone listening. If you have any questions, reach out anytime. Thanks very much. Have a great week.
Speaker 1:If you enjoyed the show, send it to a friend, have questions for Dan or Mark, connect with them on LinkedIn at any time and be sure to check out Dan's blog at streamingmedia blogcom. Thank you.