Q1 2022 Netflix Inc Earnings Call
And corporate development joining me today are co CEO Reed Hastings co CEO and Chief content Officer types, Randos, CLO, and Chief product Officer, Greg Peters CFO Spence Neumann, our year over year this quarter as Doug Anmuth from JP Morgan as a reminder, we will be making forward looking statements and actual results may vary with that Doug I'm going to turn it over to you for the first question.
Great. Thanks Spencer.
So your tone in the letter today around competition maturity and macro factors is very different than it was three months ago. I was hoping that you could start out by just walking us through how your views have changed over the past few months.
Yeah, Doug I mean, I think our views are little different because our numbers are a little different.
If we had made our $2 5 million guidance I think that was consistent with our thesis and the lower acquisition really forced us to kind of tease apart, what's going on and as we put in the letter Covid created a lot of noise on how to read the situation boosted us a lot in 2020.
And then into 2021.
I think.
Thoughtfully said it was mostly pull forward, which was the logical conclusion, but now coming into 2022 that doesn't really hold so then pushing into it we realized.
With all of the account sharing which we've always had that's not a new thing but.
But when you add that up together, we're getting a pretty high market penetration and that combined with the competition is really what we think is driving.
The lower acquisition and lower growth.
On the two parts were working on how to monetize sharing.
We've been thinking about that for a couple of years, but when we were growing fast it wasn't the high priority to work on and now we're working Super hard on it and remember these are over 100 million households that already are choosing to the unit Flix. They love the service, we just got to get paid.
At some degree for them. So that's part of it and then two it's really we got great competition, they've got some very good shows and films out and what we got to do is take it up a notch and I'll tell you that we're all pretty I know its disappointing for investors.
For sure, but internally, we're really geared up and this is like our moment to shine. This is when it all matters and we're super focused on achieving those objectives and getting back into our investors good graces.
The only thing I might add read has just said.
We've put a finer point on under on kind of elaborating on what we're seeing in terms of slowing growth and near term slowing growth, but the long term addressable market. We believe is unchanged in terms of all broadband household suggest that we have a better sense that COVID-19 clouded in terms of the near term limiters to penetrate that growth and capture.
That market. So that's one of the things that we put a finer point on this later, but I just want to reinforce that the core addressable market is still there and that's what we're still growing into Doug.
Okay. Thanks.
So maybe just in terms of the recent trends that we could talk about <unk> a little bit more you lost 200000 subscribers or gained 500000.
Russia removal.
Can you, perhaps parse out a little bit around some of those factors that you mentioned it sounds like acquisition.
At the top of the list and you've talked about that for a little while now, but hoping you could kind of isolate some of those factors and then.
Talk to us about how that informs your <unk> guide for a loss of 2 million subscribers.
Sure I'll take that and then others can fill in so so as you said, Doug we guided to $2 5 million paid net adds we delivered 0.5 million. If you exclude Russia. So there is really a $2 million Miss in our Q1.
Actuals versus guidance and what's really reflected there is acquisition growth was consistent with what we expected we were seeing that slow down when we did the guide and it played out as expected the.
The difference is really some slight elevated churn.
Throughout Q1, and this is pretty small so retention was still very good but we're talking about it like two to three tenths of a percentage point, but on our big member base that has a pretty big flow through.
It's a combination of factors there we talk about an interrelated factors in the letter, but one very directly that Russia's invasion of Ukraine had some spillover effect in other parts of EMEA, we saw that in the central and eastern European countries, where there were some elevated churn. We also saw probably some little bit more macro strain in some countries some parts of the world.
Like Latin America, we mentioned on our last call, but that was elevated and just a little bit more seasonality in the business week, we suspect some of that as those macro factors, we mentioned in maybe a little bit of competition on the margin as well. So that's really what we saw in Q2 I'm sorry in Q1, and that's really what's reflected in Q2, which is sort of the continued trends we're seeing in ACA.
Physician and this.
That's slightly elevated churn to probably continue through the quarter. It's just a softer seasonal quarter for us typically and that's what's reflected in the guide is a little bit of softer seasonality and the same essentially the same acquisition.
Our retention trends.
And maybe I can pick it up and talk about the first two factors you want a little bit more detail on and we have this addressable market that's expanding over time in every country that we're operating in that's a bunch of enabling factors like broadband and smart Tvs and then in some countries that we're operating in and we have been operating long it's like the U S is a great example.
Ample we have really significant high penetration of viewers into that near term market potential and that was really boosted by sort of this growth at the beginning period of Covid and the Lockdown now thats viewer penetration is made up of two groups. One is a group that's paying us which is great and then there.
As a group of viewers that are not paying us a narrower sharing someone else's account credential and we really see that second group is a tremendous opportunity because they are clearly well qualified they have everything they need to do get to Netflix. They know what the services. They found titles that they want to watch and so now our job is really to better translate that viewing.
And the value that those consumers are getting into revenue and the principal way, we've got going after that is asking our members.
To pay a bit more to share the service with folks outside their homes. So if you've got a sister, let's say that's living in a different city you want to share Netflix with her it that's great. We're not trying to shut down that sharing but we're going to ask you to pay a bit more to be able to share with her.
And so that she gets the benefit and the value of the service, but we also get the revenue associated with that viewing.
So maybe let's let's follow up on that a little bit more Greg we'll come back to some of the.
More recent trends in a moment, but.
I guess, when we think about account sharing.
Curious about the early testing that youre doing you'd think about Chile, and Costa Rica in Peru.
I guess now it's pretty clear to see why it's the right time to do this in a bigger way, but how do you think about rolling that out in the U S and what will be implementation actually look like.
Yeah, I mean first it's important to note that we're trying to find a balanced approach here and we're trying to basically come up with a model that supports.
Our customer centric approach that still puts members in charge of it supports member choice that delivers great entertainment value at sort of all of the options that we've got but also very importantly allows us to bring in revenue for everyone.
Who's viewing and who gets value from the entertainment that we're offering and obviously, we're doing that so that we can invest then and into more great content and a better service for everyone. So theres a bunch of factors that we're working through that's why we've deployed the tests that we have and frankly, we've been working on this for now about almost two years.
About a year a little over a year ago, we started doing some light test launches that we were informed our thinking and helped us build the mechanisms that we're deploying now we just did the first big country tests, but it'll take a while to work this out and to get that balance right and so just to set your expectations you know my bill.
Leaf is that we're going to go through a year or so of Iterating and then deploying all of that so that we get that through that solution globally launch, including markets like the United States.
Okay. That's helpful and maybe Spence just on that point.
Maybe if you could just walk through the accounting a little bit here and how do you think about the uplift whether it's more of it would come from arm or from subscribers.
Overtime.
Yes, that's great Doug you kind of nailed it which is as you heard from Greg we're looking to monetize sharing and kind of meet our members where they are so should expect that member numbers or subscriber numbers are sort of less relevant over time because of these.
Very likely show up in arms, so should think about it as engagement and.
Average revenue per member and probably increasingly important and then obviously revenue growth, which we've always said, we're trying to optimize both near and long term revenue growth to drive that positive flywheel of reinvestment in the business. So it's not that there isn't going to be a P times Q theres still Q, but but increasingly important is probably.
Arm in engagement and revenue overall.
So and just to clarify there sub accounts will not count as subscribers. That's right. That's right. That's right. So it's less distinctive evident individual household account, okay and then in the process, though as some of those current shares outside of the households, do not become sub accounts, you'll pick up some of those subscribers.
Separately.
Right.
As Greg said, we're still working through the ultimate solution here. So we don't exactly know how that's going to play out but you should assume that it's that there's less less importance on an individual household account number and therefore, what's more important is revenue viewing engagement.
So viewing engagement overall revenue growth in arm as a key metric.
Okay.
Let's go back to acquisition for a minute.
So you you noted has not returned to pre COVID-19 levels what are the ways.
You can influence acquisition.
Beyond account sharing which we talked about and then beyond of course, there is creating great content.
It shouldnt be.
It didn't make any more complicated than that Doug honestly, we've got to compete and we've got to continue to improve on the core service, which right, which is making a TV series and films and now games that people really love.
I think that we're at that's what we're really focused on and I think that that's a thing that I think we can continue to grow the business and now we've talked about being highly penetrated in some of those core markets and with users, which means that it's harder to get them to do.
Netflix if they're already using Netflix so we've got to figure out. These different models that we're doing now to more effectively monetize that viewing as Ben said earlier. The engagement is really key as youll see in the Nielsen data that we published in the letter our engagement has been super healthy even with this heightened levels of competition.
Our engagement are viewing as being very very steady holding on to our to our market share in that space, but on top of that in the quarter.
While we were not happy with the topline subscriber growth.
We definitely saw that the new season of Ozark.
And then to Anna.
The atom project and certainly the biggest of them all of the new season of breakeven delivered exactly as expected actually quite actually a little bit bigger than expected with our fans.
Of course, we think we've got to do that and we have to have an atom project in our Richardson every month and to make sure that that's your expectation of the service constantly. So we are definitely feeling the the the higher levels of penetration in those markets of users and we're definitely feeling a heightened level of competition for sure.
So we've just got to continue to do what we're doing and improve each of those things now how do you improve content. We've been doing this for a decade well first of all that's about 90 years less time than all of our competitors about it.
But I look at things like things that we've been doing over the last few years that we've been improving so big movies just.
Just a few years ago, we were struggling to help monetize the market a little art films.
Today, we are releasing some of the most popular and most watch movies in the world just over the last few months things like don't look up and read notice and Adam project as examples of that.
And that's just in a few years of improvement on one line of content.
Another is unscripted, we didn't we made zero unscripted about three years ago and today, creating these big unscripted brands in growing original unscripted universes like too hot to handle an ultimatum, that's really popular right now around the world.
Selling sunset. These are kind of a large growing original unscripted universes. So.
We've come a long way from ultimate these master and my point is.
And I think about things like our content in Korea.
Again pretty new to the market everybody knows about square game that was probably the biggest show in the history of television.
And just a few years ago, we were producing no original content in Korea, and while we all know about squib game.
D P and all of US are dead and a slew of original content thrilling our members in South Korea and fans around the world. So we're continuing to improve constantly and getting those moments that can lead to something like a good game or of Richardson constantly.
Got it okay.
I wanted to go to pricing just from them I mean, theres a lot of you kind of have this confluence of trends basically that are taking place here, but Greg I was just hoping you could talk a little bit more about the recent price increases primarily in the U S. I know it's still early.
In the U K, but I guess to what.
<unk> you.
Had mentioned slightly elevated churn in <unk> I guess, how much was that a factor how is this price increase being received currently.
Yeah. So top line is that the price changes as the last several pricing as we've done are generally performing as we've seen the price changes over the last several years. So there's no sort of fundamental difference in performance.
First of all there. These price changes are significantly revenue accretive so that's an important top level heuristic.
And we sometimes see a blip in churn.
And in some markets. We also see a marginal impact on acquisition often these effects are transitory. So it's sort of a change in fact, and we move through it and when those folks back.
But I would say the big takeaway is the vast majority of our members recognize that we're investing you know what they pass on the incremental amount that we're asking them to pay us into more entertainment value back to them back to our members more great stories bigger films more variety of content and higher quality of programming. So we.
We generally plan to continue doing what we've been doing.
But I would also say, it's we're also working hard to ensure that we have a range of price points.
Across a set of plans with different features that deliver on different consumer needs and consumer desires.
Making sure and be very focused that we retain good accessibility to the service for a broad group of people in every country, we serve at sort of that entry level. So yes.
No major changes there and we're keeping sort of the plan that we've got in place.
One of them.
I think just.
Oh go ahead sorry.
Related to that.
Greg has done great work on the price spread.
And one way to increase the price spread is advertising on low end plans and to have lower prices with advertising and those who have followed Netflix knows that I've been against the complexity of advertising and a big fan of the simplicity of subscription.
But as much of a fan of that I'm, a big fan of consumer choice, and allowing consumers, who would like to have a lower price and our advertising tolerant.
Get what they want makes a lot of sense. So that's something we're looking at now we're trying to figure out over the next year or two.
But think of US is quite open to offering even lower prices with advertising.
Consumer choice.
<unk> you want to keep my point was quite tactical I'm sure Doug We don't want to perhaps on on your point, but I just want to be really clear on the point on Q1 performance and when I talked about slightly elevated churn relative to our expectations that was not due to our price increases. So the price increase has played out as Greg said consistent with our expectations.
Stations, we just saw some slight uptick in seasonality for the other reasons I mentioned some of the the strain in central and Eastern Europe . Some of that macro trend we saw in maybe a little bit of competition on the margin.
Okay.
Told me forwards advertising, so I just want to get there.
It was a little further down the list.
One last point just on pricing given all these factors that you've talked about and written about in the letter.
Is there a change to your view on long term pricing power.
I would say our general view is unchanged and again, we don't have an a priori target end markets or whatever we've been sort of finding our way through adding more value keeping that virtuous cycle going that big spread that Reed mentioned and again, where we're seeking ways to actually.
Take that spread even wider and that's why I think adds is an exciting opportunity for us that we want to explore in more but no fundamental shift in our thinking about how that process works or the the potential that we have in that.
Okay. Thanks, Alright, so let's shift to and Doug I would just add that that's those directly related to <unk>.
And the content that people find to be incredibly valuable and our long term view of our ability to continue to do that is unchanged.
And there's a long history of that across entertainment for decades.
People Love film and television and games content and if we can continue to deliver that value deliver that engagement.
There's a long history of people being willing to pay for it and and as Reed said also advertisers trying to reach those audiences. So we believe we can kind of drive that value over time, and then monetize it so long as we deliver on that entertainment value.
Okay. So on on advertising.
I think certainly read.
Preserving the simplicity of the product has been very important but I think you've also talked a little bit about at least in the past, perhaps not seeing the incremental profit potential.
As well in terms of a lower priced AD supported tier has has that view changed.
And I guess, if you were to.
Pursuing an AD based model on a lower tier how long would it take you to get there and kind of roll that out and what are the key things you need to do along the way.
Yes, it's not a short term fix because once you start offering a lower price plan with ads is an option.
Some consumers take it and we've got a big installed base that probably are quite happy where they are so think of it as it would phase in over a couple of years in terms of being material volume and in terms of the profit potential.
Definitely the online AD market has advanced.
And now you don't have to incorporate all the information about people.
That you used to so we can be a great publisher.
And have other people do all of the fancy AD matching and integrate all the data.
About people. So we can stay out of that and really be focused on our members create.
Creating that great experience and then again getting monetized.
A first class way by a range of different companies, who offer that service.
Got it and is it fair to think that.
It would be something you would test and a few small markets to start out and then and then kind of move along.
So we're probably not that advanced but no I think it's pretty clear.
That it's working for Hulu Disney is doing at HBO did it I don't think we have a lot of doubt that it works.
All of those companies have figured it out I'm sure, we'll just get in and figure it out as opposed to test it and maybe do it or not do it. So I think we'll really get in but again it would.
It would be a plan layer.
Like it is at Hulu. So if you still want the AD free option.
Youll be able to have that as a consumer and if you would rather pay a lower price and your AD tolerance. That's also where can they cater to you also.
Okay.
Shifting gears to content.
Ted.
<unk>.
A bunch of returning hit series like elite.
Our exchanger things umbrella Academy.
How are you thinking about that slate in <unk> and maybe if you could also talk a little bit more about the back half as well.
Yeah. So those.
Sure.
Moving.
Brands for Us of course in going into the I'll start with stranger things because the new season of Stranger things is a supersized season, that's why we cut it in half each episode of the new season feels like a big feature film, it's really phenomenal we're super excited about how it's landing creatively and how excited fans are for it.
That's going to be obviously, the big story coming up later in the quarter.
The new the finale of Ozark, which is R.
Emmy Award winning fan favorite.
Season, three was a killer and season solar it brings it home and a really incredible way. We're also wrapping up our longest running show Grace and Frankie with an incredible final set of set of episodes coming up later this month.
But we're really excited about it and.
We've always said we ran through the Covid delays that had us back stack 2021.
'twenty two is not quite as back stacked, but it does build throughout the year.
And it builds up to some of our big event films in Q4 that were really excited about like knives out to <unk>.
<unk> coming up before that from the Russo brothers, who believe that a lot of great success with a really fantastic action movie with Ryan Gosling sow the seeds.
The upcoming slate in 'twenty, two we're confident is better and more impactful than it was 10 21, and we think 'twenty three it will be better and better and more impactful than 'twenty. Two so it really the content flow has been fantastic and we're really excited about it.
And just to follow up on your measured today, not obviously not to forget.
Our international content and Leap day season, five as you know continues a really great run for US there we have.
Korean version of money is coming up called money ice equipment. It has Korea.
That's really fantastic new moving from Omar side to take down from France.
Great film from Germany, all quiet on the Western front on a great slate of new content from Japan.
It could be adverse love that we're really excited about the output from all of our international territories as well.
Ted you mentioned.
Splitting stranger things into the into different parts and you have done that with a number of serious over the last few years.
I guess a streaming proliferates it feels like there is this increasing debate around the value and stickiness of providing a full season of content all at once.
I'm just curious about how youre thinking has evolved here given that we are seeing more of these series kind of broken into two parts essentially yes.
Splitting the seasons actually I had a practical reason before which was the COVID-19 delays in all of those projects that kind of led us to splitting some of the seasons, but what we found is that fans kind of liked both so being able to split it gives them a really satisfying binge experience for those people, who want that really satisfying long binge experience and then being able.
To deliver a follow up season, and a few months versus some cases.
The new season of Stranger things as coming nearly three years after our first year after the last one or more than two anyway.
And so we're really being able to split the season. When you can deliver both halves of it and it really high quality way like in the case of Ozark had additional episodes.
They'll both experiences where we're really satisfying for the avenger or the one at a time viewers as well.
Okay, and we've also had great success in <unk>.
Many batches of our scripted shows.
Doing well.
One to three episodes a week every week has also been great and still true to the avenger by giving them more than one episode to watch at a time.
You've talked about cash content spending of around $18 billion. This year.
In a period of <unk>.
Slow or sub growth.
Are you more likely to pull back to manage costs or to lean into further differentiate the offering.
Look I think we've got to continue to invest in the content both in the quality and the variety of the content and R.
We will continue to grow the content spend relative to prior years and I think in general we look at the <unk>.
What's most important though and there is the impact of the slate.
And we're very focused on making sure that the impact of the slate continues to grow we should be able to 10 years and now get more bang for that for a buck.
Relative to what we've done ourselves and relative to the market.
And Doug to that point, obviously, the revenue growth has slowed we're going to be responsible in terms of how we manage the business we talked about in the letter during this period of slower revenue growth, we're going to protect our operating margins are roughly in line with what we guided to.
For this year. So we are holding to our guidance for the full year 'twenty two but for.
Presumably for the next 18 to 24 months called the next two years, we're kind of operating to roughly that operating margin, which does mean that we're pulling back on some of our spend growth across both content and non content spend but still growing our spend is still investing aggressively into that long term opportunity, but we're trying to be.
Smart about it and prudent in terms of pulling back on some of that spend growth to reflect the realities of the revenue growth of the business.
So.
Just to clarify only because <unk> been saying for many years now.
300 basis points.
Per year over a multiyear period, obviously, we were not going to see that this year, but it sounds like over the next couple of years, you're thinking more flattish.
Until you get subscribers really growing in a bigger way well get.
Revenue growth again, getting a revenue engagement are going to be primary will also get subscribers going so there will be subscriber growth, but primarily re accelerating that revenue growth.
We have multiple levers to do that we have high confidence in monetizing sharing as we talked about re talked about things like perhaps adding an advertising layer.
And obviously continuing to improve the service grow engagement grow revenue. So we have high confidence that we will.
Accelerate revenue when we do we also have our commitment to continue to.
Gradually grow our operating margins, but let's let's first get our revenue growth accelerated and then let's talk about the pace of that margin acceleration.
And what does all of that mean for free cash flow kind of near term and then over the next couple of years.
2022 is certainly looked at it as like the first year of kind of sizable and sustainable.
Free cash flow yes.
And that continues so we're as we said we're managing the business.
Prudently.
For all of our stakeholders will be positive free cash flow this year consistent with our expectations going into the year and we will continue to build on that in years going forward. So thats, our expectation and that's what we're still planning towards.
And Spencer if you would you would add to that maybe.
No I think you hit it right headsets.
Okay.
Wanted to talk about India, a little bit.
You cut prices significantly in December across across plans.
But you've certainly pointed out the cable and India is around $3 a month.
Just curious what the response has been like do you still view those changes is.
Revenue accretive and what are you seeing in terms of May.
Maybe early behavior from some of those incremental subscribers.
Yeah, I would say to your last point there the incremental subscribers are largely behaving similar to that subscribers. We've added over the last 12 months and not a fundamental difference and really this was a bad in terms of long term Max revenue maximization, which as you know sort of how do we think about the top level value Tory model, we have for these things.
And it was stimulated specifically by the fact that Ted's team is doing some incredible work on Indian content and we saw the slate there and we're really excited about a bunch of titles that were coming down and thought there was an opportunity to broaden the audience that got to see those titles and so we've seen that.
Definitely take hold where we have an additional bump in subscribers that will now get to see that content and the bad is that those folks will enjoy those titles and that they will talk enthusiastically about those titles to their friends their family their co workers and that will lead to.
Another sort of positive momentum on the flywheel of sign ups.
And <unk> can you elaborate a little bit more just on the content in India and I guess, just how youre thinking about.
Overall products fit at this point in the market the product fit incorporates.
Subscription prices as well and willingness and ability to pay so we have seen a nice uptick in engagement in India. So we're definitely taking into the right direction.
Okay.
I wanted to talk about gaming a little bit.
I think.
Reed.
Discussed it in the past as perhaps the next genre of content beyond television.
Beyond film.
I'm curious how you'd characterize your progress.
So far.
Really happy with what the team has built.
A big capacity to be able to provide our members with interactive and gaming experiences.
We've had some nice successes, which I'll ask Greg to talk about.
So I think we're building capacity frankly faster than we did when we entered film.
So that's very encouraging.
So excited and you've seen we've been doing these small acquisitions.
To build up the Knowhow and the creative chops to.
Do you have to make some really great games.
Yeah, and just to pick it up sorry, Doug do you want to.
Sure, it's where youre going I was just going to ask what the kind of puts and takes are around owning versus licensing IP and what the appetite is for further M&A going forward.
Sure.
Both models, but I would say, we're very enthusiastic about building internal capacity and we're doing this both from sort of assembling it organically as well as through acquisition, which is a key part of our strategy to be able to build the capacity to produce the games titles that we think are really going to unlock value for.
Our members and we're learning more and more everyday from the licensed titles that we've got which is helpful.
But you can sort of early glimmer of where we're trying to head with this with the announced and we've just recently did with that.
Launch of both our game and an animated series around the exploding kittens IP I don't know if you're familiar with this card game, but it's a super fund and physical card game that we're now going to bring to form on both an animated series in a game and we will have some interplay between these two different modes for fans of that IP, but.
That sort of that you know an initial step on a long road map, we have around thinking about how do we.
Make the film in series side, and then the interactive games experience sort of the interplay between those.
Magnify the value that our members are getting from both so it's like a one plus one equals three and then hopefully four and then five situations. So that's sort of the multiyear.
Vision that we've got behind it and really to deliver on that we think the internal development capacity is going to be key because we can obviously.
Have those folks be very specifically focused on the opportunities that we see there.
And what is the what are the benchmarks or milestones, perhaps that you need to see around gaming to lean in even more here in terms of content budget and are there any metrics or numbers that you can provide so far.
I can certainly provide the framework.
We're thinking about it and that's it.
It's a top level.
Area for Us and we're very focused on it and so bottom line, we think about games and delivering value to members and reflecting that back into the business through both acquisition. So we're aiming to have titles that land that creates conversation and enthusiasm and buzz that drive more people to sign up.
With the service and then obviously in retention as well and you know engagement is that primary leading indicators that we have for retention and sort of value delivered so we're looking at both of those very very carefully and similar to how we think about it on the film and serious side. Obviously, we wanted to make sure that the investment that we're making at any given time.
Title is sort of calibrated to that business value that we're getting out of it. So we're building our understanding of how those metrics work together. So that we can have a good sort of fitness function around the work that we're doing and making sure that's delivering value and that's really the there that goes signs for us that we've got it figured out and we want to ramp and scale investment.
Okay.
Ted.
Netflix shares are back to of course back to pre COVID-19 levels, but they are also around the same level. They were at nearly four years ago in 2018.
So if you could just talk about your ability.
Two to continue to hire great talent within the company.
I think that.
People look to join Netflix they join Netflix because they believe in this long term vision of of the move into <unk>.
Way from linear TV and kind of transactional movie business into a business that can be much more satisfying for consumers and deliver on the culture and to deliver big audiences and really moved the market one of the things I'd say is by way of example is what we can do around the world.
Our teams on the ground are creative executives are business executives are on the ground all over the world are more.
Much more empowered.
They're much more collaborative and there are much more rich.
Risk tolerance than their counterparts are all over the world, which enables the created an ecosystem for something like split game over it like a little PON or <unk> exist and that is our ability to do that and to bring kind of global notoriety. It's a local content local content.
Here's is unprecedented in its pretty unrivaled at this point. So I think people look at that as something to be very exciting to be close to and at the long long terms to the long term story is.
The broadband household penetration, we're going to get to those to those houses there is a long term and the short term in the short term you've got the highly penetrated.
Traded users and we're working through that right now and in the long term you've got things like smart TV sales at a bunch of other macro factors that slowed that down that we'd know the way I'll see that as temporary including everybody worries that Netflix. So I wouldn't really does see the long play and I know I've been here for more than 20 years and have been through a couple of days.
And yes, they don't feel great in the moment, but man it feels great to come on the other side of it and I think everyone is.
Knowing that that's going to come up and we'll come out on the other side of it.
Doug we have time for two last questions. Please.
Okay.
I wanted to.
Just back to content for a minute.
Given a lot of attention to formula one with the drive to survive.
Given the success there.
Sports is obviously a frequent topic how are you thinking about sports.
There is certainly more rumbling around doing things related to NFL media and in films.
How are your.
How are your intention shifting perhaps here at all so.
We look we expand our content verticals constantly.
For us I look at it.
<unk> is a great. Great example of adding something brand new to the <unk> to the service something new for our members to enjoy.
We're going down the game path, because I think it fits us really nicely our ability to tell stories and build worlds are very consistent with our with our existing skill set and culture and we think that we can build a big revenue and profit stream.
By adding games.
Why were not quite so sure you can add the big profit stream by adding sports other folks are trying it and we're going to and where.
We've gone down this other path in the meantime, we're incredibly excited about as you mentioned the formula one drive to survive as an example of kind of sports adjacent programming.
Is that our members really value.
Growing the sport tremendously, we're taking that bad in the world of tennis, and golf and others coming up and we also have an incredible sports documentary business that keeps growing so I'm not saying, we'd never would do sports, but we'd have to see a path to growing a big revenue stream and a big profit stream with them.
Okay, and then just to close out read.
You've created this very unique very successful culture within the company over the past 20 plus years.
Has anything changed in your view just from a cultural perspective.
And either content acquisition or in some of the more operational functions.
Yeah, I mean, we've changed every year.
You know hopefully for the better we don't look at culture has some fixed thing we look at it is what's going to drive excellence. The Northstar is getting the excellence and so we've made a bunch of adjustments as we've expanded around the world. We've made adjustments as we've become more original content centric.
So we're always improving and again the goal is excellence and then our culture as a tactic in that journey.
Okay, great. Thank you Paul.
Did you want to close this out hey can I say, one thing before they close us out just to have.
Good thing one tactical one thing that I Should've mentioned earlier, Doug I, just want to make sure theres not a read through when we guide to negative 2 million paid net adds in Q2, we didn't talk about full year and how what we expect and we're not providing full year guidance, Doug, but I just want to make sure theres not a read through from negative 2 million paid net adds in Q2 that theres going to be a steady drip down of neg.
<unk>, we're not expecting our growth to reaccelerate, our revenue growth to Reaccelerate before the end of the year, but we will grow revenue and there will be paid net add growth as we get to the back half of the year Ted talked about the stronger slate, we get further away from some of the big pricing curious as we get into a stronger seasonal period. So I just wanted to make sure that that's understood as you think about.
The full year, even though we're not providing full year guidance, sorry, we didn't get to.
Always good to provide that non guidance guidance.
Thanks.
No.
We.
Look at the last 20 years like Ted mentioned, we've gone through a lot of changes and we've always figured them out one by one.
It's super exciting we're going to figure this one out we've got a great team.
We lead by a significant margin and screaming and screaming is continuing to grow around the world.
So we have a bunch of opportunity to improve but coming out the other side I'm pretty sure. We'll look at this as really foundational in our continued journey.
Over to you Ted.
Yes, that's well said right I don't I would only add that.
A reminder to folks is that as we keep talking about competition you remind you that we've always had really tough competition and all of the players who compete with US today have been competing with us since our first day of streaming some head to head and some through their legacy business models and they are now migrating to be more head to head players, while theyre struggling to manage their leg.
C businesses, so I really like the competitive position that we're in I love the competitive position that we are moving from relative than just a couple of years ago.
And every metric that we measure success engagement revenue subscribers profit all of those ways that we're measuring I think I like the competitive position that were coming at it from and I want to assure everybody that everyone that Netflix shares that excitement to come out the other side of this part of the business. So with that I'd just encourage you to.
Enjoy the final episodes of our incredible show Ozark and longest running comedy show Grace and Frankie coming up at the end of the month and an incredible slate of films and film series coming up in 'twenty two.