Q4 2023 Netflix Inc Earnings Call

and corporate development joining me today are co-CEOs Ted Sarandos and Greg Peters and CFO Spence Neumann we do have a few changes to our interview format this quarter first we are live streaming this over YouTube so hopefully it's working I guess we'll find out shortly enough second we've collected questions from the analyst community and I'll be reading those questions and moderating the interviewer in the interview as a reminder we'll be making poor looking statements and actual results may vary very

Unnamed Host: and corporate development joining me today are co-CEOs Ted Sarandos and Greg Peters and CFO Spence Neumann we do have a few changes to our interview format this quarter first we are live streaming this over YouTube so hopefully it's working I guess we'll find out shortly enough second we've collected questions from the analyst community and I'll be reading those questions and moderating the interviewer in the interview as a reminder we'll be making poor looking statements and actual results may vary very With that, let's dive first into the first set of questions, which is about our new partnership with WWE that we announced this morning. For Ted, the first question comes from Dan Salmon. Can you please expand on the decision to acquire WWE Raw rights? Is the WWE audience one that is under-penetrated for Netflix today? And can you expand on the economics or the cost of the deal? Thanks, Dan.

With me today are co Ceos head surrenders, and Greg Peters and CFO Spence Neumann, we do have a few changes to our interview format. This quarter first we are live streaming this over Youtube. So hopefully it's working I guess, we'll find out shortly enough second we have collected questions from the analyst community and I'll be reading those questions and moderating the interviewer.

Unnamed Host: Joining me today are co-CEOs Ted Sarandos and Greg Peters and CFO Spence Neumann. We do have a few changes to our interview format this quarter. First, we are live streaming this over YouTube, so hopefully it's working.

Unnamed Host: I guess we'll find out shortly enough. Second, we've collected questions from the analyst community, and I'll be reading those questions and moderating the interview. As a reminder, we'll be making forward-looking statements, and actual results may vary. With that, let's dive first into the first set of questions, which is about our new partnership with WWE that we announced this morning. For Ted, the first question comes from Dan Salmon.

The interview as a reminder, we will be making forward looking statements and actual results may vary.

With that, let's dive first into the first set of questions, which is about our new partnership with WWE that we announced this morning. For Ted, the first question comes from Dan Salmon. Can you please expand on the decision to acquire WWE Raw rights? Is the WWE audience one that is under-penetrated for Netflix today? And can you expand on the economics or the cost of the deal?

With that let's dive first into the first set of questions, which is about our new partnership with Ww, either we announced this morning.

For Ted the first question comes from Dan Salmon can you. Please expand on the decision to acquire WWE. All rights is the WWE audience. One that is underpenetrated for Netflix today and can you expand on the economics of the cost of the deal. Please.

Theodore A. Sarandos: Can you please expand on the decision to acquire WWE raw rights? Is the WWE audience one that is underpenetrated for Netflix today? And can you expand on the economics or the cost of the deal? Thanks, Dan. If I could raise a single eyebrow one at a time, I would lean into the camera with the single eyebrow and do my best Dwayne.

Theodore A. Sarandos: Thanks, Dan. If I could raise a single eyebrow one at a time, I would lean into the camera with the single eyebrow and do my best, Dwayne. But I'm going to say instead that we are thrilled to bring this WWE live programming to our members around the world. WWE Raw is sports entertainment, which is right in the sweet spot of our sports business, which is the drama of sport. This is 52 weeks of live programming every year. It feeds our desire to expand our live event programming. But most importantly, fans love it. For decades, WWE has grown this multi-generational fan base that we believe we can serve and we can grow. We believe that WWE has been historically under-distributed outside of North America. And this is a global deal, so we can help them and they can help us build that fandom around the world. I should add that this should also add some feelings. We are very excited about this.

Thanks, Dan.

Speaker Change: If I could raise a single library.

Theodore A. Sarandos: If I could raise a single eyebrow one at a time, I would lean into the camera with the single eyebrow and do my best, Dwayne. But I'm going to say instead that we are thrilled to bring this WWE live programming to our members around the world. WWE Raw is sports entertainment, which is right in the sweet spot of our sports business, which is the drama of sport. This is 52 weeks of live programming every year. It feeds our desire to expand our live event programming, but most importantly, fans love it. For decades, WWE has grown this multi-generational fan base that we believe we can serve, and we can grow. We believe that WWE has been historically under-distributed outside of North America.

Ted: I would lean into the camera with the single Library I'll do my best Wayne, but I'm Gonna stay instead that we are thrilled to bring this ww live programming to our members around the world.

Theodore A. Sarandos: But I'm going to say instead that we are thrilled to bring this WWE live programming to our members around the world. WWE Raw is sports entertainment, which is right in the sweet spot of our sports business, which is the drama of sport. This is 52 weeks of live programming every year. It feeds our desire to expand our live event programming. But most importantly, fans love it. For decades, the WWE has grown this multi-generational fan base that we believe we can serve, and we can grow. We believe WWE has been historically under-distributed outside of North America.

Ted: WWE Raw is sports entertainment, which is right in the sweet spot of our sports business, which is the drama of sport.

Ted: I think this is a 52 weeks a lot of live programming every week every year. It feeds our desire to expand our live event programming, but most importantly fans love it for decades. The WWE has grown this multi generational fan base that we believe we could serve and we can grow.

Ted: We believe that WWE has been historically under distributed outside of North America.

Ted: And this is a global deal. So we can help them and they can help us build that fandom around the world.

Theodore A. Sarandos: And this is a global deal, so we can help them, and they can help us build that fandom around the world. I should add that this should also cause some feelings. We are very excited about this.

Unnamed Host: And this is a global deal. We can help them, and they can help us build that fandom around the world. And I should add that this should also add some fuel to our new and growing ad business. We're very excited about this. And Ted, did you want to comment on the economics of the cost of the deal? No, you know, we don't comment on the economics of any of our deals. I would just say this is a long-term deal that we're really happy to be in with the WWE. Our next question comes from Rich Greenfield of Light Shed. Rich first wants me to say a great quarter to you all.

Ted: You know I'm not sure I should add that this should also add some fuel to our new and growing AD business. We're very excited about this deal.

Unnamed Host: And Ted, did you want to comment on the economics of the cost of the deal?

Theodore A. Sarandos: And Ted, did you want to comment on the economics of the cost of the deal? No, we don't comment on the economics of any of our deals. I would just say this is a long-term deal that we're really happy to be in with the WWE.

Speaker Change: And then did you want to comment on the economics of the cost of the deal No. You know we don't comment on the economics of any of our deals are I would just say this is a long term deal that we're really happy to be in with the WWE.

Theodore A. Sarandos: No, we don't comment on the economics of any of our deals.

Theodore A. Sarandos: I would just say this is a long-term deal that we're really happy to be in with WWE.

Speaker Change: Great. Our next question comes from Rich Greenfield of LightShed. Rich first wants me to say a great quarter to you all, and his question is, should we think about the WWE deal as fitting into your existing plan to spend roughly $17 billion a year on programming, or is this expansion to live going to drive overall spending higher, and lastly, could you talk about the opportunities to create shoulder programming around WWE similar to Drive to Survive?

Unnamed Host: Great. Our next question comes from Rich Greenfield of LightShed. Rich first wants me to say a great quarter to you all, and his question is, should we think about the WWE deal as fitting into your existing plan to spend roughly $17 billion a year on programming, or is this expansion to live events going to drive overall spending higher, and lastly, could you talk about the opportunities to create shoulder programming around WWE similar to Drive to Survive? Well, you know, expanding into live event programming is something we've talked about for So you should look at this as fits inside of our $17 billion programming spend now. And in terms of building on it, you should think about Formula One as like this is almost the inverse of Formula One, which is a very big and passionate U.S. fan base and a lot of room to grow outside of the U.S. And we could build that as we have with Formula One and other sports, like through our shoulder programming, like Drive to Survive And now, with this great storytelling, the events themselves are the storytelling of the WWE. So this is a proven formula for us that we're excited to jump into. You know, this is sports entertainment, very close to our core.

Speaker Change: Our next question comes from Rich Greenfield of light shed a rich first wants me to say a great quarter.

Speaker Change: Yes.

And his question is should we think about the WWE deal is fitting into your existing plans to spend roughly $17 billion a year in programming or is this expansion into live going to drive overall spending a higher and lastly could you talk about the opportunities to create shoulder programming around WWE E.

Gregory K. Peters: And his question is, should we think about the WWE deal as fitting into your existing plans to spend roughly $17 billion a year on programming? Or is this expansion to live going to drive overall spending higher? And lastly, could you talk about the opportunities to create shoulder programming around WWE, similar to Drive to Survive?

I'm there to drive to survive.

Speaker Change: Well, you know, expanding into live event programming is something we've talked about for quite a while, and this has been in the works. So you should look at this as fits inside of our $17 billion programming spend now. And in terms of building on it, you should think about Formula One as like this is almost the inverse of Formula One, which is a very big and passionate U.S. fan base and a lot of room to grow outside of the U.S. And we could build that as we have with Formula One and other sports like through our shoulder programming, like Drive to Survive, like Full Swing, like Breakpoint, like Quarterbacks, like Tour de France. And now with this great storytelling, the events itself are the storytelling of the WWE. So this is a proven formula for us that we're excited to jump into. You know, this is sports entertainment, very close to our core. The deal is long term. We're super excited about it.

Speaker Change: Expanding into live event programming is something we've talked about for quite a while and this has been in the works. So used to look at this as fits inside of our $17 billion programming spend now.

Gregory K. Peters: Well, you know, expanding into live event programming is something we've talked about for quite a while, and this has been in the works. So you should look at this as it fits inside of our $17 billion programming spend now. So, and in terms of building on it, you should think about Formula One as, like, this is almost the inverse of Formula One, which is a very big and passionate U.S. fan base and a lot of room to grow outside of the U.S. And we could build that as we have with Formula One and other sports, like through our shoulder programming, like Drive to Survive, like Full Swing, like Breakpoint, like Quarterbacks So this is a proven formula for us that we're excited to jump into. You know, this is sports entertainment, very close to our core.

Speaker Change: So and in terms of a building on it you should think about Formula. One is like this is almost the inverse of Formula one which is a very big and passionate U S fan base and a lot of room to grow outside of the U S and we could build that as we have with formula one and other sports like through our shoulder programming like drive to survive.

Speaker Change: Like full swing like breakpoint like quarterbacks like toward the front months.

Speaker Change: And now with this great storytelling with the event itself or the storytelling is WWE. So this is a proven formula for us that we're excited to jump into <unk>.

Speaker Change: This is sports entertainment very close to our core are the deals long term, we're super excited about it.

Unnamed Host: The deal is long term.

Unnamed Host: We're super excited about it.

Unnamed Host: The deal is long term. We're super excited about it. Great. And the WWE partnership has spurred a lot of questions around our broader approach to sports, including quite a question from Ben Swinburne, but I'll read Michael Nathanson's question. Yeah, since he got it in first.

Speaker Change: Great. And the WWE partnership has spurred a lot of questions around our broader approach to sports, including a question from Ben Swinburne, but I'll read Michael Nathanson's question since he got it in first. So, Ted, given the news today, is it safe to presume that you will now be interested in similar types of global sports rights like the NBA or UFC? Why is the WWE more attractive than those?

Speaker Change: Great and the Ww partnership has spurred a lot of questions around our broader approach to sports, including quite a question from Ben Swinburne Swinburne, but I'll read Michael Nathan's question, Yeah. Since he got it in first so Ted given the news today is it safe to presume that you will now be interested in similar types of global sports rights.

Unnamed Host: Great. And the WWE partnership has spurred a lot of questions around our broader approach to sports, including a question from Ben Swinburne, but I'll read Michael Nathanson's question since he got it in first. So, Ted, given the news today, is it safe to presume that you will now be interested in similar types of global sports rights like the NBA or UFC? Why is WWE more attractive than those?

Theodore A. Sarandos: So Ted, given the news today, is it safe to presume that you will now be interested in similar types of global sports rights like the NBA or UFC? Why is the WWE more attractive than those? So unique to those other opportunities, WWE is sports entertainment, so it's really as close to our core as you can get with that sports storytelling. So, and in terms of the deal itself, it has options, and it has the protections that we seek in our general licensing deals and with economics that we're super happy with globally. So I would not look at this as a signal of any other change or any change to our sports strategy. Great, thank you, Ted.

Speaker Change: Like the MBA or a U S. C. A why is the WWE more attractive than those rights.

Speaker Change: So unique to those other opportunities, WWE is sports entertainment. So it's really as close to our core as you can get of that sports storytelling. So and in terms of the deal itself, it has options and has the protections that we seek in our general licensing deals and with economics that we're super happy with globally.

Speaker Change: So a unique to those other opportunities WWE is sports entertainment. So it's really that is close to our core as you can get of the sport storytelling.

Theodore A. Sarandos: So unique to those other opportunities, WWE is sports entertainment, so it's really as close to our core as you can get with that sports storytelling. And in terms of the deal itself, it has options and has the protections that we seek in our general licensing deals and with economics that we're super happy with globally. So I would not look at this as a signal of any other change or any change to our sports strategy.

So and then in terms of the deal itself. It has options and as it protects the protections that we seek in our general licensing deals and with economics that we're super happy with globally. So.

Speaker Change: So I would not look at this as a signal of any other change or any change to our sports strategy.

Speaker Change: So I would not look at this as a signal of any other change or any change to our sports strategy.

Speaker Change: Great, thank you, Ted. I'll move this along now to a series of questions regarding our results in the forecast. First, coming from Mark Mahaney of Evercore, and this is for Spence, how should we think about arm growth going forward? Is mid-single digit percentage increase a reasonable benchmark? And what are the factors that could create either upside or downside to that growth?

Speaker Change: Great. Thank you Ted I'll move as long now to a series of questions regarding our results in the forecast are first.

Unnamed Host: Great, thank you, Ted. I'll move this along now to a series of questions regarding our results in the forecast. First, coming from Mark Mahaney of Evercore, and this is for Spence, how should we think about asset growth going forward? Is a mid-single digit percentage increase a reasonable benchmark? And what are the factors that could create either upside or downside to that growth? Sure, sure.

Unnamed Host: I'll move us along now to a series of questions regarding our results in the forecast. First, coming from Mark Mahaney of Evercore. This is for Spence.

Speaker Change: First off coming from Mark Mahaney of Evercore.

Mark Mahaney: Oh this is for Spence, how should we think about arm growth going forward is mid single digit percentage increase a reasonable benchmark and what are the factors that could create either upside or downside to that growth outlook.

Spencer Adam Neumann: How should we think about arm growth going forward? Is a mid single-digit percentage increase a reasonable benchmark? And what are the factors that could create either upside or downside to that growth? Sure, sure. Thanks, Mark.

Spencer Adam Neumann: Sure, sure. Thanks, Mark. So, well, first, you know, stepping back, 2023, as a reminder, was a pretty unusual year for us. It was essentially all member-driven growth because our pricing and plans focus in 23 was on rolling out paid sharing. We had almost no price increases until late in the year in 23, and even then, it was just a partial quarter impact.

Speaker Change: Sure sure. Thanks, Mark So well first off you know stepping back 2023 as a reminder, it was a pretty unusual year for us. It was essentially all member driven growth because our pricing and plans focus in 'twenty three was on rolling out paid sharing we had almost no price increases until until late in the year in 'twenty three and even then it was just a partial quarter impact.

Thanks, Mark.

So, well, first, you know, stepping back, 2023, as a reminder, was a pretty unusual year for us. It was essentially all member-driven growth because our pricing and plans focus in 23 was on rolling out paid sharing. We had almost no price increases until late in the year in 23, and even then, it was just a partial quarter impact. As we look to 24, as we noted in the letter for 2024, we expect healthy double-digit FX-neutral revenue growth, including growth in FX-neutral ARM. So we expect continued member growth powered by a great slate, including the full-year impact of our 2023 net ads carrying into 24.

Spencer Adam Neumann: So, well, first, you know, stepping back, 2023, as a reminder, was a pretty unusual year for us. It was essentially all member-driven growth because our pricing and plans focus in 23 was on rolling out paid sharing. We had almost no price increases until late in the year in 23, and even then it was just a partial quarter impact.

Spencer Adam Neumann: As we look to 24, as we noted in the letter for 2024, we expect healthy double-digit FX-neutral revenue growth, including growth in FX-neutral ARM. So we expect continued member growth powered by a great slate, including the full-year impact of our 2023 net ads carrying into 24. And no change to our pricing philosophy. You saw some of that pricing action already in the past quarter. And, you know, we should get some help from extra members in starting to scale our ads business. But as we said, ads won't be a primary driver in 24. So when we look beyond in general over kind of multiple years, 24 and beyond, we're focused on continually improving our service. If we do that well, we'll have more members, we'll have more value that we can occasionally price into, and lots of engagement to build a big and profitable ads business.

Speaker Change: As we looked at 'twenty four as we noted in the letter for 2024, we expect healthy double digit FX neutral revenue growth, including growth in FX neutral arm. So we expect continued member growth powered by great slate, including the full year impact of our 2023 net adds carrying into 'twenty, four and no change to our price.

Spencer Adam Neumann: As we look to 24, as we noted in the letter for 2024, we expect healthy double-digit FX-neutral revenue growth, including growth in the FX-neutral arm. So we expect continued member growth powered by a great slate, including the full-year impact of our 2023 net ads carrying into 24, and no change to our pricing philosophy. You saw some of that pricing action already in the past quarter, and, you know, we should get some help from extra members in starting to scale our ads business, but as we said, ads won't be a primary driver in 24. So when we look beyond, in general, over kind of multiple years, 24 and beyond, we're focused on continually improving our service. If we do that well, we'll have more members, we'll have more value that we can occasionally price into, and lots of engagement to build a big and profitable business.

And no change to our pricing philosophy. You saw some of that pricing action already in the past quarter. And, you know, we should get some help from extra members in starting to scale our ads business. But as we said, ads won't be a primary driver in 24. So when we look beyond in general over kind of multiple years, 24 and beyond, we're focused on continually improving our service. If we do that well, we'll have more members, we'll have more value that we can occasionally price into, and lots of engagement to build a big and profitable ads business, so healthy revenue growth with a mixture of volume and arm that's really the output and you know i'll probably disappoint because i'm not going to provide a specific guide on arm because we managed overall revenue growth but we want arm to be a component of that growth it's just that it could move up or down based on things in any given year like fx like the place at which we're scaling our ads reach and some lag that could happen in terms of monetizing that reach and just generally our pricing and plan strategy more broadly in a given year, Thanks, Spence.

Speaker Change: <unk> philosophy, you saw some of that pricing action already in the past quarter and you know we should get some help from extra members and starting to scale, our ads business, but as we said adds won't be a primary driver in 'twenty four so when we look beyond and in general over multiple years 'twenty four and beyond we're focused on continually improving our service if we do.

Speaker Change: That well will have more members were up more value that we can occasionally price into and lots of engagement to build a big unprofitable ads business. So healthy revenue growth with a mixture of volume and I'm an arm that's really the output.

Spencer Adam Neumann: so healthy revenue growth with a mixture of volume and arm that's really the output and you know i'll probably disappoint because i'm not going to provide a specific guide on arm because we managed overall revenue growth but we want arm to be a component of that growth it's just that it could move up or down based on things in any given year like fx like the place at which we're scaling our ads reach and some lag that could happen in terms of monetizing that reach and just generally our pricing and plan strategy more broadly in a given year

Spencer Adam Neumann: So healthy revenue growth with a mixture of volume and arm, that's really the output. And I'll probably disappoint you because I'm not gonna provide a specific guide to arm because we managed overall revenue growth, but we want arm to be a component of that growth. It's just that it could move up or down based on things in any given year, like FX, like the pace at which we're scaling our ads reach and some lag that could happen in terms of monetizing that reach, and just generally our pricing and plan strategy more broadly in a given year. Thanks, Spence.

Speaker Change: Yeah, I'll, probably disappoint cause I'm not going to provide a specific guide on our because we manage to overall revenue growth, but we want arm to be a component of that growth.

Speaker Change: It's just that it could move up or down based on things in any given year like FX like the pace at which we're scaling our ads reach and some lag that could happen in terms of monetizing that reach and just generally our pricing and planned strategy more broadly in a given year.

Speaker Change: Thanks Spence. Our next question is from Steve Kay Hall from Wells Fargo for Greg. The question once a subscriber in arm benefits from page here and begin to diminish in 2024, what do you think are the biggest incremental opportunities to continue to drive subscriber and revenue rose what types of additional content or additional member.

Speaker Change: Thanks, Spence. Our next question is from Steve Cahal from Wells Fargo for Greg. The question is, once a subscriber and arm benefits from paid sharing begin to diminish in 2024, what do you think are the biggest incremental opportunities to continue to drive subscriber and revenue growth? What types of additional content or additional member benefits provide the best ROI to help sustain healthy revenue growth?

Unnamed Host: Our next question is from Steve Cahal from Wells Fargo for Greg. The question is, once subscriber and arm benefits from paid sharing begin to diminish in 2024, what do you think are the biggest incremental opportunities to continue to drive subscriber and revenue growth?

Gregory K. Peters: Our next question is from Steve Cahill from Wells Fargo for Greg. The question is, once subscriber and arm benefits from paid sharing begin to diminish in 2024, what do you think are the biggest incremental opportunities to continue to drive subscriber and revenue growth? What types of additional content or additional member benefits provide the best ROI to help sustain healthy revenue growth? Well, we're excited to be at the point where we've operationalized that page sharing product work. So it's integrated into everything we do, and we're iterating and improving on it, just like we would any other significant part of our product experience. So we think of this essentially as having built a more effective engine for translating the entertainment value that we're creating for our members into revenue. But I think it's critical to understand that that engine works on top of, and we see it working on top of, very healthy organic growth.

Unnamed Host: What types of additional content or additional member benefits provide the best ROI to help sustain healthy revenue growth?

Greg: It's provide the best ROI helps sustain healthy revenue growth.

Gregory K. Peters: Well, we're excited to be at the point where we've operationalized that page sharing product work. So it's integrated into everything we do, and we're iterating and improving on it just like we would any other significant part of our product experience. So we think of this essentially as having built a more effective engine for translating the entertainment value that we're creating for our members into revenue. But I think it's critical to understand that that engine works on top of, and we see it working on top of, very healthy organic growth. You can see it in things like better than forecasted churn.

Gregory K. Peters: Well, we're excited to be at the point where we've operationalized that page sharing product work. So it's integrated in everything we do, and we're iterating and improving on it just like we would any other significant part of our product experience. So we think of this essentially as having built a more effective engine for translating the entertainment value that we're creating for our members into revenue. But I think it's critical to understand that that engine works on top of, and we see it working on top of, very healthy organic growth. You can see it in things like better than forecasted churn. We see better than expected impacts on the recent price changes we did. And that's the model essentially, right? If we continue to improve our core offering, that means more diversity and more quality from our members' perspective and our films and series. Now adding the live events programming to add even more value, continuing to grow games and the entertainment value that we're delivering through those. Then our page sharing work and our ads work creates a more effective engine to translate all that value into revenue growth. And we'll support increased conversion of our addressable market in many years.

Speaker Change: Well, we're excited to be at the point, where we've operationalized that paid sharing product work. So it's integrated in everything we do and we're iterating and improving on it just like we would any other significant part of our product experience. So we think of this essentially is having built a more effective engine for translating the entertainment value that we're <unk>.

Speaker Change: For our members into revenue, but I think it's critical to understand that that engine works on top of and we see it working on top of very healthy organic growth you can see it in things like better than forecasted churn, we see better than expected impact from the recent price changes, we did and that's the that's the model essentially right. If we can continue to improve our core offering that means more diverse.

Unnamed Host: You can see it in things like better-than-forecasted churn. We see better-than-expected impacts on the recent price changes we did. And that's the model, essentially, right?

Gregory K. Peters: We see better than expected impacts on the recent price changes we did. And that's the model, essentially, right? If we continue to improve our core offering, that means more diversity and more quality from our members' perspective and for our films and series, now adding the live events programming to add even more value, continuing to grow games and the entertainment value that we're delivering through those. Then our page sharing work and our ads work creates a more effective engine to translate all that value into revenue growth. And we'll support increased conversion of our addressable market for many years.

Unnamed Host: If we continue to improve our core offering, that means more diversity and more quality from our members' perspective. And our films and series, now adding live events programming to add even more value, continue to grow games and the entertainment value that we're delivering through those. Then our page sharing work and our ads work creates a more effective engine to translate all that value into revenue growth and will support increased conversion of our addressable market for many years. Thanks, Greg.

Speaker Change: And more quality from our members perspective in our films and series now, adding a live event programming to add even more value continuing to grow games in the entertainment value that we're delivering through those that are paid sharing work in our ads work creates a more effective engine to translate all of that value into revenue growth and will support increased conversion.

Speaker Change: Of our addressable market and many years to come.

Speaker Change: Thanks, Greg. The next question is from Doug Enliff from JP Morgan, and I'll direct this one to Spence. The $13 million-plus paid net ads in Q4 was strong overall and across all regions, but EMEA seemed to drive a particular upside. Is there anything specific to point out there, perhaps the ad tier or specific content or localized pricing, perhaps?

Speaker Change: Thanks, Greg. The next question is from Doug Anmuth from JP, Morgan and I'll direct this one to Spence the 13th.

Spencer Adam Neumann: The next question is from Doug Enliff from JP Morgan, and I'll direct this one to Spence. The $13 million plus paid net ads in Q4 were strong overall and across all regions, but EMEA seemed to drive particular upside. Is there anything specific to point out there? Perhaps the ad tier or specific content or localized pricing, perhaps? Yeah, thanks.

Doug Mitchelson: Plus peanut as in Q4 was strong overall and across all regions, but EMEA seem to drive particular upside is there anything specific to point out there, perhaps the ad tier or specific content or localized pricing perhaps.

Unnamed Host: Thanks, Greg. The next question is from Doug Enliff from JP Morgan, and I'll direct this one to Spence. The $13 million-plus paid net ads in Q4 were strong overall and across all regions, but EMEA seemed to drive a particular upside.

Spencer Adam Neumann: Yeah, so thanks. Well, actually, EMEA is sort of a perfect example of a little bit of what Greg was just talking about. So first, it starts with great slate performance, a great content performance. We had a really strong slate across EMEA from the crown finale in the UK to in France, we had Blood Coast and Lupin and Class Act, we had Berlin, Elite and Nowhere and Spain and in Poland, 1670 and much more, frankly. So it starts with that strong slate. And then by channel Greg's last answer, that kind of better value translation engine, if you will, which drives even more growth through our page sharing solutions and our monetization engine. So that helped as well. So it really all came together in EMEA this past quarter. And I'll say, very importantly, it's not just net ads. It's, you know, again, our primary focus is on revenue growth. We had very strong revenue growth as a result of that in EMEA this past quarter, 13% FX neutral growth in Q4.

Speaker Change: Yeah, Thanks, well actually EMEA as a sort of a perfect example of a little bit of what Greg was just talking about so first it starts with great slate performance a great content performance, we had a really strong slate across EMEA from the crown finale in the U K two in France, We had blood coast and coupon in Class Act weird.

Spencer Adam Neumann: Well, actually, EMEA is a sort of a perfect example of a little bit of what Greg was just talking about. So, first, it starts with great slate performance, great content performance. We had a really strong slate across EMEA from the Crown finale in the UK to France. We had Blood Coast and Lupin and Class Act. We had Berlin, Elite, Nowhere in Spain and Poland 1670 and much more, frankly.

Is there anything specific to point out there, perhaps the ad tier or specific content or localized pricing, perhaps?

Yeah, so thanks. Well, actually, EMEA is sort of a perfect example of a little bit of what Greg was just talking about. First, it starts with great slate performance, and great content performance.

Speaker Change: Berlin, and leap day, and nowhere in Spain, and Poland, and 16, and 17 and much more frankly, so it starts with that strong slate and then by channel.

Spencer Adam Neumann: So it starts with that strong slate. And then, by channel, Greg's last answer, that kind of better value translation engine, if you will, which drives even more growth through our paid sharing solutions and our monetization engine. So that helped as well.

Speaker Change: Greg's last answer that you kind of better value Tran translation engine, if you will which drives even more growth.

We had a really strong slate across EMEA, from the crown finale in the UK to France, we had Blood Coast and Lupin and Class Act, we had Berlin, Elite, and Nowhere, and Spain, and Poland, 1670 and much more, frankly. So it starts with that strong slate. And then Channel Greg's last answer, that kind of better value translation engine, if you will, which drives even more growth through our page sharing solutions and our monetization engine. So that helped as well. So it really all came together in EMEA this past quarter, and I'll say, very importantly, it's not just net ads. It's, you know, again our primary focus is on revenue growth.

Speaker Change: Through our paid sharing solutions and our monetization engine, so that helped as well. So it really all came together in EMEA this past quarter and I'll say I'm very importantly, it's not just net adds. It's you know again are our primary focus is on revenue growth. We had very strong revenue growth as a result of that in EMEA This past quarter, 13% FX.

Spencer Adam Neumann: So it really all came together in EMEA this past quarter. And I'll say very importantly, it's not just net ads. It's, you know, again, our primary focus is on revenue growth. We had very strong revenue growth as a result of that in EMEA this past quarter, 13 percent FX-neutral growth in Q4. Thanks, Spence.

Speaker Change: Neutral growth in Q4.

Speaker Change: Thanks, Spence. Doug also has a follow-up question around paid sharing, which I will direct to Greg. How far along are you in terms of the paid sharing benefits? Do you still believe paid sharing will add subscribers for several more quarters? And is there any way to quantify what percentage of the 100 million borrower household population have either become extra members or full paying subscribers?

Speaker Change: Thanks Spence Doug also has a follow up question around paid sharing which I will direct to Greg how far along are you in terms of the Patriot benefits do you still believe featuring well adds subscribers for several more quarters and is there any way to quantify what percentage of the 100 million borrower a household.

Gregory K. Peters: Doug also has a follow-up question around paid sharing, which I will direct to Greg. How far along are you in terms of the paid sharing benefits? Do you still believe paid sharing will add subscribers for several more quarters? Is there any way to quantify what percentage of the 100 million borrower household population have either become extra members or full paying subscribers? Yeah, as I mentioned, we've gotten to the point where the page sharing product experience is just something we do at this point. But also, I think it's important to say that, like many other things that we do, we also see a real opportunity to continue to materially improve that value translation engine. So we definitely delivered interventions to new cohorts in the last quarter.

Speaker Change: <unk>.

Greg: Have either become extra members or full paying subscribers.

Gregory K. Peters: Yeah, as I mentioned, you know, we've gotten to the point where page sharing, the page sharing product experience is just something we do at this point. But also, I think it's important to say that, like many other things that we do, we also see a real opportunity to continue to materially improve, you know, that value translation engine. So we definitely delivered interventions to new cohorts in the last quarter. We're going to continue to deliver new to new cohorts in 2024. But increasingly, I sort of don't think about it as like, you know, going after these certain pools, but more about just finding the most effective way to convert folks who are using the service, the right call to action, the right nudge at the right time. And those might have been historical borrowers or, you know, folks that are new to the service as well. And we're going to continue to improve that engine. That will continue to improve our growth for years ahead, not just 2024.

Speaker Change: Yeah as I mentioned, we've gotten to the point, where paid sharing the Patriot and product experience is just something we do at this point.

We had very strong revenue growth as a result of that in EMEA this past quarter, 13% FX-neutral growth in Q4. Thanks, Spence.

Speaker Change: But also I think it's important to say that like many other things that we do we also see a real opportunity to continue to materially improve.

Speaker Change: Value translation engine. So we definitely delivered interventions to new cohorts in the last quarter, we're going to continue to deliver new to new cohorts in 2024, but increasingly I sort of don't think about it is like you know going after these certain pools, but more about just finding the most effective way to convert folks who are using the <unk>.

Unnamed Host: Doug also has a follow-up question around paid sharing, which I will direct to Greg. How far along are you in terms of the paid sharing benefits? Do you still believe paid sharing will add subscribers for several more quarters? And is there any way to quantify what percentage of the 100 million borrower household population have either become extra members or full paying subscribers?

Gregory K. Peters: We're going to continue to deliver new cohorts in 2024. But increasingly, I sort of don't think about it as like, you know, going after these certain pools, but more about just finding the most effective way to convert folks who are using the service, the right call to action, the right nudge at the right time. And those might have been historical borrowers or, you know, folks that are new to the service as well.

Speaker Change: It's the right call to action the right nudge at the right time and those might've been historical borrowers are folks that are new to the service as well and we're going to continue to improve that engine that will it continue to improve our growth for years ahead, not just 2024.

Unnamed Host: And we're going to continue to improve that engine that will continue to improve our growth for years ahead, not just in 2024. Great. I'll now transition us to a series of questions around advertising. For Greg, Dan Salmon from New Street Research, his question is, what are some of your most important milestones for the advertising business in 2024? Do you have a target level of MAUs or ad member households? What sorts of improvements to ad tech or measurement are you seeking?

Speaker Change: Great I'll now transition us to a series of questions around advertising.

Speaker Change: Great. I'll now transition us to a series of questions around advertising. For Greg, Dan Salmon from New Street Research, his question is, what are some of your most important milestones for the advertising business in 2024? Do you have a target level of MAUs or ad member households? What sorts of improvements to ad tech or measurement are you seeking and perhaps any new country launches for your ad?

Gregory K. Peters: Yeah, as I mentioned, we've gotten to the point where the page sharing product experience is just something we do at this point.

Speaker Change: For Greg Dan Salmon from New Street Research. His question is what are some of your most important milestones for the advertising business. In 2024 do you have a target level of M. A use or a member households, what sorts of improvements to our AD tech or measurement are you seeking and perhaps any new country launches for you.

Gregory K. Peters: But also, I think it's important to say that, like many other things that we do, we also see a real opportunity to continue to materially improve, you know, that value translation engine. So we definitely delivered interventions to new cohorts in the last quarter. We're going to continue to deliver new cohorts in 2024. But increasingly, I sort of don't think about it as like, you know, going after these certain pools, but more about just finding the most effective way to convert folks who are using the service, the right call to action, the right nudge at the right time. And those might have been historical borrowers or, you know, folks that are new to the service as well. And we're going to continue to improve that engine. That will continue to improve our growth for years to come, not just in 2024.

Gregory K. Peters: And perhaps any new country launches for your ad? Yeah, our top advertiser priority, you've heard us say before, I think you'll hear us say it again, is scale. We saw 70% quarter-over-quarter growth last quarter. That's after 70% quarter-over-quarter growth for the quarter before, and then 100% the quarter before that.

Speaker Change: <unk> plan.

Speaker Change: Our top ads priority, you've heard us say it before, I think you'll hear us say it again, is scale. We saw 70% quarter-of-quarter growth last quarter. That's after 70% quarter-of-quarter for the quarter before, and then 100% the quarter before that. So that's a good trajectory to be on. We're now at 23 million MAUs, and we see that continuing to grow in the quarters ahead. Now, as to your point about, you know, what's the target, every market's different. There's not a magic MAU number, but I think it's fair to say that we've still got plenty of room to grow in all the markets that we operate in, and we're focused on the additional work that we can do in that space. That means making the ads plan more attractive. You know, we've added streams, higher resolution, downloads. It means engaging partner channels. You'll see us do more of that. Shifting our plans and pricing structure in other places where we think it's appropriate. So all that works ahead of us. We know we can do that. We can do tremendous amounts in that space, and we're going to go do it over the next quarters. Second priority, you mentioned this, which is really, you know, growing the technical advertising features and growing our go-to-market capabilities. And these are features like targeting, improved ad relevance. That's good for members. It's good for brands. We've got tons to do on improved measurement. We want to launch more ads products. We've got binge ads, sponsorships now. And, you know, we have to build increasingly the capability to be better partners with advertisers. And serve their needs. So this is, you know, better sales teams, ad operations, and just more capability to meet brands where they need us and how they need us.

Speaker Change: Our top adds priority you've heard us say before I think you'll hear us say it again is scale, we saw 70% quarter on quarter growth last quarter.

After a 70% quarter on quarter for the quarter before and then 100% the quarter before that so that's a good trajectory to be on we're now at $23 million may use and we see that continuing to grow in the quarters ahead now as to your point about whats the target every market's different there's not a magic number but I think it's fair to say that we still got.

Gregory K. Peters: So that's a good trajectory to be on. We're now at 23 million MAUs, and we see that continuing to grow in the quarters ahead. Now, as to your point about, you know, what's the target? Every market's different. There's not a magic MAU number.

Gregory K. Peters: But I think it's fair to say that we still have plenty of room to grow in all the markets that we operate in, and we're focused on the additional work that we can do in that space. That means making the advertising plan more attractive. You know, we've added streams, higher resolution, and downloads. It means engaging partner channels to see us do more of that, and shifting our plans and pricing structure to other places where we think it's appropriate. So all that works ahead of us.

Speaker Change: Plenty of room to grow in all the markets that we operate in.

Speaker Change: And we're focused on the additional work that we can do in that space that means making the ads playing more attractive you know we've added streams higher resolution downloads. It means engaging partner channels, you'll see us do more of that shifting our plans and pricing structure and other places where we think it's appropriate. So all of that works out of US. We know we can do tremendous amounts.

Unnamed Host: Great. I'll now transition us to a series of questions around advertising. For Greg, Dan Salmon from New Street Research, his question is, what are some of your most important milestones for the advertising business in 2024?

Gregory K. Peters: We know we can do tremendous amounts in that space, and we're going to do it over the next couple of quarters. Second priority, you mentioned, which is really growing the technical advertising features and growing our go-to-market capabilities. And these are features like targeting, and improved ad relevance. That's good for members.

In that space and we're gonna go do over the next quarters.

Speaker Change: Second priority you mentioned this which is really growing the technical advertising features and growing our go to market capabilities and these are features like targeting improved AD relevance. That's good for members. It's good for brands, we've got tons to do unimproved measurement, we want to launch more ads products, we've got a binge ads sponsorships now and.

Unnamed Host: Do you have a target level of MAUs or ad member households? What sorts of improvements to ad tech or measurement are you seeking, and perhaps any new country launches for your ad?

Gregory K. Peters: It's good for brands. We've got tons to do on improved measurement. We want to launch more advertising products. We've got binge ads and sponsorships now. And, you know, we have to build increasingly the capability to be better partners with advertisers and serve their needs. So this is, you know, better sales teams, ad operations, and just more capability to meet brands where they need us and how they need us. So we're focused on the long-term revenue potential here, and we're very optimistic about it. It's a huge opportunity. 180 billion euros of ad spend outside China and Russia, 25 billion alone on connected TV.

Speaker Change: We have to build increasingly the capability to be better partners with advertisers and serve their needs. So this is you know a better sales teams.

Gregory K. Peters: Our top advertising priority, you've heard us say it before, and I think you'll hear us say it again, is scale. We saw 70% quarter-of-quarter growth last quarter. That's after 70% quarter-of-quarter for the quarter before, and then 100% the quarter before that. So that's a good trajectory to be on. We're now at 23 million MAUs, and we see that continuing to grow in the quarters ahead. Now, as to your point about, you know, what's the target? Every market's different.

Operations, and just more capability to meet brands, where they are where they need us and how they need us.

Speaker Change: We're focused on the long-term revenue potential here. We're very optimistic about it. It's a huge opportunity, $180 billion of ad spend, ex-China and Russia, $25 billion alone on connected TV. We know ad dollars follow engagement. We've got the most engaged audience, so we believe we're well-positioned to capture some of that ad spend that shifts from linear to streaming.

Speaker Change: So we're focused on the long term revenue potential here, we're very optimistic about it. It's a huge opportunity of 180 billion of AD spend ex China, and Russia $25 billion alone on connected TV, We know add dollars follow engagement. We've got the most engaged audience. So we believe we're well positioned to capture some of that ad spend.

Speaker Change: It shifts from linear to streaming.

Gregory K. Peters: We know ad dollars follow engagement. We've got the most engaged audience, so we believe we're well-positioned to capture some of that ad spend that shifts from linear to streaming. Great. And, Greg, any thoughts to Dan's question around launching an advertising plan in other countries, in addition to the 12 countries we're in today? Thanks for reminding me about that one.

Speaker Change: Great. And Greg, any thoughts to Dan's question around launching an ads plan in other countries in addition to the 12 countries we're in today? Thanks for reminding me on that one. I would say we got a ton of work ahead of us on just getting to, you know, the level of maturity and impact to the business from the countries that we're operating in today. I would say, you know, never say never on expanding beyond that. But it's worth noting that the countries that we are currently operating in represent about 80% of global ad spend. So we're already, you know, working in the spaces where there's the majority of opportunity. You know, we'll see in the fullness of time, but we'd say we got years of work ahead of us to take the ads business to the point where it's a material impactor to our general business.

Speaker Change: Great and Greg.

Speaker Change: Any thoughts to Dan's question around launching and that's planned in other countries. In addition to the 12 countries. We're in today. Thanks for reminding me on that one I would say we got a ton of work ahead of us on just getting to you know.

Gregory K. Peters: There's not a magic MAU number, but I think it's fair to say that we've still got plenty of room to grow in all the markets that we operate in, and we're focused on the additional work that we can do in that space. That means making the ads plan more attractive. You know, we've added streams, higher resolution, and downloads. It means engaging partner channels. You'll see us do more of that, shifting our plans and pricing structure to other places where we think it's appropriate. So all that work is ahead of us. We know we can do it. We can do tremendous amounts in that space, and we're going to do it over the next quarters. The second priority, you mentioned, which is really, you know, growing the technical advertising features and growing our go-to-market capabilities.

Speaker Change: The level of maturity and impact to the business from the countries that we're operating in today.

Speaker Change: I would say never say never on expanding beyond that but it's worth noting that the countries that we are currently operate and represent about 80% of global AD spend so we're already.

Gregory K. Peters: I would say we've got a ton of work ahead of us on just getting to, you know, the level of maturity and impact on the business from the countries that we're operating in today. I would say, you know, never say never on expanding beyond that, but it's worth noting that the countries that we are currently operating in represent about 80% of global ad spend. So we're already, you know, working in the spaces where there's the majority of opportunity. You know, we'll see in the fullness of time, but we'd say, I'd say we have years of work ahead of us to take the ads business to the point where it's a material impact on our general business. Thank you, Greg.

Working in the spaces, where there is the majority of opportunity, yes, we will.

Speaker Change: See in the fullness of time, but we'd say I said, we've got years of work ahead of us to take the ads business to the point, where it's a material impact to our general business.

Speaker Change: Great. Thank you Greg.

Speaker Change: Thank you, Greg. From Steve Cahill from Wells Fargo, how do you think about the efficacy of continuing to use a third-party relationship for ad sales versus the opportunity to invest in your own ad tech and ad sales infrastructure? Do you have a sense of what kind of investment would be required to transact more directly with advertising?

Speaker Change: From Steve came home from Wells Fargo, How do you think about the efficacy of continuing.

Speaker Change: To use a third party relationship for AD sales versus the opportunity to invest in your own AD Tech and AD sales infrastructure do you have a sense of what kind of investment would be required to.

Gregory K. Peters: And these are features like targeting and improved ad relevance. That's good for members. It's good for brands. We've got tons to do on improved measurement. We want to launch more advertising products. We've got binge ads and sponsorships now. And, you know, we have to build the capability to be better partners with advertisers and serve their needs. So this is, you know, better sales teams, ad operations, and just more capability to meet brands where they need us and how they need us. We're focused on the long-term revenue potential here. We're very optimistic about it. It's a huge opportunity, $180 billion of ad spend, ex-China and Russia, $25 billion alone on connected TV. We know ad dollars follow engagement. We've got the most engaged audience, so we believe we're well-positioned to capture some of that ad spend that shifts from linear to streaming.

Speaker Change: To transact more directly with advertisers.

Steve Cahill: Yeah, and just to clarify, 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 similarly on the ad sales and the go-to-market side of things, we're building out our own teams that cover a portion of the sales and operations activity.

Yeah, and just to clarify 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 similarly on the AD sales and they go to market side of things were.

Unnamed Host: From Steve Cahill from Wells Fargo, how do you think about the efficacy of continuing to use a third-party relationship for ad sales versus the opportunity to invest in your own ad tech and ad sales infrastructure? Do you have a sense of what kind of investment would be required to transact more directly with advertising? Yeah, and just to clarify, 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 make a differential contribution. And then, similarly, on the ad sales and the go-to-market side of things, we're building out our own teams that cover a portion of the sales and operations activity. So I think you asked in terms of what's the size of the investment.

Speaker Change: <unk> out our own teams that cover a portion of the sales and operations activities.

Speaker Change: So I think you, you know, asked in terms of what's the size of investment, you know, we have plans to continue to grow those teams. So those are both growing at a pretty strong clip and growing that investment. But we've modeled out where, you know, what we think we need. And even with those investment levels and the growth that we expect that we see, we expect the margins on the ad business to remain very high.

Speaker Change: So I think you asked about in terms of what's the size of investment we have plans to continue to grow those teams. So those are both growing at a pretty strong clip and growing that investment, but we've modeled out where we think we need an even with those investment levels and the growth that we expect that we see we expect the margins on the AD business to remain very high.

Speaker Change: Thanks, Greg. A question from Rich Greenfield on advertising. Later this week, T-Mobile's subscriber benefit called Netflix on Us will convert to Netflix's ad tier unless subscribers upgrade to an ad-free tier. Is it reasonable to assume that your U.S. ad-supported subscriber base will roughly double as a result of this change? And assuming it is, how quickly will you be able to fill that inventory?

Speaker Change: Great. Thanks, Greg.

Speaker Change: In from Rich Greenfield on advertising later this week a T mobile's subscriber benefit called Netflix on us will convert to.

Unnamed Host: Great. And Greg, any thoughts to Dan's question around launching an advertising plan in other countries in addition to the 12 countries we're in today?

Speaker Change: Netflix is add tier unless our subscribers upgrade to an.

Speaker Change: And AD free tier is it reasonable to assume that your U S AD supported subscriber base will roughly double as a result of this change and assuming that it is how quickly will you be able to fill that inventory.

Gregory K. Peters: You know, we have plans to continue to grow those teams, so those are both growing at a pretty strong clip and growing that investment. But we've modeled out where we think we need, and even with those investment levels and the growth that we expect to see, we expect the margins on the ad business to remain very high. Great, thanks, Greg. A question from Rich Greenfield on advertising. Later this week, T-Mobile's subscriber benefit called Netflix on Us will convert to Netflix's ad tier unless subscribers upgrade to an ad-free tier. Is it reasonable to assume that your U.S. ad-supported subscriber base will roughly double as a result of this change? And assuming that it is, how quickly will you be able to fill that inventory?

Gregory K. Peters: Thanks for reminding me of that one. I would say we have a ton of work ahead of us on just getting to, you know, the level of maturity and impact on the business from the countries that we're operating in today. I would say, you know, never say never on expanding beyond that. But it's worth noting that the countries that we are currently operating in represent about 80% of global ad spend. So we're already, you know, working in the spaces where there's the majority of opportunity. We'll see in the fullness of time, but we'd say we have years of work ahead of us to take the ads business to the point where it's a material impact on our general business.

Speaker Change: Yeah, I won't get into the specifics of a particular deal or provide a forecast for a particular deal, but I'll just say that, you know, just as we've done for many, many years, leveraging partner channels is an important part of our subscriber growth strategy. We're applying the same techniques and approaches to scaling our ads membership, and we love having this additional tool. It's very effective, very useful for us because that lower consumer-facing price means that we've got room now to bundle the ads plan into a set of lower-priced partner offerings where it was hard to make the economics work for everyone previously. So it opens up a whole new range of opportunities. It's great for new members as well who are leveraging those bundles. They get a better plan than basic, more streams, higher resolution with downloads. And, of course, you know, the real benefit is they can... They get access to all this amazing stories at a lower effective price through the bundle. So, you know, we really think of this as a win-win-win, and we're going to continue to leverage these bundles going forward. And I think Rich asked, you know, how we think about how quickly we fill the supply. You know, I mean, when you're building, you know, growing as fast as we're growing right now, it creates a lot of challenges you might expect to then fill behind that. But I'd much rather be in that position where we're growing that inventory. And then racing behind to fill it and improve our monetization than the reverse. So I'm happy to have that challenge.

Yeah, I won't get into the specifics of a particular deal or provide a forecast for a particular deal, but I'll just say that you know just as we've done for many many years leveraging partnered channels is an important part of our subscriber growth strategy. We're applying the same techniques and approaches to scaling our ads membership and we love having this.

Speaker Change: Additional tool its very effective.

Speaker Change: [noise] useful for us because that lower consumer facing price means that we got room now to bundle. The ads plan into a set of lower priced partner offerings, where it was hard to make the economics work for everyone. Previously so it opens up a whole new range of opportunities, it's great for new members as well.

Unnamed Host: Thank you, Greg.

Gregory K. Peters: Yeah, I won't get into the specifics of a particular deal or provide a forecast for a particular deal. But I'll just say that, you know, just as we've done for many, many years, leveraging partner channels is an important part of our subscriber growth strategy. We're applying the same techniques and approaches to scaling our ads membership, and we love having this additional tool. It's very effective, and very useful for us because that lower consumer facing price means that we have room now to bundle the ads plan into a set of lower priced partner offerings where it was hard to make the economics work for everyone previously. So it opens up a whole new range of opportunities. It's great for new members as well who are leveraging those bundles. They get a better plan than Basic, more streams, and higher resolution with downloads.

Unnamed Host: From Steve Cahill from Wells Fargo, how do you think about the effectiveness of continuing to use a third-party relationship for ad sales versus the opportunity to invest in your own ad tech and ad sales infrastructure?

Gregory K. Peters: Do you have a sense of what kind of investment would be required to transact more directly with advertising? Yeah, and just to clarify, 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 make a differential contribution. And then, similarly, on the ad sales and the go-to-market side of things, we're building out our own teams that cover a portion of the sales and operations activity. So I think you asked in terms of the size of the investment, and we have plans to continue to grow those teams. So those are both growing at a pretty strong clip and growing that investment. But we've modeled out where we think we need, and even with those investment levels and the growth that we expect to see, we expect the margins on the ad business to remain very high.

Speaker Change: Who are leveraging those bundles they get a better plan than basic more streams higher resolution with downloads and of course, the real benefit is they get access to all of this amazing stories.

Speaker Change: Stories at a lower effective price through the bundle. So we really think of this as a win win win.

Speaker Change: We're going to continue to leverage these bundles going forward and I think rich asked how do we think about quickly how good we feel the supply.

Speaker Change: When you're building a growing as fast as we're growing right now it creates a lot of challenges you might expect to then fill behind that.

Gregory K. Peters: And of course, you know, the real benefit is they get access to all these amazing stories at a lower effective price through the bundle. So, you know, we really think of this as a win, win, win. And we're going to continue to leverage these bundles going forward. And I think Rich asked how we think about how quickly we fill the supply.

Speaker Change: But I'd much rather be in that position, where we're growing that inventory and then raising behind to fill it and improve our monetization than the reverse so I'm happy to have that challenge.

Speaker Change: Super. I'll now move us along to a series of questions related to content. So Ted, from Jason Helfstein of Oppenheimer, are you shifting the mix of your content spend to more licensed second run content? And if so, how should we think about this mix impacting Netflix's operating margin?

Speaker Change: Super I'll now move along to a series of questions related to content. So Ted from Jason <unk> of Oppenheimer are you shifting the mix of your content spend to.

Gregory K. Peters: You know, I mean, when you're building, you know, growing as fast as we're growing right now, it creates a lot of challenges you might expect to then fill behind that. But I'd much rather be in that position where we're growing that inventory and then racing behind to fill it and improve our monetization than the reverse. So I'm happy to have that challenge.

More licensed second run content and if so how should we think about this mix impacting Netflix is operating margins.

Unnamed Host: Thanks, Greg. A question from Rich Greenfield on advertising. Later this week, T-Mobile's subscriber benefit called Netflix on Us will convert to Netflix's ad tier unless subscribers upgrade to an ad-free tier.

Theodore A. Sarandos: So, you know, we've always had a healthy appetite for licensing content from others for our members. I don't see any meaningful change in that mix. And, you know, the current margin outlook contemplates that healthy mix between originals and licensed titles. You know, it might be that we can deliver more on our programming spend with some licensed titles, but we also believe that we deliver an incredible amount of value, excitement, and differentiation with our original series. You know, remember our original series made up the number one most watched original 48 of 52 weeks last year. So, we really don't have any plans to move away from those investments.

Speaker Change: So we've always had a healthy appetite for licensing content from others for our members are I don't see any meaningful change in that mix and you know the current margin outlook contemplates that healthy mix between original and licensed titles.

Unnamed Host: Super. I'll now move us along to a series of questions related to content. So, Ted, from Jason Helfstein of Oppenheimer, are you shifting the mix of your content spend to more licensed second-run content? And if so, how should we think about this mix impacting Netflix's operating margin?

Gregory K. Peters: Is it reasonable to assume that your U.S. ad-supported subscriber base will roughly double as a result of this change? And, assuming it is, how quickly will you be able to fill that inventory? Yeah, I won't get into the specifics of a particular deal or provide a forecast for a particular deal, but I'll just say that, you know, just as we've done for many, many years, leveraging partner channels is an important part of our subscriber growth strategy. We're applying the same techniques and approaches to scaling our advertising membership, and we love having this additional tool. It's very effective, and very useful for us because that lower consumer-facing price means that we've got room now to bundle the ads plan into a set of lower-priced partner offerings where it was hard to make the economics work for everyone previously. So it opens up a whole new range of opportunities. It's great for new members as well who are leveraging those bundles. They get a better plan than Basic, more streams, and higher resolution with downloads. And, of course, you know, the real benefit is that they can...

Speaker Change: It might be that we can deliver more on our programming spend with some license titles, but we also believe that we deliver an incredible amount of value excitement and differentiation with our original series.

Theodore A. Sarandos: So, you know, we've always had a healthy appetite for licensing content from others for our members. I don't see any meaningful change in that mix, and, you know, the current Margin Outlook contemplates that healthy mix between originals and licensed titles. You know, it might be that we can deliver more on our programming spend with some licensed titles, but we also believe that we deliver an incredible amount of value, excitement, and differentiation with our original series. Remember, our original series were the number one most-watched original 48 out of 52 weeks last year, so we really don't have any plans to move away from those investments. Right?

Speaker Change: Remember our original series made up the the number or the number one most watched original 48 to 52 weeks last year.

Speaker Change: So we really don't have any plans to move away from those investments.

Speaker Change: Right. And another question for you Ted from Rich on content. While Netflix data clearly shows that new original movies outperform licensed titles in terms of viewers and view hours, it doesn't appear that those new movies are having the same cultural impact that TV series have. Do the recent management departures or their willingness of Hollywood studios to license post theatrical movies to Netflix signal any sort of meaningful shift in our film strategy towards licensing away from original production?

Speaker Change: Great.

Speaker Change: Another question for you Ted from rich on content.

Ted: Well Netflix data clearly shows that new original movies outperformed licensed titles in terms of viewers and view hours. It doesn't appear that new movie those new movies are having the same cultural impact.

Ted: The TV series have.

Ted: Due to recent management departures or their willingness of Hollywood Cdos for license post theatrical movies, Netflix signaling sort of meaningful shift in our film strategy towards licensing away from original production Yeah, no thinking of our original movies are attracting some of the biggest audiences in the world look at leave they're well behind in Q4.

Theodore A. Sarandos: And another question for you, Ted, from Rich on content: while Netflix data clearly shows that new original movies outperform licensed titles in terms of viewers and viewing hours, it doesn't appear that those new movies are having the same cultural impact that TV series have. Do the recent management departures or Hollywood studios' willingness to license post-theatrical movies to Netflix signal any sort of meaningful shift in our film strategy towards licensing away from original productions? Yeah, no; look at how our original movies are attracting some of the biggest audiences in the world. Look at Leave the World Behind in Q4. Look at all those crazy memes about the creepy deers that were all over the place when that movie came out.

Theodore A. Sarandos: Yeah, no, look at our original movies are attracting some of the biggest audiences in the world. Look at Leave the World Behind in Q4. Look at all those crazy memes about the creepy deers that were all over the place when that movie came out. Or look at Society of the Snow from Spain right now, which this morning was nominated for two Oscars. Or even look back last year, Jennifer Lopez's great movie, The Mother. By some accounts, it was the most watched movie in the world last year. So I think about it that fans really don't care much about budgets and windows. They just want a movie that they love. They want a movie to make them cry or make them laugh or give them something great to talk about over dinner. As you point out, our original films do outperform those licensed films, and they do uniquely distinguish us from the competition. Just this morning, our original films got 18 Oscar nominations across 10 different films. So we do not plan to change our strategy or the mix. It's always great. We're going to be that kind of blend of first window, second window, and deep catalog. We think that formula works best to entertain the world.

Ted: A look at all those crazy means about the creepy deere's all over the place when that movie came out or.

Gregory K. Peters: They get access to all these amazing stories at a lower effective price through the bundle. So, you know, we really think of this as a win-win-win, and we're going to continue to leverage these bundles going forward. And I think Rich asked, you know, how we think about how quickly we fill the supply. You know, I mean, when you're building, you know, growing as fast as we're growing right now, it creates a lot of challenges you might expect to then fill behind that. But I'd much rather be in that position where we're growing that inventory and then racing behind to fill it and improve our monetization than the reverse.

We're looking at society of the Snow from Spain, right now with this morning was nominated for two Oscars.

Ted: Or even look back last year, Jennifer Lopez as great movies with the mother.

Ted: By some accounts it was the most watched a movie in the world last year. So I think about it that fans really don't care much about budgets and windows. They just wanted a movie that they loved they wanted to move into make them cry or make them laugh or giving something great to talk about it over dinner.

Ted: As you pointed out our original films do outperform those license films and they do uniquely distinguish us from the competition.

Theodore A. Sarandos: Or look at Society of the Snow from Spain right now, which this morning was nominated for two Oscars. Or even look back last year at Jennifer Lopez's great movie, The Mother. By some accounts, it was the most watched movie in the world last year. So I think about it that fans really don't care much about budgets and windows. They just want a movie that they love. They want a movie to make them cry or make them laugh or give them something great to talk about over dinner.

Ted: Just this morning, our original films got 18 Oscar nominations across 10 different films. So we do not plan to change our strategy or the mix is always going to be that kind of a blend of first window second window and deep catalog, we think that formula works best to entertain the world.

Unnamed Host: So I'm happy to have that challenge.

Unnamed Host: Super. I'll now move us along to a series of questions related to content.

Theodore A. Sarandos: So Ted, from Jason Helfstein of Oppenheimer, are you shifting the mix of your content spend to more licensed second-run content? And if so, how should we think about this mix impacting Netflix's operating margin? So, you know, we've always had a healthy appetite for licensing content from others for our members. I don't see any meaningful change in that mix. And, you know, the current margin outlook contemplates that healthy mix between originals and licensed titles. It might be that we can deliver more on our programming spend with some licensed titles, but we also believe that we deliver an incredible amount of value, excitement, and differentiation with our original series. You know, remember our original series made up the number one most watched original 48 episodes of 52 weeks last year. So, we really don't have any plans to move away from those investments.

Speaker Change: Great. And as a follow up to that question around licensing, Ted, your competitors have largely abandoned their opposition to licensing catalog content to Netflix. We've seen, for example, NBC, NBC Suits, HBO's Six Feet Under and more recently, a series of Disney TV titles on Netflix. Do you think your competitors should begin licensing you their new original series as well versus keeping them exclusively to their own streaming service?

Speaker Change: Great and as a follow up to that question around licensing Ted your competitors have largely abandoned their opposition to licensing catalog content in Netflix we've seen for.

Theodore A. Sarandos: As you point out, our original films do outperform those licensed films, and they do uniquely distinguish us from the competition. Just this morning, our original films got 18 Oscar nominations across 10 different films. So we do not plan to change our strategy or the mix. It's always going to be that kind of blend of first window, second window, and deep catalog.

For example, NBC NBC suits hbo's six feet under and more recently a series of Disney television titles on Netflix do you think your competitors should begin licensing you their new original series as well versus keeping them exclusively to their own streaming services.

Theodore A. Sarandos: We think that formula works best to entertain the world. Great. And as a follow-up to that question around licensing, Ted, your competitors have largely abandoned their opposition to licensing catalog content to Netflix. We've seen, for example, NBC Suits, HBO's Six Feet Under, and more recently, a series of Disney TV titles on Netflix.

Theodore A. Sarandos: Yeah, I mean, I guess I'd call you back to that history again and just say, you know, we've got a rich history of helping break some of TV's biggest hits like Breaking Bad and Walking Dead or even more recently with Schitt's Creek. Because of our recommendation and our reach, we can resurrect a show like Suits and turn it into a big pop culture moment, but also generate billions of hours of joy for our members. So I think we get to remember the studios have always been in the business of selling their content to others, including direct competitors for years. I believe because, again, of our distribution heft and our recommendation system that sometimes we can uniquely add more value to the studio's IP than they can. Not all the time, but sometimes it does, and we're the best buyer for it. So I am thrilled that the studios are more open to licensing again, and I'm thrilled to tell them that we are open for business.

Speaker Change: I mean, I guess I'd call you back to that history again, and just say you know we've got a rich history of of helping break some of the Tv's biggest hits like breaking bad and walking dead or even more recently with Shits Creek.

Speaker Change: Because of our recommendation and our reach we can resurrect a show like suits and turned it into a big pop culture, a minute a moment, but also generate billions of hours of joy for our members. So I think you have to remember the studios have always been in the business of selling their content to others, including direct competitors for years.

Unnamed Host: Right. And another question for you, Ted, from Rich on content.

Theodore A. Sarandos: Do you think your competitors should begin licensing their new original series to you as well versus keeping them exclusively on their own streaming? Yeah, I mean, I guess I'd call you back to that history again and just say, you know, we've got a rich history of helping break some of TV's biggest hits like Breaking Bad and Walking Dead, or even more recently with Schitt's Creek. Because of our recommendation and our reach, we can resurrect a show like Suits and turn it into a big pop culture moment, but also generate billions of hours of joy for our members. So I think we've got to remember the studios have always been in the business of selling their content to others, including direct competitors, for years. I believe, because of our distribution heft and our recommendation system, that sometimes we can uniquely add more value to the studio's IP than they can. Not all the time, but sometimes it does, and we're the best buyer for it.

Theodore A. Sarandos: While Netflix data clearly shows that new original movies outperform licensed titles in terms of viewers and view hours, it doesn't appear that those new movies are having the same cultural impact that TV series have. Do the recent management departures or Hollywood studios' willingness to license post-theatrical movies to Netflix signal any sort of meaningful shift in their film strategy away from original production?

Speaker Change: I I believe because again of our our distribution heft in our recommendation system that sometimes we can uniquely add more value to our to the studios IP then they can.

Speaker Change: Not all the time, but sometimes it does and we've been we're the best buyer for it. So I am thrilled that the studios are more open to licensing again and I'm thrilled to tell them that we are open for business.

Speaker Change: Great. And a question on animation and animated features from Rich Greenfield as well. For Ted is Leo, Netflix's most successful animated film to date. It's been heavily watched based on our top 10 data. Is there any color you can provide on repeat viewing of the film? And why has this animated feature film resonated versus other Netflix animated films?

Speaker Change: Great.

Theodore A. Sarandos: Yeah, no, look at how our original movies are attracting some of the biggest audiences in the world.

Speaker Change: Question on an animation animated features from rich Greenfield as well for Ted is Leo Netflix is most successful animated film to date.

Theodore A. Sarandos: Look at Leave the World Behind in Q4.

Theodore A. Sarandos: Look at all those crazy memes about the creepy deers that were all over the place when that movie came out.

Rich Greenfield: It's been heavily watch based on our top 10 data is there any color you can provide on repeat viewing in the film and why has this and immediate feature film resonated.

Theodore A. Sarandos: Or look at Society of the Snow from Spain right now, which this morning was nominated for two Oscars. Or even look back last year at Jennifer Lopez's great movie, The Mother. By some accounts, it was the most watched movie in the world last year.

Rich Greenfield: Versus other Netflix animated feature films.

Speaker Change: I think Leo has resonated for the same reason that Seabees did last year. It's great. People really love it. It brings a lot of joy to families. And yes, they do watch them over and over again, which drives a lot of engagement, but also drives a lot of attachment. I think that Leo and Seabees are proof points that we have the flywheel to create original IP in that animated space. And there is so much appetite for animated feature. You know, seven of the top 10 most watched movies since Nielsen's been tracking streaming are animated features. So I'm super thrilled with Leo. We're kicking around Leo 2 right now. And it's a film that works on so many levels. The art of the animation is beautiful. The comedy is funny. And families just really love it. So we look forward to a lot more. We have Spellbound coming up next year. We're just really thrilled that the animation team is now firing on all cylinders.

Speaker Change: I think Leo has resonated for the same reason that CBS did last year. It was it's great people really love. It. It brings a lot of joy to families and yes, they do watch them over and over again, which drives a lot of engagement, but also drives a lot of attachment.

Theodore A. Sarandos: So I am thrilled that the studios are more open to licensing again, and I'm thrilled to tell them that we are open for business. And a question on animation and animated features from Rich Greenfield as well as for Ted is Leo, Netflix's most successful animated film to date. It's been heavily watched based on our top 10 data. Is there any color you can provide on repeat viewing the film, and why has this animated feature film resonated versus other Netflix animated features?

Theodore A. Sarandos: So I think about it and realize that fans really don't care much about budgets and windows.

Speaker Change: I think that Leo and sea based our proof points.

Theodore A. Sarandos: They just want a movie that they love. They want a movie to make them cry or make them laugh or give them something great to talk about over dinner.

Speaker Change: We have the flywheel to create original IP in that animated space and there is so much appetite for animated feature seven of the top 10, most watched movies since Nielsen it's been tracking streaming our animated features so I'm I'm Super thrilled with Leo we're kicking around the O two right now and it's real.

Theodore A. Sarandos: As you point out, our original films do outperform those licensed films, and they uniquely distinguish us from the competition.

Theodore A. Sarandos: I think Leo has resonated for the same reason that Seabeast did last year. It's great. People really love it.

Theodore A. Sarandos: Just this morning, our original films got 18 Oscar nominations across 10 different films.

Theodore A. Sarandos: It brings a lot of joy to families, and yes, they do watch him over and over again, which drives a lot of engagement but also drives a lot of attachment. I think that Leo and Seabeast are proof points that we have the flywheel to create original IP in that animated space, and there is so much appetite for animated features. Seven of the top ten most watched movies since Nielsen's been tracking streaming are animated features. So I'm super thrilled with Leo. We're kicking around Leo 2 right now.

Speaker Change: Film that works on so many levels the animation the art of the animation is beautiful the comedy is funny.

Theodore A. Sarandos: So we do not plan to change our strategy or the mix.

Theodore A. Sarandos: It's always great.

Theodore A. Sarandos: We're going to be that kind of blend of the first window, the second window, and the deep catalog. We think that formula works best to entertain the world.

Speaker Change: And families. This really love. It. So we look forward to a lot more were spellbound coming up next year, where we're just really thrilled with the <unk>.

Unnamed Host: And as a follow-up to that question about licensing, Ted, your competitors have largely abandoned their opposition to licensing catalog content to Netflix.

<unk> team is now firing on all cylinders.

Speaker Change: Moving along to engagement, this question is from Brian Kraft of Deutsche Bank, and I'll direct this one to Ted. What have the engagement trends been like globally and domestically? Has it been steady, increasing or decreasing, and how has paid sharing impacted engagement per me?

Speaker Change: Moving along to engagement. This question is from Bryan Kraft Deutsche Bank and I'll direct this one to Ted what are the engagement trends been like globally and domestically has it been steady increasing or decreasing and how has paid sharing impact of engagement per member.

Theodore A. Sarandos: We've seen, for example, NBC's Suits, HBO's Six Feet Under, and more recently, a series of Disney TV titles on Netflix. Do you think your competitors should begin licensing their new original series to you as well versus keeping them exclusively on their own streaming service? Yeah, I mean, I guess I'd call you back to that history again and just say, you know, we've got a rich history of helping break some of TV's biggest hits like Breaking Bad and Walking Dead or, even more recently, Schitt's Creek. Because of our recommendation and our reach, we can resurrect a show like Suits and turn it into a big pop culture moment, but also generate billions of hours of joy for our members.

Theodore A. Sarandos: So we're really thrilled with our engagement trends, domestically and globally. This is really a story about viewing, moving from linear television to streaming. The story has been constant and it continues. It's also a story about Netflix kind of leading the way with professional film and television and now games. Our engagement is a bit impacted by our page sharing. Think about it like fewer households using the same account. So as those folks spin off and get their own accounts, and we win them over with our programming, that will normalize and continue to grow. You know, we were really pleased with our engagement. We have shown you in graphic detail what that engagement looks like on a title by title basis in this engagement report we just released. And I think you see in that report, you know, about two hours of daily engagement with our members, which is great. And you see that some of our hits and even our near hits are attracting enormous audiences. So we have to keep pleasing them. And we have to do that in multiple languages in multiple countries and all over the world. And that's what we're excited about. And it's showing up in that engagement.

Theodore A. Sarandos: It's a film that works on so many levels. The art of the animation is beautiful. The comedy is funny. And families just really love it.

Ted: And so we're really thrilled with our engagement trends domestically and globally.

Ted: This is really a story about viewing.

Unnamed Host: So we look forward to a lot more. We have Spellbound coming up next year. We're just really thrilled that the animation team is now firing on all cylinders. Moving along to engagement, this question is from Brian Kraft of Deutsche Bank, and I'll direct this one to Ted. What have the engagement trends been like globally and domestically? Has it been steady, increasing, or decreasing, and how has paid sharing impacted engagement? We're really thrilled with our engagement trends, domestically and globally. This is really a story about viewing, moving from linear television to streaming. The story's been constant, and it continues.

Ted: Viewing moving from linear TV to streaming and the story has been constant and it continues. It's also a story about Netflix kind of leading the way with professional film and TV in our games. Our engagement is a bit impacted by our paid sharing think about it like fewer households, using the same account so as those folks spinoff.

Ted: Their own accounts and we win them over with our programming.

That will normalize and it continued to grow.

Ted: We were really pleased pleased with the engagement we have shown you in graphic detail what.

Theodore A. Sarandos: So I think we need to remember the studios have always been in the business of selling their content to others, including direct competitors, for years. I believe, again, because of our distribution heft and our recommendation system, that sometimes we can uniquely add more value to the studio's IP than they can. Not all the time, but sometimes it does, and we're the best buyer for it.

Ted: What that engagement looks like on a title by title basis. In this engagement report, we just released and I think you see in that report.

Theodore A. Sarandos: It's also a story about Netflix kind of leading the way with professional film and television and now games. Our engagement is a bit impacted by our paid sharing. Think about it like fewer households using the same account.

Ted: Two hours of daily engagement with our members which is great.

Ted: And you'll see that some of our our our hits and even our near hits are attracting enormous audiences. So we have to keep leasing them and we have to do that in multiple languages in multiple countries and all over the world in them and that's what we're that's we're excited about and it's showing up in that engagement.

Theodore A. Sarandos: As those folks spin off and get their own accounts and we win them over with our programming, that will normalize and continue to grow. We're really pleased with our engagement. We have shown you in graphic detail what that engagement looks like on a title-by-title basis in this engagement report we just released.

Theodore A. Sarandos: So I am thrilled that the studios are more open to licensing again, and I'm thrilled to tell them that we are open for business.

Unnamed Host: Great. And a question on animation and animated features from Rich Greenfield as well.

Speaker Change: Great, let's move on to our gaming.

Speaker Change: Great. Let's move on to gaming. A couple questions on gaming. First from Justin Patterson at KeyBank for Greg. The gaming portfolio expanded significantly last year and even added some more mainstream titles like Grand Theft Auto, Trilogy. How are you thinking about sizing the investment in this area? How has engagement changed over the past year and what are the signals you're evaluating to gauge when it's time to monetize?

Speaker Change: Questions on gaming first from Justin Patterson at Keybanc for Greg.

Theodore A. Sarandos: For Ted is Leo, Netflix's most successful animated film to date. It's been heavily watched, based on our top 10 data. Is there any color you can provide on repeat viewing of the film? And why has this animated feature film resonated versus other Netflix animated films? I think Leo has resonated for the same reason that Seabees did last year. It's great. People really love it. It brings a lot of joy to families. And yes, they do watch them over and over again, which drives a lot of engagement but also drives a lot of attachment. I think that Leo and Seabees are proof points that we have the flywheel to create original IP in that animated space. And there is so much appetite for animated features.

Gregory K. Peters: The gaming portfolio expanded significantly last year.

Theodore A. Sarandos: I think you see in that report about two hours of daily engagement with our members, which is great. You see that some of our hits and even our near hits are attracting enormous audiences. We have to keep pleasing them, and we have to do that in multiple languages, in multiple countries, and all over the world.

Justin Patterson: Even added more mainstream titles like Grand theft auto.

Speaker Change: <unk> how are you thinking about sizing the investment in this area how is engagement changed over the past year and what are the signals you are evaluating to gauge when it's time to monetize.

Gregory K. Peters: Yeah, well, we're stoked by the performance of GTA. We had high hopes, but it exceeded even those high hopes. So it's a great place to be. So the biggest download and engagement numbers that we've seen so far, we were in the top mobile game downloads for several weeks, which shows it was not only big for us, but big numbers for mobile gaming in general.

Speaker Change: Yeah, well, we're stoked by the performance of our GTA, we had high hopes, but it exceeded even those high hopes that's a it's a great place to be so the biggest download and engage the numbers that we've seen so far we were in the top mobile game downloads for several weeks, which shows it was not only a big for us, but big numbers for mobile.

Unnamed Host: That's what we're excited about, and it's showing up in that engagement. Great. Let's move on to gaming. A couple questions about gaming.

Gregory K. Peters: First, from Justin Patterson at KeyBank for Gregg. The gaming portfolio expanded significantly last year and even added some more mainstream titles like Grand Theft Auto Trilogy. How are you thinking about sizing the investment in this area? How has engagement changed over the past year, and what are the signals you're evaluating to gauge when it's time to monitor? Yeah, we're stoked by the performance of GTA. We had high hopes, but it exceeded even those high hopes. So it's a great place to be.

Speaker Change: Gaming in general.

Gregory K. Peters: And, you know, beyond any specific title, we've tripled game engagement over the last year. So that's a solid growth trajectory for us. Games, you know, it's a huge opportunity, $140 billion in consumer spend, ex-China and Russia, and we believe we can build games as a strong component, another content category to deliver entertainment value to our subscribers.

Speaker Change: And beyond any specific title, we've tripled game engagement over the last year. So that's a solid growth trajectory for us games, it's a huge opportunity of $140 billion in consumer spend ex China, and Russia, and we believe we can build games is strong components another content category to deliver entertainment value to.

Theodore A. Sarandos: You know, seven of the top 10 most watched movies since Nielsen's been tracking streaming are animated features. So I'm super thrilled with Leo. We're kicking around Leo 2 right now. And it's a film that works on so many levels. The art of the animation is beautiful. The comedy is funny. And families just really love it. So we look forward to a lot more.

Speaker Change: Our subscribers.

Gregory K. Peters: But to your question on size of investment.

Speaker Change: But to your question on size of investment.

Gregory K. Peters: So the biggest download and engagement numbers that we've seen so far; we were in the top mobile game downloads for several weeks, which shows that it was not only big for us but also big numbers for mobile gaming in general. And, you know, beyond any specific title, we tripled game engagement over the last year. So that's a solid growth trajectory for us. Games, you know, it's a huge opportunity, $140 billion in consumer spend x China and Russia.

Gregory K. Peters: You know, we thought about this as we've got to allocate enough to the initiative to ensure that we're playing to win, that we have enough activity in the space that we're learning and growing, but also recognizing that we had a tremendous amount to learn and a tremendous set of institutional capabilities to develop. And we wanted to make sure that we weren't growing that investment significantly before proving to ourselves that we can actually effectively translate that investment into member value. So things are going well. We continue to see this level of engagement growth, and we continue to see what we've been seeing so far, which is evidence, as we would expect, that that engagement leads to business benefits like increased retention. Then we'll be able to scale that investment appropriately. Having said all of that, you know, it's still, I'll use the early days words that we love to use, and it's worth noting that our games investment is a very small fraction of our overall content budget right now.

Speaker Change: We thought about this is we've got to allocate enough to the initiative to ensure that we're playing to win that we have enough activity in the space that we're learning and growing but also recognizing that we had a tremendous amount to learn in a tremendous set of institutional capabilities to develop and we wanted to make sure that we weren't growing that investments.

Unnamed Host: We have Spellbound coming up next year.

Theodore A. Sarandos: We're just really thrilled that the animation team is now firing on all cylinders.

Unnamed Host: Moving along to engagement, this question is from Brian Kraft of Deutsche Bank, and I'll direct this one to Ted.

Theodore A. Sarandos: What have the engagement trends been like globally and domestically? Has it been steady, increasing, or decreasing, and how has paid sharing impacted engagement per me? So we're really thrilled with our engagement trends, domestically and globally. This is really a story about viewing, moving from linear television to streaming. The story has been constant, and it continues.

Speaker Change: Lee before proving to ourselves that we can actually effectively translate that investment into member value. So things are going well, we continue to see this level of engagement growth and we continue to see what we've been seeing so far which is evidence as we would expect that that engagement leads to a business benefits like increased retention then.

Gregory K. Peters: And we believe we can build games as a strong component, another content category to deliver entertainment value to our subscribers. But your question on the size of the investment. You know, we thought about this as we've got to allocate enough to the initiative to ensure that we're playing to win, that we have enough activity in the space that we're learning and growing, but also recognizing that we had a tremendous amount to learn and a tremendous set of institutional capabilities to develop. And we wanted to make sure that we weren't growing that investment significantly before proving to ourselves that we could actually effectively translate that investment into member value. So things are going well.

Theodore A. Sarandos: It's also a story about Netflix kind of leading the way with professional film and television and now games. Our engagement is a bit impacted by our page sharing. Think about it like fewer households using the same account. So as those folks spin off and get their own accounts, and we win them over with our programming, that will normalize and continue to grow. You know, we were really pleased with our engagement. We have shown you in graphic detail what that engagement looks like on a title by title basis in this engagement report we just released.

Speaker Change: We'll be able to scale that investment appropriately.

Speaker Change: Having said all of that it's still I'll use the early days words that we love to use and it's worth noting that our games investment is very small fraction of our overall content budget right now.

Speaker Change: Great. Greg, second question on gaming from Michael Pachter of Wedbush. He asked, given the outperformance of Graham Theft Auto Trilogy on the Netflix service, will you reconsider your focus on games available exclusively on the service, asking if you will seek to emulate the success of Graham Theft Auto by offering games like Candy Crush or Fortnite on Netflix as well?

Speaker Change: Great Greg on a second question on gaming for Michael Pachter of Wedbush.

He asks given the outperformance of Grand Theft Auto trilogy on the Netflix service will you reconsider your focus on games available exclusively on the service.

Theodore A. Sarandos: And I think you see in that report, you know, about two hours of daily engagement with our members, which is great. And you see that some of our hits and even our near hits are attracting enormous audiences. So we have to keep pleasing them.

Speaker Change: People will seek to emulate the success of Grand theft auto by offering games like Candy crush a fortnight on Netflix as well.

Speaker Change: Yes licensing games existing games with often with some form of exclusivity that's been a key part of our strategy and it's going to continue to be so we've clearly seen one of the things that we've learned is that recognizable games, that's either existing popular game titles or game franchises or games that are based on well known IP.

Gregory K. Peters: Yes, licensing games, you know, existing games with often with some form of exclusivity, that's been a key part of our strategy, and it's going to continue to be so, you know, we've clearly seen one of the things that we've learned is that recognizable games, that's either existing popular game titles, or, you know, game franchises, or games that are based on well known IP, in many cases, that's IP from our own films and series, those are the ones that are working the best for us right now. So we're going to get you to find the right opportunities to bring those kind of titles to our members, we're going to look for more great licensing and, you know, some exclusive licensing, so we can do things more like what you've seen us do last quarter with GTA, but also other titles like Football Manager 2024, which performed very well for us, Money Heist, or Casa de Papel, which was great, you'll see it this quarter with titles like Virgin River. So that's definitely the strategy that we're on, and you'll see us do more of that work.

Gregory K. Peters: We continue to see this level of engagement growth, and we continue to see what we've been seeing so far, which is evidence, as we would expect, that that engagement leads to business benefits like increased retention. Then we'll be able to scale that investment appropriately. But having said all of that, you know, it's still, I'll use the early days words that we love to use.

Theodore A. Sarandos: And we have to do that in multiple languages in multiple countries and all over the world. And that's what we're excited about, and it's showing up in that engagement.

Unnamed Host: Great. Let's move on to gaming.

Speaker Change: In many cases, that's IP from our own films and series those are the ones that are working the best for US right. Now so we're going to continue to find the right opportunities to bring those kind of titles to our members we're going to look for more great licensing in some exclusive licensing.

Unnamed Host: A couple questions on gaming.

Unnamed Host: First, from Justin Patterson at KeyBank for Greg.

Gregory K. Peters: And it's worth noting that our games investment is a very small fraction of our overall content budget right now. Greg, another question on gaming from Michael Pachter of Wedbush. He asked, given the outperformance of Grand Theft Auto Trilogy on the Netflix service, will you reconsider your focus on games available exclusively on the service? I'm wondering if you will seek to emulate the success of Grand Theft Auto by offering games like Candy Crush or Fortnite on Netflix as well. Yes, licensing games, you know, existing games with often some form of exclusivity, it's been a key part of our strategy, and it's going to continue to be so. You know, one of the things that we've learned is that recognizable games, that is, existing popular game titles, or, you know, game franchises, or games that are based on well-known IP, in many cases, that is IP from our own films and series, those are the ones that are working the best for us right now.

Gregory K. Peters: The gaming portfolio expanded significantly last year and even added some more mainstream titles like Grand Theft Auto Trilogy. How are you thinking about sizing the investment in this area? How has engagement changed over the past year, and what are the signals you're evaluating to gauge when it's time to monetize? Yeah, well, we're stoked by the performance of GTA. We had high hopes, but it exceeded even those high hopes. So it's a great place to be. So the biggest download and engagement numbers that we've seen so far; we were in the top mobile game downloads for several weeks, which shows that it was not only big for us but also big numbers for mobile gaming in general. And, you know, beyond any specific title, we tripled game engagement over the last year. So that's a solid growth trajectory for us. Games, you know, it's a huge opportunity, $140 billion in consumer spend, ex-China and Russia, and we believe we can build games as a strong component, another content category to deliver entertainment value to our subscribers. But to your question on the size of the investment.

Speaker Change: So we can do things more like what you've seen us do last quarter with GTA, but also other titles like football manager 'twenty, 'twenty, four which performed very well for us money highest or cognitive Apollo, which was great you'll see it this quarter with titles like Virgin River. So that's definitely the strategy that we're on and you'll see us do more of that work.

Speaker Change: Great. We have a question also from John Hodulik of UBS. This one I'll point to Greg, but since you can feel free to join in as well. The question is, how should we think about pricing changes in the rest of the world now that you are through the majority of the password sharing implementation and in light of the recent price adjustments in the U.S., U.K., and Africa?

Speaker Change: Great.

Speaker Change: A question also from Jon <unk> of UBS I'm. This one I'll point to.

Speaker Change: Greg, but since you can feel free to join in as well. The question is how should we think about pricing changes and the rest of the world now that you are through the majority of the password sharing implementation and in light of the recent.

Speaker Change: Price adjustments in the U S UK and France.

Gregory K. Peters: So we're going to continue to find the right opportunities to bring those kinds of titles to our members; we're going to look for more great licensing and, you know, some exclusive licensing. So we can do things more like what you saw us do last quarter with GTA, but also other titles like Football Manager 2024, which performed very well for us, Money Heist, or Casa de Papel, which was great. You'll see it this quarter with titles like Virgin River.

Gregory K. Peters: Yeah, as we had talked about previously, we largely put price increases on hold while we were rolling out the paid sharing work because we saw that as a form of substitute price increase. Now that we're through that, we're able to resume our sort of standard approach towards price increases. You've seen us do that in the U.S., U.K., and France. Those changes went well, better than we forecasted. And we'll continue to then monitor other countries and try and assess, you know, when we've delivered enough additional entertainment value. We look at engagement, retention, acquisition as the signals there. So that we can go back to members and ask them to pay a bit more to keep that positive flywheel going. And we can invest in more great film series and games for those members. So, you know, the summary statement might be back to business as usual. And Spence, I don't know if you wanted to add anything there. I think you nailed it. You're on a roll. So, it's good.

Gregory K. Peters: Yes, we had talked about previously we largely put price increases on hold why we're rolling out the patriarch work because we saw that as a form of substitute price increase now that we're through that we're able to resume our sort of standard approach towards our price increases and price increases you've seen us do that in the U S U K and France, those changes went well better than we.

And we will continue to then monitor other countries and trying to assess when we've delivered enough additional entertainment value. We look at engagement retention acquisition as of signals. There. So that we can go back to members and ask them to pay a bit more to keep that plant positive flywheel going and we can invest in more great film series and games for those members. So.

Gregory K. Peters: You know, we thought about this as we've got to allocate enough to the initiative to ensure that we're playing to win, that we have enough activity in the space that we're learning and growing, but also recognizing that we had a tremendous amount to learn and a tremendous set of institutional capabilities to develop. And we wanted to make sure that we weren't growing that investment significantly before proving to ourselves that we could actually effectively translate that investment into member value. So things are going well. We continue to see this level of engagement growth, and we continue to see what we've been seeing so far, which is evidence, as we would expect, that that engagement leads to business benefits like increased retention. Then we'll be able to scale that investment appropriately. Having said all of that, you know, it's still, I'll use the early days words that we love to use, and it's worth noting that our games investment is a very small fraction of our overall content budget right now.

Gregory K. Peters: So that's definitely the strategy that we're on, and you'll see us do more of that work. Great. We also have a question from John Hodulik of UBS. This one I'll point to Greg, but Spencer, you can feel free to join in as well.

Speaker Change: The summary statement might be back to business as usual and spent I don't know if you wanted to add anything there I think you know that you and your honor roll. So that's good.

Gregory K. Peters: The question is, how should we think about pricing changes in the rest of the world now that you are through the majority of the password sharing implementation and in light of the recent price adjustments in the US, UK, and Africa? Yeah, as we had talked about previously, we largely put price increases on hold while we were rolling out the paid sharing work because we saw that as a form of substitute price increases. Now that we're through with that, we're able to resume our sort of standard approach to price increases. You've seen us do that in the US, UK, and France.

Speaker Change: Great. I'll move us along now to a couple questions on competition and the competitive landscape. The first question comes from Maria Ripps of Kinnacord Genuity. With ads coming to Prime Video at the end of this month, and given Amazon is making it the default option for its Prime members, could you talk about how you are positioning Netflix relative to the competition when you're speaking with advertisers? Could you also comment on if Netflix considered making the ad tier the default option similar to Amazon? And what were some of the puts and takes about that decision? So I'll turn that one over to you, Greg. Yeah, we did consider making it the default option. But given our long history of not having ads, we thought it was better for our members, rather than force them into a change and give them ads, but better to attract them to the ads plan for the ones that wanted it based on the benefits. More streams. More streams, higher resolution downloads, and, of course, the lower price to be able to access all these incredible stories. So I mentioned the growth numbers we were seeing previously and the rate of growth we're on. I think that approach is generally working well for our members, and we haven't seen any big backlash as a result, which is positive as well. And then in terms of competitive positioning, probably the most important thing to start with is the market's big. We talked about over $25 billion in CTV ad spend alone. So there's room for multiple players, clearly. And when we think about how we compete for some of that ad spend, I really think we need to play to our strengths. We've got an incredibly engaged audience, the most engaged audience, who are watching the most culture-defining films, series, and live events. That is an important place for brands to be, and it's something that differentiates us from our competitors. So that's the space that we're going to play in.

Speaker Change: Great I'll move us along now to a couple of questions on competition and the competitive landscape.

First question comes from Maria Rips of Canaccord Genuity.

Maria Rips: With ads coming to Prime video at the end of this month and given Amazon is making it the default option for its prime members could you talk about how you are positioning Netflix relative to the competition when youre speaking with advertisers.

Maria Rips: Could you also comment on if Netflix considered making the tier the default option similar to Amazon and what were some of the puts and takes about that decision. So I'll turn that one over to you Greg.

Gregory K. Peters: Those changes went well, better than we forecasted, and we will continue to monitor other countries and try and assess, you know, when we've delivered enough additional entertainment value. We look at engagement, retention, and acquisition as the signals there so that we can go back to members and ask them to pay a bit more to keep that positive flywheel going. And we can invest in more great films, series, and games for those members. So, you know, the summary statement might be back to business as usual. And, Spence, I don't know if you wanted to add anything there. I think you nailed it. You're on a roll, so it's good.

Gregory K. Peters: We didn't consider making it the default option, but given our long history of not having ads. We thought it was better for our members rather than forced them into a change and give them at but better to attract them to the ads plan for the ones that wanted it based on the benefits more streams higher resolution downloads and of course.

Unnamed Host: Great. Greg, another question on gaming from Michael Pachter of Wedbush. He asked, given the outperformance of Graham Theft Auto Trilogy on the Netflix service, will you reconsider your focus on games available exclusively on the service, asking if you will seek to emulate the success of Grand Theft Auto by offering games like Candy Crush or Fortnite on Netflix as well?

Gregory K. Peters: The lower price to be able to access all.

Gregory K. Peters: All of these incredible stories so.

Unnamed Host: Great. I'll move us along now to a couple questions on competition and the competitive landscape. The first question comes from Maria Rips of Kinecord Genuity.

Gregory K. Peters: <unk> the growth numbers, we were seeing previously and the rate of growth wrong. So I think that approach is generally working well for our members and we haven't seen any big backlash is resolved, which is which is positive as well.

Gregory K. Peters: Yes, licensing games, you know, existing games with often with some form of exclusivity, that's been a key part of our strategy, and it's going to continue to be so, you know, we've clearly seen one of the things that we've learned is that recognizable games, that's either existing popular game titles, or, you know, game franchises, or games that are based on well known IP, in many cases, that's IP from our own films and series, those are the ones that are working the best for us right now. So we're going to get you to find the right opportunities to bring those kind of titles to our members, we're going to look for more great licensing and, you know, some exclusive licensing, so we can do things more like what you've seen us do last quarter with GTA, but also other titles like Football Manager 2024, which performed very well for us, Money Heist, or Casa de Papel, which was great, you'll see it this quarter with titles like Virgin River.

Gregory K. Peters: With ads coming to Prime Video at the end of this month, and given Amazon is making it the default option for its Prime members, could you talk about how you are positioning Netflix relative to the competition when you're speaking with advertisers? Could you also comment on whether Netflix has considered making the ad tier the default option similar to Amazon? And what were some of the puts and takes about that decision? So I'll turn that one over to you, Greg. Yeah, but we didn't consider making it the default option.

Gregory K. Peters: And then in terms of competitive positioning probably the most important thing to start with as you know the market is big right, we talked about over $25 billion in CTV AD spend alone. So there's room for multiple players clearly and when we think about how we compete for some of that AD spend I really think we need to play with to our strengths. We've got an incredibly engaged audience. The most engaged.

Gregory K. Peters: And who are watching the most culture defining films series and live events that has an important place for brands to be and it's something that differentiates us from our competitors. So that's that's the space that we're going to plan.

Gregory K. Peters: But given our long history of not having ads, we thought it was better for our members rather than force them into a change and give them ads, but better to attract them to the ads plan for the ones that wanted it based on the benefits, more streams, higher resolution downloads, and, of course, the lower price to be able to access all these incredible stories. So I mentioned that the growth numbers we were seeing previously and the rate of growth were off. I think that approach is generally working well for our members, and we haven't seen any big backlash as a result, which is positive as well. And then, in terms of competitive positioning, probably the most important thing to start with is that the market is big, right? We talked about over $25 billion in CTV ad spend alone. So there's clearly room for multiple players.

Speaker Change: Super. Another question on competition. This one probably best for Ted and Spence to take. It comes from Eric Sheridan from Goldman Sachs. How does the current competitive landscape or content impact the trajectory of Netflix's own content spending in 2024 and beyond? Is it possible that the company could widen its competitive moat on the same or lower absolute amount of content?

Gregory K. Peters: Super.

Speaker Change: Another question on competition. This one probably best for Ted and Spence to take it.

Speaker Change: It comes from Eric Sheridan from Goldman Sachs. How does the current competitive landscape for content impact the trajectory of Netflix his own content spending in 2024 and beyond is it possible that the company could widen its competitive mode on a same or lower absolute amount of content spend.

Okay.

Theodore A. Sarandos: I think it's always been a competitive place for the top for the top programming. So I think that'll continue. And that's really what I think what you're talking about is whether when we went out when when the top.

Speaker Change: Always been a competitive place for the top for the top programming. So I think that'll continue and that's really what I think what you're talking about is whether when we went out when a when the top.

Gregory K. Peters: So that's definitely the strategy that we're on, and you'll see us do more of that work.

Unnamed Host: Great. We also have a question from John Hodulik of UBS. This one I'll point to Greg, but since you can, feel free to join in as well.

Speaker Change: Thank you for joining us today, and we'll see you next time.

Speaker Change: Titles come to market when the big packages come in Netherlands, Duking it out for them, there's going to be remained to be pretty competitive I think that we're reinvesting at a very healthy rate, we see that in the engagement, we see that in the retention and we see that in the and the subscriber growth So I.

Gregory K. Peters: The question is, how should we think about pricing changes in the rest of the world now that you are through the majority of the password sharing implementation and in light of the recent price adjustments in the U.S., U.K., and Africa? Yeah, as we had talked about previously, we largely put price increases on hold while we were rolling out the paid sharing work because we saw that as a form of substitute price increases. Now that we're through with that, we're able to resume our sort of standard approach to price increases. You've seen us do that in the U.S., U.K., and France. Those changes went well, better than we forecasted. And we'll continue to monitor other countries and try and assess when we've delivered enough additional entertainment value. We look at engagement, retention, and acquisition as the signals there. So we can go back to members and ask them to pay a bit more to keep that positive flywheel going. And we can invest in more great film series and games for those members. So, you know, the summary statement might be back to business as usual.

Gregory K. Peters: And when we think about how we compete for some of that ad spend, I really think we need to play it to our strengths. We've got an incredibly engaged audience, the most engaged audience who are watching the most culture-defining films, series, and live events. That is an important place for brands to be, and it's something that differentiates us from our competitors. So that's the space that we're going to play in. Super

Speaker Change: I don't think this would be the time to to try to test that and spent so don't you think differently, but.

Speaker Change: Yeah, I would just say, just to reinforce that, I mean, we've seen the benefits over time of continuous improvement, great execution and focus, and kind of gradually building our business and doing it really well and thrilling our members. And so you see it like we are increasing our content spend and coming out of the strikes in 23, we're trying to get back up to as much as $17 billion of cash content spend this year. And as we've also said over the last few years, as we kind of re-accelerate our revenue growth, which we're seeing in the business, we hope to sustain that healthy revenue growth, grow profit and profit margins over time, and then reinvest a good portion of that back into business, which means increasing our content spend. So we do plan to do that, but we want to do it in a smart, judicious, responsible way. And, you know, obviously today's even announcement with WWE is a case in point. We believe we have room to do that while still... We're still staying very disciplined in terms of our overall content spend and our business performance. Yeah, I think the perception of over-serving thrilling content to our members has served us pretty well.

Speaker Change: I would just say I just to reinforce that I mean, we've seen the benefits over time of continuous improvement great execution focus and kind of gradually building, our business and doing it really well and thrilling our members and so you see it like we are increasing our content spend that coming out of the strikes in 'twenty three we're trying to get back up to as much.

Theodore A. Sarandos: Another question on competition, this one probably best for Ted and Spence to take. It comes from Eric Sheridan from Goldman Sachs. How does the current competitive landscape or content impact the trajectory of Netflix's own content spending in 2024 and beyond? Is it possible that the company could widen its competitive moat on the same or lower absolute amount of content? I think it's always been a competitive place for the top programming, so I think that'll continue and that's really what I think you're talking about, whether when the top, Thanks for watching. Yeah, I would just say, just to reinforce that. I mean, we've seen the benefits over time of continuous improvement, great execution, and focus and kind of gradually building our business and doing it really well and thrilling our members.

Speaker Change: A $17 billion of cash content spend this year and as we've also said over the last few years as we are kind of Reaccelerate, our revenue growth, which we're seeing in the business. We hope to sustain that healthy revenue growth grow profit and profit margins over time, and then reinvest a good portion of that back into the business, which means increasing.

Speaker Change: Our content spend so we do plan to do that but we wanted to do it in a smart judicious responsible way then obviously today's even announcements with WWE isn't as a case in point, we believe we have room to do that while still staying very disciplined in terms of our overall content spend in our business performance.

And Spence, I don't know if you wanted to add anything there. I think you nailed it. You're on a roll.

Unnamed Host: So, it's good.

Unnamed Host: Great. I'll move us along now to a couple questions on competition and the competitive landscape. The first question comes from Maria Ripps of Kinnacord Genuity. With ads coming to Prime Video at the end of this month, and given Amazon is making it the default option for its Prime members, could you talk about how you are positioning Netflix relative to the competition when you're speaking with advertisers?

Theodore A. Sarandos: And so you see, we are increasing our content spend and coming out of the strikes in 23, we're trying to get back up to as much as $17 billion of cash content spend this year. And as we've also said over the last few years, as we kind of reaccelerate our revenue growth, which we're seeing in the business, we hope to sustain that healthy revenue growth, grow profit and profit margins over time, and then reinvest a good portion of that back into the business, which means increasing our content spend. So we do plan to do that, but we want to do it in a smart, judicious, responsible way. Then, you know, obviously, today's announcement with WWE is a case in point.

Speaker Change: I think the perception of over serving thrilling thrilling content joint members has served us pretty well so yeah.

Speaker Change: And we've got lots of room to grow, obviously, and so we just want to do it in a disciplined way. No question.

Speaker Change: We've got lots of room to grow obviously and so we wanted to do it in a disciplined way no question.

Speaker Change: Another question from Eric Sheridan from Goldman Sachs. A bigger picture question. Given the scale of audience that has been built by Netflix, how do you think about the potential for new areas to widen your exposure to verticals or formats of media consumption? I think maybe Eric is referring to short form content or UGC, things like that. Ted? I would kind of call back to something that Greg alluded to earlier. In the areas of business that are in our core, movies, television, and now games, that business, we're capturing about 5% of consumer spending. In our most mature markets, we're getting about 10% of TV time. So in our very core business, we still have an enormous room to grow. So when I look at that, it doesn't make me think about searching for more. When I look at our inorganic growth in different kinds of programming, there's so much room to grow in this bit of programming that we're kind of hopefully getting better and better at for our members every day. So there's a lot of adjacent businesses that are not necessarily competitive and are certainly complementary in some ways. Some of those platforms that you're talking about, maybe in the user-generated space, have turned out to be great marketing tools for our professional content. So I think we're rightfully focused, I think, on the core of... Of professional storytelling.

Speaker Change: Another question from Eric Sheridan from Goldman Sachs.

Eric J. Sheridan: A bigger picture question given the scale of audience that has been built by Netflix how do you think about the potential for new areas to widen your exposure to verticals or formats of media consumption. I think maybe Eric is referring to short form content or UGC things like that.

Gregory K. Peters: Could you also comment on whether Netflix considered making the ad tier the default option, similar to Amazon? And what were some of the pros and cons about that decision? So I'll turn that one over to you, Greg. Yeah, we did consider making it the default option. But given our long history of not having ads, we thought it was better for our members rather than force them into a change and give them ads, but better to attract them to the ads plan for the ones that wanted it based on the benefits. More streams. More streams, higher-resolution downloads, and, of course, a lower price to be able to access all these incredible stories.

Eric J. Sheridan: I would kind of come back to something that Greg alluded to earlier in.

Eric J. Sheridan: In the areas of business that are in our core movies TV in our games today.

Eric J. Sheridan: That that business, where we're getting we're capturing about 5% of consumer spending.

Spencer Adam Neumann: We believe we have room to do that while still staying very disciplined in terms of our overall content spend on our business performance. Yeah, I think the perception of over serving thrilling, thrilling content to our members has served us pretty well. And we've got lots of room to grow, obviously, and so we just want to do it in a disciplined way. No question. Another question from Eric Sheridan from Goldman Sachs, a bigger picture question: given the scale of the audience that has been built by Netflix, how do you think about the potential for new areas to widen your exposure to verticals or formats of media consumption? I think maybe Eric is referring to short-form content or UGC, things like that. Ted?

Eric J. Sheridan: In our most mature markets, we're getting about 10% of TV time, so in the in our very core business, we still have enormous room to grow.

Eric J. Sheridan: So I wouldn't look at that it doesn't make me think about searching for more inorganic growth in different kinds of programming. There's so much room to grow in this bit of programming that we're kind of hopefully getting better and better at for our members every day. So there's a lot of adjacent businesses that are not necessarily competitive and theres certainly complementary in some ways.

Gregory K. Peters: So I mentioned the growth numbers we were seeing previously and the rate of growth we're on. I think that approach is generally working well for our members, and we haven't seen any big backlash as a result, which is positive as well. And then in terms of competitive positioning, probably the most important thing to start with is that the market is big. We talked about over $25 billion in CTV ad spend alone. So there's room for multiple players, clearly, and when we think about how we can compete for some of that ad spend, I really think we need to play to our strengths. We've got an incredibly engaged audience, the most engaged audience, who are watching the most culture-defining films, series, and live events. That is an important place for brands to be, and it's something that differentiates us from our competitors. So that's the space that we're going to play in.

Speaker Change: Some of those platforms that you're talking about maybe in the user generated space have turned out to be great marketing tools for our professional content. So I think we're rightfully focused I think on the core.

Theodore A. Sarandos: I would kind of call back to something that Greg alluded to earlier. In the areas of business that are our core, movies, television, and now games, that business, we're capturing about 5% of consumer spending. In our most mature markets, we're getting about 10% of TV time. So in our very core business, we still have an enormous room to grow. So when I look at that, it doesn't make me think about searching for more inorganic growth in different kinds of programming.

Speaker Change: Of.

Speaker Change: Our professional storytelling.

Speaker Change: Great. I'm going to move this over to a few questions around capital allocation. The first is from Brian Pitts of BMO Capital Markets. Basically, the question for Spence is, can you help us frame your M&A views over the next 12 months? You know, is there the possibility for mobile gaming, acqui-hire, or what other sorts of M&A activity would Netflix be interested in?

Speaker Change: Great.

Speaker Change: I remove this over to a few questions around capital allocation. The first is from Brian Pitz of BMO capital markets.

Basically the question for Spencer can you help us frame your M&A views over the next 12 months.

Speaker Change: Is there the possibility for mobile gaming Aqua hire or what other sorts of M&A activity would netflix be interested in.

Theodore A. Sarandos: There's so much room to grow in this bit of programming that we're kind of hopefully getting better and better at for our members every day. So there are a lot of adjacent businesses that are not necessarily competitive and are certainly complementary in some ways. Some of those platforms that you're talking about, maybe in the user-generated space, have turned out to be great marketing tools for our professional content. So I think we're rightfully focused, I think, on the core of professional storytelling. Great. I'm going to move this over to a few questions around capital allocation. The first is from Brian Pitts of BMO Capital Markets.

Speaker Change: Well, thanks, Brian. We're not going to speculate on kind of potential M&A activity, but as you know, our historical bias is to build and not buy. We try to be very responsible in terms of our capital allocation philosophy. You know, we hold a modest amount of debt. We're currently holding $10 to $15 billion in gross debt. We fully fund our business and new initiatives. You see that in terms of our investment into ads, into live, into games while still growing the business. And, you know, we'll look at selective accelerators to that organic growth. We have done that. But, you know, we're not interested in some of the big linear assets that may or may not be available. We also noticed that, noted that in the letter. And so I think that's how you should kind of think about our, you know, what's out there to go. Thanks, Brian.

Oh, well I'm, sorry, we're not going to we're not going to speculate on kind of a potential M&A activity, but as you know our.

Unnamed Host: Super. Another question on competition.

Unnamed Host: This one is probably best for Ted and Spence to take.

Historical bias is to build and not by and we try to be very responsible in terms of our capital allocation philosophy.

Theodore A. Sarandos: It comes from Eric Sheridan from Goldman Sachs. How does the current competitive landscape or content impact the trajectory of Netflix's own content spending in 2024 and beyond? Is it possible that the company could widen its competitive moat on the same or lower absolute amount of content? I think it's always been a competitive place for the top for the top programming. So I think that'll continue. And that's really what I think what you're talking about, whether or not when we went out when it was at its peak.

Speaker Change: You know we hold a modest amount of debt. We're currently holding $10 billion to $15 billion of gross debt, we fully fund our business and new initiatives you see that in terms of our investment into into ads into alive into games, while still growing the business.

Speaker Change: We'll look at selective accelerators to that or.

Spencer Adam Neumann: Basically, the question for Spence is, can you help us frame your M&A views over the next 12 months? You know, is there the possibility for mobile gaming, acquihire, or what other sorts of M&A activity would Netflix be interested in? We're not going to speculate on potential M&A activity, but as you know, our historical bias is to build and not buy. We try to be very responsible in terms of our capital allocation philosophy. We hold a modest amount of debt. We're currently holding $10 billion to $15 billion in gross debt.

Speaker Change: Organic growth, we have done that but we're.

Speaker Change: We're not interested in some of the big linear assets that may or may not be available. We also noticed that I noted that in the letter and so.

Speaker Change: I think thats, how you should kind of think about or.

Unnamed Host: Thank you for joining us today, and we'll see you next time.

Yeah, what's out there.

Yeah, I would just say, just to reinforce that. I mean, we've seen the benefits over time of continuous improvement, great execution, and focus, and kind of gradually building our business and doing it really well and thrilling our members. And so you see, we are increasing our content spend and coming out of the strikes in 23, we're trying to get back up to as much as $17 billion of cash content spend this year. And as we've also said over the last few years, as we kind of re-accelerate our revenue growth, which we're seeing in the business, we hope to sustain that healthy revenue growth, grow profit and profit margins over time, and then reinvest a good portion of that back into the business, which means increasing our content spend.

Speaker Change: To go after.

Speaker Change: And staying with you spent another question on the capital allocation. This one coming from Alan Gould of AR.

Speaker Change: And staying with you, Spence, another question on capital allocation, this one coming from Ellen Gould of Loop Capital. We know your general rule of thumb is to have cash equal to two months of revenue. How big of a factor is the current stock price in your buyback activity? And some of your debt begins venturing over the next few years. What do you believe is the optimal leverage ratio to maximize shareholders?

Alan Gould: Luke capital.

Alan Gould: We know your general rule of thumb is to have cash equal to two months of revenue how big of a factor is the current stock price and your buyback activity and some of your debt begins maturing over the next few years. When you believe is the optimal leverage ratio to maximize shareholder value.

Spencer Adam Neumann: We fully fund our business and new initiatives. You see that in terms of our investment in ads, into live, into games, while still growing the business. And we'll look at selective accelerators to that organic growth. We have done that. But we're not interested in some of the big linear assets that may or may not be available.

Speaker Change: Yeah sure. So I'm glad you asked because I missed the last piece of our capital allocation philosophy, which is to hold about two months of <unk>.

Speaker Change: Of our revenue in the form of cash on the balance sheet and then to return the excess cash to shareholders over time, we've done that in the form of a buyback.

Spencer Adam Neumann: We also noted that in the letter, and so I think that's how you should kind of think about what's out there to go after. And staying with you, Spence, another question on capital allocation, this one coming from Alan Gould of Loop Capital. We know your general rule of thumb is to have cash equal to two months of revenue. How big of a factor is the current stock price in your buyback activity?

Speaker Change: And so you know with a little over $7 billion of cash on the balance sheet at the end of year and with as you say the kind of the the our expectation for strong cash flow build and the year roughly $6 billion is what we're projecting at current FX rates for 2024, you can expect that we'll continue to return excess cash to shareholders shareholders through the buyback we.

So we do plan to do that, but we want to do it in a smart, judicious, responsible way. And, you know, obviously today's announcement with WWE is a case in point. We believe we have room to do that while still... We're still staying very disciplined in terms of our overall content spend and our business performance. Yeah, I think the perception of over-serving thrilling content to our members has served us pretty well. And we've got lots of room to grow, obviously, and so we just want to do it in a disciplined way. No question.

Spencer Adam Neumann: And some of your debt begins maturing over the next few years, what do you believe is the optimal leverage ratio to maximize shareholding? Yeah, sure. So I'm glad you asked because I missed the last piece of our capital allocation philosophy, which is to hold about two months of revenue in the form of cash on the balance sheet and then to return the excess cash to shareholders over time. We do that in the form of a buyback. And so with a little over $7 billion of cash on the balance sheet at the end of the year, and with, as you say, our expectation for strong cash flow build-up in the year, roughly $6 billion is what we're projecting at current FX rates for 2024. You can expect that we'll continue to return excess cash to shareholders through the buyback. We don't try to time any kind of stock price.

Speaker Change: Don't try to time the stock price. So we really are kind of more in a I'd call. It more of a price averaging sort of our approach in that buyback over time as we have excess cash and then in terms of optimal leverage ratio look where we we are fortunate to have continued to strengthen our balance sheet. We had a recent upgrade from.

Speaker Change: Moody's in Q4.

Speaker Change: To grow into that investment grade balance sheet, but we were pretty intentionally under leverage frankly, we think that the optimal without getting overly specific we think essentially as I said, our capital allocation strategy has served us well and that philosophy has served us well over the past handful of years, and we think that flexibility in the balance sheet also.

Unnamed Host: Another question from Eric Sheridan from Goldman Sachs. A bigger picture question.

Theodore A. Sarandos: Given the scale of the audience that has been built by Netflix, how do you think about the potential for new areas to widen your exposure to verticals or formats of media consumption?

Theodore A. Sarandos: I think maybe Eric is referring to short form content or UGC, things like that. Ted? I would kind of call back to something that Greg alluded to earlier.

Spencer Adam Neumann: So we really are kind of in a, I'd call it, more of a price averaging sort of approach in that we buy back over time as we have excess cash. And then, in terms of the optimal leverage ratio, look, we are fortunate to have continued to strengthen our balance sheet. We had a recent upgrade from Moody's in Q4. We continue to grow into that investment grade balance sheet, but we were pretty intentionally under leveraged.

Speaker Change: Serves us well to adapt to a quite dynamic industry.

Speaker Change: Yeah.

Speaker Change: Great. I think we'll wrap up with one final question. It's actually one question we've gotten from several different analysts. And in the spirit of WWE, probably a good one for Ted and Greg to tag team on, the question is, what are your key 2024 priorities? Maybe Greg, first to you.

Speaker Change: Great.

Speaker Change: I think we'll wrap up with one final question. It's actually one question, we've gotten from several different analysts and in the spirit of WWE, probably a good one for Ted and Greg to tag team on the question is what are your key 2024 priorities, maybe Greg the first Q.

Theodore A. Sarandos: In the areas of business that are in our core, movies, television, and now games, that business, we're capturing about 5% of consumer spending. In our most mature markets, we're getting about 10% of TV time. So in our very core business, we still have an enormous room to grow.

Spencer Adam Neumann: Frankly, we think that the optimal, without getting overly specific, we think essentially, as I said, our capital allocation strategy has served us well, and that philosophy has served us well over the past handful of years. And we think that flexibility in the balance sheet also serves us well to adapt to a quite dynamic industry. Great. I think we'll wrap up with one final question. It's actually one question we've gotten from several different analysts, and in the spirit of WWE, probably a good one for Ted and Greg to tag team on, the question is, what are your key 2024 priorities? Maybe Greg, first to you.

Gregory K. Peters: Sure Yeah, I think you've heard us.

Expressed this multiple times in this call but.

Theodore A. Sarandos: So when I look at that, it doesn't make me think about searching for more.

Gregory K. Peters: But we just we see so much potential and so much opportunity ahead of us in our core business. We've got hundreds of millions of qualified households out there that are still yet to sign up for Netflix I can't believe it but they are there and we've got to win them over theres. Many hours like billions of hours of television time that we are not currently winning growing along.

Theodore A. Sarandos: When I look at our inorganic growth in different kinds of programming, there's so much room to grow in this bit of programming that we're kind of hopefully getting better and better at for our members every day. So there are a lot of adjacent businesses that are not necessarily competitive and are certainly complementary in some ways. Some of those platforms that you're talking about, maybe in the user-generated space, have turned out to be great marketing tools for our professional content.

Gregory K. Peters: Those two dimensions more households, and more moments of truth, we call them more entertainment value delivered is the key priority for us we want to improve our entertainment offering to do that that means delivering more stories that our members Love films series games now live events. That's the key to that success and then on top of that where folk.

Gregory K. Peters: Sure, I think you've heard us express this multiple times on this call, but we see so much potential and so much opportunity ahead of us in our core business. We have hundreds of millions of qualified households out there that have still yet to sign up for Netflix. I can't believe it, but they're there, and we've got to win them over. There are many hours, like billions of hours of TV time, that we are not currently winning.

Theodore A. Sarandos: So I think we're rightfully focused, I think, on the core of... professional storytelling.

Gregory K. Peters: Sing on improving how we translate all of that additional entertainment value into revenue and improved operating margin I mean, it's growing our ads business. It means growing general plans and pricing optimization. That's the major area of work there. So that's where we're going to be focused on for 2024, and we're super excited to do it so without I'm not I'll tag team to my partner co CEO.

Unnamed Host: Great. I'm going to move this over to a few questions around capital allocation. The first is from Brian Pitts of BMO Capital Markets.

Gregory K. Peters: Growing along those two dimensions, more households and more moments of truth, as we call them, more entertainment value delivered, is a key priority for us. We want to improve our entertainment offering to do that. That means delivering more stories that our members love, films, series, games, and now live events. That's the key to that success. And then on top of that, we're focusing on improving how we translate all that additional entertainment value into revenue and improved operating margin. That means growing our advertising business; it means growing general plans, and pricing optimization. That's the major area of work there.

Basically, the question for Spence is, can you help us frame your M&A views over the next 12 months?

You know, is there the possibility of mobile gaming, acqui-hire, or what other sorts of M&A activity would Netflix be interested in? Well, thanks, Brian.

Speaker Change: We'll do that instead of a sleeper hold.

Speaker Change: Look I think everything you said is 100%, Greg and I think it all is built on the foundation of movies and.

We're not going to speculate on any kind of potential M&A activity, but as you know, our historical bias is to build and not buy. We try to be very responsible in terms of our capital allocation philosophy.

Speaker Change: And C V series in games that people Love can't live without talk about can't wait to get back to post about a that drives the conversation that drives this love for programming and entertainment, so where to start but that was next week Griselda brand New show from the makers of Narcos, starting Sofia Vergara, that's insane so good.

You know, we hold a modest amount of debt. We're currently holding $10 to $15 billion in gross debt.

Gregory K. Peters: That's where we're going to be focused on for 2024, and we're super excited to do it. So with that, I'll tag team with my partner, co-CEO; we'll do that instead of a sleeper hold. Look, I think everything you said is 100%, Greg, and I think it all is built on the foundation of movies and TV series and games that people love, can't live without, talk about, can't wait to get back to, post about. That drives the conversation, that drives this love for programming and entertainment. So we're going to start with that with next week's Griselda, a brand new show from the makers of Narcos That's insane.

Following the success of one piece, we've got a brand new avatar, the last airbender coming for fans.

We fully fund our business and new initiatives.

You see that in terms of our investment in ads, into live, into games while still growing the business. And, you know, we'll look at selective accelerators for that organic growth. We have done that. But, you know, we're not interested in some of the big linear assets that may or may not be available. We also noticed that and noted that in the letter. And so I think that's how you should kind of think about our, you know, what's out there to go. Thanks, Brian.

Speaker Change: Got the three body problem, though based on the one of the top selling science fiction books of all time from the creators of game of Thrones, we have a new show from the U K from Guy Ritchie called the gentleman, that's insanely fun and we're back with returning seasons of Richardson of Emily and Paris of diplomat of squid game and.

Speaker Change: And on top of that great movies like a the second part of rebel Moon coming up.

Theodore A. Sarandos: It's so good. Following the success of One Piece, we've got a brand new avatar, The Last Airbender, coming for fans. We've got The Free Body Problem, based on one of the top selling science fiction books of all time from the creators of Game of Thrones.

Speaker Change: Damsel with Millie, Bobby Brown, Jennifer Lopez, the new film Atlas Hitman, which drove everybody crazy at Sundance last night.

Unnamed Host: And staying with you, Spence, another question on capital allocation, this one coming from Ellen Gould of Loop Capital.

Speaker Change: And Eddie Murphy in Beverly Hills Cop, four axle folly, and so much more it's just it's so fun and this is a never ending mission to continue to improve this for our members and make sure that we're bringing them all the joy that we can and want to thank all of the teams that Netflix who have made that possible and in 2023 and will in 2024.

We know your general rule of thumb is to have cash equal to two months of revenue. How big of a factor is the current stock price in your buyback activity? And some of your debt begins venturing over the next few years. What do you believe is the optimal leverage ratio to maximize shareholders? Great.

Theodore A. Sarandos: We have a new show from the UK from Guy Ritchie called The Gentleman that's insanely fun. And we're back with returning seasons of Bridgerton, Emily in Paris, Diplomat, and Squid Game. And on top of that, great movies like the second part of Rebel Moon coming up, Damsel with Millie Bobby Brown, Jennifer Lopez's new film Atlas, Hitman, which drove everybody crazy at Sundance last night, Eddie Murphy and Beverly Hills Cop 4, Axel Foley, and so much more.

Speaker Change: I'm very excited and I'll throw it back to you Spencer.

Speaker Change: Awesome. Thank you so much, Ted. Thank you, Greg. Thank you, Spence, for entering the questions from analysts. I also want to thank our audience for tuning in to our first ever live streamed video format. We look forward to your feedback. And in the spirit of continuous improvement at Netflix on everything, we look forward to getting better at this over time. So thank you all again, and we'll see you next quarter.

Unnamed Host: I think we'll wrap up with one final question. It's actually one question we've gotten from several different analysts.

Speaker Change: Awesome. Thank you so much Ted Thank you Greg. Thank you Spencer for entering the questions from analysts.

Speaker Change: I also want to thank our audience for tuning into our first ever a live stream. The video format. We look forward to your feedback and in the spirit of continuous improvement that Netflix on everything we look forward to getting better at this overtime. So thank you all again and we'll see you next quarter.

Gregory K. Peters: And in the spirit of WWE, probably a good one for Ted and Greg to tag team on, the question is, what are your key 2024 priorities? Maybe Greg, first to you.

Theodore A. Sarandos: It's just, it's so fun. And this is a never-ending mission to continue to improve this for our members and make sure that we're bringing them all the joy that we can. And I want to thank all the teams at Netflix who have made that possible in 2023 and will in 2024. So I'm very excited, and I'll throw it back to you, Spencer.

Unnamed Host: Awesome.

Gregory K. Peters: Thank you so much, Ted.

Unnamed Host: Thank you, Greg.

Speaker Change: Thank you, everybody.

Unnamed Host: Thank you, Spence, for asking the questions from the analysts.

Speaker Change: Thanks, everybody.

Unnamed Host: I also want to thank our audience for tuning in to our first ever live streamed video format.

Unnamed Host: Thank you so much, Ted. Thank you, Greg. Thank you, Spence, for taking the questions from the analysts. I also want to thank our audience for tuning into our first ever live-streamed video format. We look forward to your feedback, and in the spirit of continuous improvement at Netflix on everything, we look forward to getting better at this over time. So thank you all again, and we'll see you next quarter. Thank you, everybody.

Unnamed Host: We look forward to your feedback.

Unnamed Host: And in the spirit of continuous improvement at Netflix on everything, we look forward to getting better at this over time.

Unnamed Host: So thank you all again, and we'll see you next quarter.

Unnamed Host: Thank you, everybody.