Q2 2025 Netflix Inc Earnings Call
Good afternoon and welcome to the Netflix Q2 2025 earnings interview. I'm censor Wong. VP of Finance, ir and corporate development. Joining me today are co-ceo Ted sarandos and Greg Peters and CFO Spence Newman.
As a reminder we'll be making 4 looking statements in actual results May Vary. We'll take questions submitted by the analyst community and we will begin uh, with our results and our forecast. Uh, the first question comes from Steve Khal of Wells Fargo.
Steve Khal: Uh, the question is, since the revenue increase, uh, in your forecast is primarily FX driven. We're curious about the components of the constant currency. Uh, increase is this due to a better, uh, underlying Revenue growth or Are there specific expenses that are coming in better, like content amiz.
I will, I will take that 1. Uh thanks Steve. So I um because you saw on the letter, we increased our full year Revenue, guidance, to 44.8 to 45.2 billion that's up from the, the prior guide of 43 and a half to 44, and a half billion. So, up about a billion at the midpoint of the range and a tighter range. Uh, as you noted primarily reflects the FX impact from the weakening dollar relative to most other currencies, uh, but the good news is, we're also seeing strength in our underlying business. We've got healthy member growth and that even picked up nicely at the end of the Q2 a bit more than we expected. And we think that'll carry through with our
Our strong back half slate. So so we're reflecting that in our latest forecasts. And we're also seeing nice momentum and add sales, uh, still off a pretty small base, but good growth and it's on Pace to roughly double our Revenue in the year and it's a bit ahead of beginning of your expectations. So when we carry all that through to operating margin our, our operating expenses are essentially unchanged, which is part of your question. So they're basically unchanged forecast to forecast. So we're largely flowing through through the expected higher revenues, uh, to profit margins. So that's why our updated Target full year. Reported margin is up a point from 29 to 30% and that 50 basis. Point increase in FX neutral, margins is really just that Revenue lift from stronger membership growth and adds relative to Prior forecast flowing through to margin.
Speaker Change: Dispense, uh, we'll take our next question from Barton Crockett of rosenblat securities.
uh, why is operating margin guidance for the full year only 30% after the upside in 2q and a forecast of 31.5%, for the third quarter, because there are a timing issue FX issue, or is there a new level of spending that will continue, uh, beyond the fourth quarter of 2025,
Uh well this is this is really, uh, mostly timing. So, thanks Barton. We we, primarily as a as a reminder, we primarily managed to fully year margins and we expect our content expenses will ramp in Q3 and Q4, we've got many of our biggest new and returning titles and live events in the back half of the year. We've also, you know, Q4 is typically a and generally almost always is a heavier film. Slate sure. We'll talk about our expect, we'll talk about more of this on the call. We'll also be marketing to support that heavier slate and and we're continuing to aggressively build out our ad, sales infrastructure and capabilities through through the year. So all of that is to be expected. We can manage to we managed to those margins and even with that back half ramp and expenses, we expect operating margins to be up, year-over-year in each quarter, including Q4 um and as just noted, we expect to deliver a strong full year margins. As we just took up our our guide to uh, you know, 29 and a half percent FX neutral 30% reported
Speaker Change: Great. Thanks Spence. Um, the next question comes from Tom champion of Piper Sandler.
How has your view of the consumer and the macro economy changed over the last 90 days?
Spence: Similar to last quarter, we're carefully watching consumer sediment in the broader economy but at this point there's really nothing significant to note in the metrics and the indicators that we get directly through the business. Um those are retention that remains stable in industry-leading. There will be no significant shifts in plan mix or plan take rate and the price changes. We've done since the last quarter have been in line with expectations, uh, engagement also remains healthy. So things all look stable from those indicators and big picture entertainment in general and Netflix specific have been historically, pretty resilient and tougher Economic Times. We also think that we are an incredible entertainment value. Uh, you know, not only compared to traditional entertainment. But if you think about other streaming competitors and we start at 799, the United States, and you think about all the entertainment you get, uh, we have a belief and expectation that the demand for not only entertainment, but for us specifically will remain strong.
Spence: Swinburne of Morgan, Stanley. Uh, can you share any data points around your upfront? Negotiations?
Spence: Yep. As we noted in the letter, our us upfront. It's nearly complete we've closed. Large majority of deals with the major agencies. Those results have generally been in line or slightly better than our targets and consistent with our goal to roughly double the ads business this year and what our advertisers excited about growing scale is something we definitely hear. Also a highly attentive and engaged audience, so bigger audience, but also an audience that's more engaged relative to our peers, the roll out of our own ad Tech stack, which helps deliver a bunch of features and then our slate, which is generally amazing and includes a growing number of live events, that advertisers are excited about
Speaker Change: Great. Um, follow-up question, on Advertising, uh, from vicram of beard, uh, how have advertisers in the US responded to the Netflix, add Suite, uh, roll out since the April launch. Uh, what features and capabilities are attracting the most interest and how is the initial feedback and other regions outside of, uh, the US
We've completed uh the roll out of our own ads, uh text Act and the Netflix add Suite to all of our ad markets now. So we're fully on our own stack uh around the world at this point that roll out was generally smooth, um across all countries, we see good performance metrics across all countries and the early results are in line with our expectations. Now, we're in this phase of
Learning and improving quickly based on the fact that being live everywhere, means that you get a bunch of feedback about what we can do better, which is great, as we mentioned before, the most immediate benefit, uh, from this roll out is just making it easier for advertisers to buy on Netflix. We hear that benefit that ease, um, from direct feedback talking to advertisers. They tell us that it's easier. We see it in our overall sales performance, we've seen an increase programmatic buying, so all of these are consistent, you know with what we are expecting both qualitatively and from a metrics perspective, um, we also I guess worth noting that we're going to roll out additional demand sources like Yahoo that will further open up the market for us. Long term being on our own stack that improves the speed of our execution to deliver this. You know, pretty significant roadmap of features that we have in front of us, it's things like improved targeting and measurement. Uh, there's also leveraging Advertiser and third-party data sources which we definitely hear demand for as well. Um, and it will ultimately allow us to improve the ad experience for our members.
Which is critically important. So that means better ads personalization. So the ads that I see, are increasingly different from the ads that let's say, Ted would see and they're more relevant for each of us, which is good for us as users. And it's good for for the brands. We're also going to be introducing interactivity in the second half of the year, so that's exciting. So, that's all to say this is, you know, a pretty significant milestone for US 1. We're super excited to get behind this, because now, we can shift into this steady release cycle where we're dropping new features all the time, both for advertisers and for members.
Speaker Change: The development and release model that we have in other parts of the business. So it's it's fun to be able to get to that point.
Speaker Change: Thanks Greg. Uh, I'll move this along now to a set of questions around uh content as well as a engagement. Um, this 1 comes from Ben swinburne of Morgan Stanley. Uh, 1% engagement growth year-over-year. Uh suggests engagement is down your rear on an average uh per member basis. How do we reconcile that with engagement growing on a per member household basis? If that's still accurate,
Speaker Change: So total View hours did grow a bit in the first half 25 and that's despite a particularly back half weighted slate but to your point on engagement, on a per member basis, we've mostly been focused for the last few years on measuring engagement on what we call an owner household basis. So, this takes out the borrower effect and we obviously think this is the best way to assess our engagement for member because it removes the tricky comparison impacts from Paid sharing. So that metric per owner, household engagement has been relatively steady over the past 2 and a half years throughout the roll out of paid sharing and admits, uh, increasing competition for TV time, as more viewing moves to streaming and gets this on demand benefit. So, we're glad to have held that normalized engagement level, but we, clearly also want to increase it. And to that end, we're optimistic and expect that our engagement growth. In the second half of this year, will be better than in the first half. Given our
Speaker Change: Strong second half slate.
To think about the business currently, as being, uh, quote unquote hit boosted or had driven and are you confident that both original and licensed content momentum can continue in 2026?
Yeah, I'll take that. Um and thank you Doug uh on the first part of your question. We're definitely riding this long-term trend of linear to streaming and that has a natural adoption curve. But we can accelerate our growth with big hits but as you said, each 1 of them, even in success going to drive about 1% of total viewing. So you need a lot more than just a big hit everyone in a while. Uh, so to your point, it's not about the single head. So what it is, is is about a steady drum beat of shows and films and soon enough games that our members really love and continue to expect from us. So, like, uh, by way of example, we had 44, individual shows nominated for Emmys this year, so that's what quality at scale looks like. Um, we ended the quarter uh, with a huge return of squid game. Thanks for acknowledging. Uh, I'll go into the second half with the return of Wednesday and stranger things, and a really strong slate of supporting titles and favorites. Like, uh, and new shows, like, next week. We've got this week, we're at Eric bana's Untamed. Uh, next week. We have Leanne Morgan's. New comedy show. Leanne both look really great.
Uh, and that's just to name a few and the back half of the Year also has this, perhaps the most anticipated slate of new movies that we've ever had. And that starts on the 25th with Happy Gilmore 2. Uh, followed by. We have a, a new Knives Out film. We have new films from Noah baumbach from gamma Del Toro from Katherine Bigalow, and it does not stop there. It does roll right into 20126 and that's the second part of your question. And we're looking forward to movies like The rip, uh, from Ben Affleck, and Matt Damon Shirley star on new movie called Apex, which is a phenomenal action movie. Millie, Bobby Brown is back in Enola. Holmes, 3, recall that uh in 2023 and all the homes was our biggest 2, was our biggest movie, so we're looking forward to that new sequel. Uh, and let it go, igna is going to be phenomenal. Uh, and then on top of that, um, we talked about return of Bridgerton 1 piece avatar, The Last Airbender, all 3, huge successes around the world. Uh,
Speaker Change: The gentleman 4 Seasons Point Break. I'm sorry. Running points. All right. Uh beef. Uh, which is you were calling 2023 won, just about every award imaginable. And was a gigantic success for us. It's back for a new season in 26 3 body problems. Love is Blind Outer Banks. Uh, and not just from the US from the from France, we have lupon from Spain. We have Berlin. Uh, we have a new season of 100 Years of Solitude from Colombia. So big hit returning shows in new series.
Speaker Change: From each of our regions around the world, um, and the new stuff we've got coming up, like, Man on Fire reimagining of Little House on the Prairie. Uh, The Duffer brothers, from stranger things have a brand new show uh, the Burrows. Um, uh, we've got the human vapor from Japan uh operation suffered cigar from India. Uh, can this love be translated from Korea? So again popular programming new and returning from all over the world in 2026. Um, unscripted shows like the reboot of star star search. Uh, we've got into the doll Universe, uh, with Wonka's golden ticket, which is really excited about. And in our live, we've got a few surprises for you next year, but of course, we have our NFL Christmas Day, double header, that we're really thrilled about too. So we're really incredibly excited about the back half of this year and confident that it keeps rolling in 26.
Speaker Change: Thank you, Ted. Um, we'll take the next question from Rich, Greenfield of light shed Partners. Uh, who asks, are you concerned by the stagnation in your viewing shared domestically? Uh, I think rich is probably referring to the Nielson gauge data. Um, do you need to spend more on programming or spend differently to materially move your viewing share higher? Yeah, thanks Rich. Uh, look, our, our goal continues to be to continue to grow our share over the long term and over the past few years. You're right. We've been able to maintain our share even as we work through a growing number of TV based streaming services. Uh, some free, some paid, uh, and the impact of paid sharing that Greg mentioned earlier.
Speaker Change: And increased profit margin. So that's our model in action. It is, um, our objective to sustain healthy Revenue. Growth reinvest in the business to improve on all aspects of the service. Uh, and that includes growing content, spend strengthening and expanding the entertainment offering, uh, and to drive that positive flywheel of growth by adding value to our members, uh, and all the while growing engagement revenue and profit around the world.
Speaker Change: Great. Um, thank you Ted. Um, I'll move uh to Alan Gould from loop capital. Next uh, can you uh provide more information on the tf1 partnership? Uh, why did you choose to add tf1 in France as opposed to uh other broadcasters as your first partner? Why is now the right time to create such a partnership should we anticipate similar Partnerships in other countries?
Yeah, perhaps just start with the the rationale for the partnership. You would think with that long list of uh, amazing titles that Ted just rattled off, we would have enough to satisfy every person on the planet, but it turns out, we actually consistently hear from our members that they want more. They want more variety more, uh, breadth of content. So, the fundamental purpose for this tf1 partnership is all about that. Goal of expanding our entertainment offering. How do we enhance the value? We deliver to members, we want to provide more content, more variety, more quality. Um, so just as you've seen us do with licensing and production, this is just another mechanism to expand that offering. And in this case, it's
Speaker Change: Specifically about highly relevant local for local content in a country that has strong demand for that. Local content. This is an accelerated way to satisfy that need why? Now, why was this time the right time? Well, we've invested a lot in a bunch of enabling capabilities that are either required or highly leveraged by this deal. You can think live
adds the new UI among other things. Um, and then why tf1 versus some other partner? Well, we know each other really well. Uh, we wanted our first partner to be in a big territory. We wanted to pick the leading local programmer. Uh, we wanted to be highly aligned in terms of the, the deal and the shape of the partnership and the values that we thought we could generate mutually uh, by working together for our customers.
And we both look at this as an opportunity to learn to figure out. How do we scale the local content? The tf1 is producing to more customers, uh, in France. So we're looking forward, uh, to seeing what consumers think you'd never really know until you get out there and, and get the real reactions. And then obviously we'll factor that into our plans going forward.
Speaker Change: Thanks Greg, um, from Robert Fishman of Moffett Nathanson uh, with reports suggesting Apple's. Now in the dry receipt for F1 rights, haha, pun intended, I guess. Um, plus plus UFC, and MLB still looking for New Deals and, uh, the NFL may be looking to come to Market at your earlier. Can you share updated thoughts on how
Speaker Change: How you are approaching Sports rights for Netflix and where you draw the line on something that can move the needle.
No, thanks for that. Robert uh remember sports are a subcomponent of our live strategy. Um uh but our live strategy goes beyond Sports Alone. Um our live strategy and our Sports strategy are on change. You know, we remain focused on ownable big breakthrough events uh, that because our audience is really love them. Um, anything we Chase, uh, in the event space, or in the sports space, has got to make economic sense as well. You know, we've, uh, we bring a lot to the table and the deals that we make out to reflect that. So, live is a relatively small, part of the total content spend, and we've got about 200 billion View hours. So it's a pretty small part of view hours as well right now, but that being said, not all View hours are equal. Um, and what we've seen with live is has an outsized positive impacts around conversation around acquisition and we suspect around retention. Uh, and but so right now, we're we're very excited where we sit, we're very excited with the existing strategy. We're excited about the Canelo Crawford fight in September and the 7th.
Speaker Change: Awards. And our weekly WWE matches, uh, in the NFL of course, which is a great property and we're happy to have, uh, Christmas Day, double header, uh, which includes Dallas versus Washington and Detroit versus Minnesota. Uh, so today, our Live Events have all primarily been in the US, keep in mind. Uh, so over time, we're going to continue to invest and grow our live capabilities for events around the world in the years ahead.
Speaker Change: So we're excited but the strategy is unchanged.
Yeah, thanks Steve. I I'd say, um, remember when we started original scripted programming, we had zero production capability, um, House of Cards was in fact, thinking about our first 3 years of of original programming. All of those shows were produced by others. Uh, you have to go 3, 3 years later, we produce stranger things in house. Uh, today we still have shows that are produced by others, uh, Universal 20th television, which is Disney, uh, Paramount Lionsgate wonders, Warner television. Uh, there's lots of available infrastructure to produce TV and that is true of Live Events and sports as well. Um, if we, when we do more and more, we may choose to bring some of that in-house. Um, we've already produced a few, um, and we're just as likely to continue to use Partners, uh, with existing production infrastructure and work to make sure that those Productions are bespoke and do they feel like they could only be on Netflix. Uh, so you shouldn't think about the mix of Partnerships and self-producing as a
we, we think about it as a scaling Tool, uh, not backfilling some Lake lack of ability, uh, in some areas of the company. So, and I should note, by example, uh, CBS is a phenomenal partner producing the NFL games with us and we're thrilled to work with them again this year on Christmas Day.
Maybe take this opportunity just to make some commentary on the general capability. We've been building with live. You know, when we start something new uh we pretty much expect that we're not going to be brilliant at it at the beginning. Uh, but we yeah, that's true. Unfortunately, we don't have any really reason to believe that, uh, but we don't let that stop us from kicking off initiatives that we believe have a strong strategic rationale, even though we know, we need to develop that capability. And of course, our job is to get out there, um, and, and Learn by doing and get world class as quickly as we possibly can. And if you look at our current capabilities around live, we are in just a completely different, uh, place today compared to when we first started as a good example that just happened. Last Friday, we had our first concurrent pair of Live Events. We had Taylor versus Serano globally delivered alongside WWE Smackdown, which was delivered X us both events at scale and delivered with extremely high quality. So great progress, we've seen and we've got a great roadmap of features, ahead of us to continue to enhance those experiences.
Speaker Change: For folks.
Thank you both. Um, last question on the content side or the topic of content comes from Ben swinburne and Morgan Stanley. Um, what are the learnings from the success of K-pop? Demon Hunters um more animated musicals with fictional bands. Perhaps question mark man, that is a question from a manager who's probably has that movie playing on repeat in their home. If I'm if I'm guessing correctly uh K-pop demon Hunters is a is a phenomenal success out of the gate, 1 of the things.
Things that I'm excited. Really proud of the team over is, um, original animation, not SQL not live action. Remake original animation feature is very tough and has been struggling uh for years. And I think the fact that our biggest hits now uh Leo um Sea Beast, and now K-pop demon Hunters are original animation. So we're super thrilled about that. Um, the mix of music and pop culture, uh getting it right matters, get the storytelling matters, The Innovation and, and animation itself matters. And the fact that people are in love with this film and in love, with the music from this film, that'll keep it going for a long time. So we're really thrilled. And now the next beat is, where does it go from here? So, you know, we're we put in the letter how just how successful the music is been and continues to be, and we think that'll drive fandom for this. Uh, fictional K-pop bands that we have. But more importantly, uh, for the song golden, and for the song soda pop, these are enormous hits and they all come from a film that's available.
Only on Netflix. So we're really excited that we can uh, pierce the culture with original animated features. Uh, considering that folks have been poking us on it. Let's do it again. Later in the year within your dreams right? Ted. Absolutely Andrew dream, is another very funny 1 and also completely original. So yeah.
Great. I'll move us on now uh, to a few questions on uh plans uh, as well as product. Um, so from Michael Morris of Guggenheim, he asks Netflix continues to broaden content genres notably with live sports and the recently announced tf1 partnership. Is there a path to additional tiers of service based on types of content available or will Netflix always make all content available at the ad-free youhad supported price points.
Is the right Netflix for them. Also, how do we provide good accessibility to new members around the world? We want to grow and that means making sure that we've got accessible price points. Uh, and then finally, the, the plans we offer they have to, you know, ensure that we're having reasonable returns to the business based on the entertainment value that we delivered, and we're hoping to grow those. And so, in those returns would grow as well. And obviously, the reason to do that is we can continue to reinvest and adding more entertainment and building, uh, better experience. And maybe 1 of the thought too. Is, there's a component of complexity in Choice Stacks that we have to consider and how we think about our offering is um, is structured. So having said all that though, I think we believe that the bundle is a great value for members. It allows uh members around the world to access a wide range of entertainment and a very easy way at a very reasonable price. So I would expect that that will remain an important feature of our offering for the foreseeable future. A lot of value in Simplicity. Yeah. Yeah.
Great. Um, from Rich Greenfield of light shed Partners, um, help us understand why your new uiux is so important. As you expand live content Beyond Live, can you provide some color on what metrics have improved since the launch of the new UI such as speed of users finding a title and change in failed sessions?
Yeah, as we said um previously it's it's really hard for a new UI to immediately compete. Be better than the UI that we've had for the past 10 years has been iteratively evolved and improved. But now that we've actually rolled out this new UI to the first large wave of TV devices. We're actually seeing performance, that's better than what we saw in our pre-launch testing, and to some degree. That's, um, expected because we made some improvements based on the results of that testing phase. So it's exciting to see that those delivered actual better results, but the rate of that change actually gives us increased confidence that this new experience will drive better performance. Um, by the variety of metrics. We look at some of which include the ones that that rich is mentioning in relatively short order.
Uh, and then maybe just a point on. Why, why, why do we build this and launch? This new experience in the first place? Why was this so important bluntly? The previous experience was designed for the Netflix of 10 years ago, and the business has involved considerably since then, we got a wider breadth of entertainment options, we got TV and film, more of those, of course, from around the world, but now also, uh, games and Live Events. And if you think about the discovery experience, that's best suited for these new content types, it's inherently different. Helping our members, understand that there's a really good reason for them to launch Netflix and tune in at 700 p.m. on a Friday night versus, just showing up whenever they were free and wanted to be entertained. That's a totally different job. And we
Speaker Change: Really need a different uh user interface to do that job. Well,
add to that. We saw the opportunity to leverage newer Technologies, like real-time recommendations that respond dynamically to what you need from us in that specific moment. So, the Netflix you get on a Tuesday night is different from the Netflix, you get on a Sunday afternoon, but all of those rationals together, and what we're seeing in terms of the performance of far, we're very confident, um, that we've got a much better platform in this new, user experience to build from to continue to improve and that will help us meet the needs of the business over the years to come.
Thanks Greg. Um, the next question comes from Steve kahal of Wells. Fargo uh YouTube is the only streamer that exceeds Netflix in terms of us, share of TV time. Do you see an opportunity to bring notable YouTube creators and their content exclusively to Netflix? How big could this opportunity be?
Uh, thanks Steve, look. We want to be in business with the best creatives on the planet. Uh, regardless of where they come from, uh, some of them are here in Hollywood. Others are in Korea. Some are in India, and some are creators that distribute only on social media platforms. And, uh, most of them have not yet been discovered. So, um, for those creators, doing great work, we have phenomenal, distribution desirable, monetization, brilliant Discovery in our UI and a hungry audience, waiting to be entertained. So, uh, Steve you recently, I think I I listened to you on a podcast where you talked about our business model and on this, I believe on this very
For different ways to connect with audiences.
And maybe broadening this out for a second. Uh, and taking that question to look at sort of all of the competitors that we face for a share of TV time. You know, we've always said that the market entertainment is in very large, uh, and we Face competition from all kinds of directions. So whether it's linear or streamers, or video games or social media, it's also a very Dynamic, uh, competitive market as we and all of our competitors seek to provide better and better options for consumers and 1 of those changes 1 of those. Those vectors of dynamism has been that sort of steady, inevitable shift, uh, to streaming and on demand, as more services move to deliver their content in a way that we all know consumers want that creates increasing competitive pressure for us, that we've got to respond to. We also see free services, uh, as a form of strong competition, 3 is, it's very powerful from a consumer perspective. Uh, so it's not surprising that some free services are growing and engagement, but I think Ted said it well earlier and
The call, uh not all hours are created equal and we have a different profit model from other services, a strong profit model. So we're going to compete to win more moments of Truth for sure. But especially compete to win those most profitable moments, and back to your specific question. It's worth remembering. There's about 80% of total TV view, share that neither Netflix or YouTube are winning right now. We think that represents a huge opportunity for which we are
Speaker Change: Are competing, uh, aggressively. And we aim to grow our share.
The vast majority of our money and attention is focused on that 80%.
Thank you. Um, next question from Justin Patterson of KeyBank, uh, could you please talk about your generative AI initiatives, where do you think gen AI will be most impactful over time. Uh, revenue or expense uh efficiency.
Well, um, let me take start with the with Jen AI. We remain convinced that AI represents a incredible opportunity to help creators make films, and series better, not just cheaper, um, their AI powered Creator tools. So, this is real people doing real work with better tools. Uh, our creators are already seeing the benefits in production through uh, pre visualization and shot planning work. Um, and certainly visual effects. Hey, you used to be that only big budget projects would have access to Advanced visual effects like daging. Remember last quarter we talked about Pedro paramo uh well that that's just no longer the case. And you know, this this year we had uh um lotta is a very big hit show for us from Argentina. And in that production we leveraged virtual production and AI powered VFX. And there was a shot in the show that the creators wanted to show uh building collapsing of Buzz. Uh so our Ely team uh eyline Team
Partnered with their creative team, using AI powered tools, they were able to achieve an amazing result with remarkable speed and in fact, that VFX sequence was completed 10 times faster than it could have been competed completed with visual, uh, traditional bfx tools and workflows. Um, and also, the cost of it would just wouldn't have been feasible for a show in that budget. So, that sequence actually is the very first gen AI final footage to appear on screen in a Netflix, original series or film. So the creators were thrilled with the result. We were thrilled with the result and more importantly, the audience was thrilled with the result. So I, I think these tools are helping creators expand the possibilities of Storytelling on screen and that is endlessly exciting.
And maybe to cover a few of the other areas. Uh, you know, the member experience is a place where we feel like there's tons of opportunity to leverage these new generative Technologies to improve the experience. You know, we've been in the personalization and recommendation business for, you know, 2 decades. But yet we see a tremendous room and opportunity to make it even better by leveraging some of the more newer generative techniques. We're also rolling out have piloted, uh, right now at conversational experience, uh, that uses allows our members to basically have a, a sort of natural language discussion with our user interfacing. You know, I want to watch a a film from the 80s that's, uh, you know, a dark psychological Thriller, get some results back, maybe iterate through those in a
Speaker Change: Titles that that we're currently carrying, but it's very compelling for both Watchers and for those Brands, and we think these generative techniques can decrease that hurdle iteratively over time and enable us to do that in more and more spots. So, there's a bunch of places where we think we've got uh, an advantage in terms of data and scale where we can leverage these new generative techniques to deliver just more benefits for our members and for our creative Community. Yeah, if you don't mind me coming back for 1. Second, I just rolled up. I line as if someone knows that I line is, I probably should clarify. And I line is our production, Innovation group, inside of our VFX house at scan line and they're doing a lot of this work with our creators. So I just just realized that I just threw that out there as everyone knew. So thanks for clarifying Ted. Um, let's see. Our next question comes from Brian pits of uh BMO Capital markets uh with your evolving gaming Ambitions uh including Partnerships with Grand Theft Auto and the recently announced Roblox agreement. Can you talk to near-term monetization Opportunities within gaming?
Sure. Uh, we look at the near-term monetization opportunities games, very similar, to how we've looked at, uh, other new content categories, you can pick in scripted or film or on and on. And that's essentially if we deliver more value in our offering we get increased user acquisition, we get increased retention, we get increased willingness to pay. So it drives all of the sort of core fundamentals of our business.
We've seen those positive effects albeit in a small way relative to the size of our overall business. When it comes to members playing games on the service, we already have those positive proof points and we're going to ramp our investment in this area, which is currently quite small compared to our overall content investment, as we ramp the size of those positive effects. So we want to remain disciplined and not investing too. Far ahead of demonstrating that, we know how to translate that investment, uh, into value for our members. We've seen good progress, as you know, with licensed games. Like GTA, uh, we've seen good progress with the games we developed like, squid game Unleashed. So you'll see more from us in both of those categories, as well as a whole new set of interactive experiences that we think that we're either in a, a unique or differential position to deliver. So, we're super excited to roll those out over the next year and then we remain open to the core question. We remain open to evolving, our monetization model, but we have got to get to a lot more scale.
Um, before that becomes a really materially relevant question. So we're going to do that work first and it's probably worth restating. Uh, The Tam for this Market is very, very large. Uh, we remain convicted about our strategic opportunity and it's excited to make more progress.
Thanks Rick. Uh, we'll take our last question, uh, from Jessica reif erlic of Bank of America Securities. Uh, giving your healthy balance sheet and what appears to be a coming wave of m&a and media globally. Are there certain types of assets that would strengthen? Your moat? IE is your view of owning successful IP or Studio assets as they come to Market.
I'll I'll take that 1 uh Spencer thanks Jessica. Um well we agree. Uh continued consolidation of studio and network assets is is likely um but at least with respect to consolidation within Legacy Media, we don't think it materially uh changes the competitive landscape. Uh as you all know we we've historically been more Builders and buyers and we continue to see big runway for growth without fundamentally changing that Playbook. You heard a lot of that today. So we look at a lot of things. Um, we apply, apply a framework uh, or a lens to those opportunities. When we look at, you know, is it a big opportunity? Does it strengthen our entertainment offerings? Is it strengthen our capabilities? Does it accelerate our strategy? Um, and we look at all of that relative to the opportunity cost of distraction or other Alternatives. Um, you know, we've been, uh, pretty clear in the past that we also have no interest in in owning Legacy Media networks. So that, um, also kind of reduces the funnel for us but, you know, in general, We Believe
Believe we can and will be choosy. We've got a great business, uh we're predominantly focused on growing that organically investing aggressively and responsibly into that growth, uh and returning excess cash to shareholders through, share of purchase and I think you'll see us continue on that path.
Great. Thanks been uh, and that will wrap up our uh, Q2 uh, earnings call. So we thank you all for taking the time to join us, and we look forward to seeing you all next quarter. Thank you.