Spencer Wang: Six earnings interview. I am Spencer Wang, VP of Finance and Capital Markets. Joining me today are co-CEOs Ted Sarandos and Greg Peters, and CFO Spence Neumann. As a reminder, we will be taking forward-looking statements and actual results may vary. We will now take questions submitted by the analyst community. Our first question comes from David Joyce of Seaport Research Partners. His question is, investors are looking for more clarity in what has typically been Netflix's industry-leading strategy. What role do live events or becoming a centralized streaming portal or offering short-form video, third party or user-generated content play in how you see Netflix regaining a competitive edge that can help sentiment?
Ted Sarandos: I will take that, and thank you, David, for the question. It gives us an opportunity to clarify, obviously. Our strategy is unchanged, and it has always been and it continues to be, to combine best-in-class entertainment with industry-leading discovery, global distribution, and the best possible monetization. We want to be the must-have entertainment service, the first one members check for a great series or a great film, and the last service they would ever cancel. Now, the anchor of that strategy are the Netflix originals. Differentiated, exclusive, ambitious, professionally produced series and films and live events. We have oriented the market to expect something great and new to watch every week, so we have to deliver on quality and quantity always.
Ted Sarandos: As for the live events, in a world of so much choice, we have titles like KPop Demon Hunters and Wednesday and Bridgerton, and with all those things to choose from, live events like the Canelo-Crawford fight or the event-type sports that we do with the NFL and the MLB, these events break through. They stand out, they drive new membership, they add fuel to our ad revenues, they please our existing members, and they just generally enhance the value of Netflix. We take all of that strategy, we pair that exclusive programming with a broad offering of third-party programming, including second-run titles, deals we just did with Sony and Disney, Universal, and others.
Ted Sarandos: In addition to that, we look to new ways to bring third-party content onto the service as well to complement those originals, like we just did with TF1 in France, where you are ingesting a full network of programming. All that said, it is really important to remember, roughly 95% of our spend and nearly all of our revenue is focused on that core, where we see a long runway for future growth. Other areas that you mentioned, these are early-stage initiatives meant to explore future programming expansions, and we keep our focus and our investment in those areas very tight because the core is the critical growth engine.
Spencer Wang: Great. Thank you, Ted. Our next question comes from Eric Sheridan of Goldman Sachs. How would you characterize recent engagement trends in the US relative to other geographies? How would you frame any variables such as content, seasonality, competition, that might be driving any such divergences in engagement by region?
Greg Peters: I will pick up this one and start with just overall engagement, which we think of as the sum total of actual value that we are delivering to members. This is quality, quantity, and variety of viewing. That remains healthy, and it drives our business model. The best evidence that we have that we are delivering that value is churn. We have healthy retention in every region. Q3 churn, both globally and in the United States, improved year-on-year. It is better than forecast. It is already industry-leading. The ultimate determinant of are we delivering that value is the reaction to price changes.
Greg Peters: Those recent price changes that we did, including in the United States, have gone well. We have seen results that are consistent with past changes and our expectations. Consistent with all that performance, we do plan on delivering our full year guidance.
Greg Peters: Now, you talked about specific engagement trends by geography, and as you saw from the letter, we had great results in APAC, LATAM, and EMEA. Our local titles from those regions are driving engagement, and they are driving business growth. You can see how our business model works here. We specifically highlighted India, which had a strong slate with a couple titles really, really performing. As a result, view hours in Q3 in India grew 24% on an absolute basis. They were also up on a per member basis, all of which drives membership. It drove membership and nearly 20% year-over-year revenue growth. So that is a great example of how the core model works. We deliver on member value, and we get the business outcomes that we are looking for.
Greg Peters: Turning to the US, the other region, our engagement is solid, and it will allow us to continue to grow as we have for the last several years. We know that we can do better, and that better is our upside. It is our goal to go from very good to great on the performance of that slate. I just want to note that we are quite excited about what we have coming. Coming from the US in Q4, on series side, we are already off to a great start with limited series East of Eden. My whole social group is talking about that. We have season 4 of The Diplomat, the best season yet of this show.
Ted Sarandos: 100%.
Greg Peters: Later this quarter, we've got "The Body." We've got "The Murder of JonBenét Ramsey." We've got the final season of "Emily in Paris." On the film side, we've got "The Further Mis-Adventures of Cliff Booth" with Brad Pitt, directed by David Fincher, written by Quentin Tarantino. You can't ask for a more star-studded lineup than that. We've got "Bad Day" with Cameron Diaz, and then we've got "Steps," which is our new animated film featuring Ali Wong, Stephanie Hsu, and Amanda Seyfried. In addition to all that, we've got our Christmas Day NFL games, and we'll now have the first Thanksgiving Eve game, which we are going to spice up with U2 as the halftime show, and U2 is just legendary, one of my favorites.
Greg Peters: Moving to 2027, our slate includes "Narnia," we've got "Charlie vs. the Chocolate Factory," "Here Comes the Flood," "Runups 3," fifth season of "Bridgerton," third season of "Wednesday," Michael Fassbender starring in a new series about the Kennedys, "The God of the Woods," "Rabbit Rabbit," just to name a few. We're going to have NFL games, one NFL game in the final week of the regular season. This is the first time we're doing that. Of course, the Women's World Cup in the US and Canada. So there is just a lot to look forward to.
Spencer Wang: Thanks, Greg. That was an impressive overview of the slate and Q4 and 2027.
Greg Peters: Yeah.
Spencer Wang: I think you made
Greg Peters: Reminded me of someone.
Spencer Wang: Ben proud.
Greg Peters: Reminded me of someone.
Spencer Wang: Fair. To build on that, we do have a set of questions building off the theme of engagement to some of the executive changes. This next question comes from Rob Sanderson of Loup Capital. As Netflix is a massive and global content production operation, in what ways can a fresh perspective at the top influence the organization? What elements of success from his tenure at Disney are you most optimistic that Peter Rice can replicate at Netflix? Are there particular aspects you think the content org can perform better under new leadership?
Ted Sarandos: Well, Rob, that's a great question. First, let me start by taking this opportunity to thank Bela Bajaria for all of her incredible contributions to Netflix. Bela had an incredible decade-long run here. She put a lot of great hits on the board. She led the teams through a lot of expansions of new types of content. She also did the hard work of building this incredible international team who's been making local-for-local content around the world, which has become a great competitive differentiator for us over the last decade. I just want to take that moment to thank Bela. Also, calling back to that great list you just heard from Greg, there is a lot to be excited about, but I know that we could do better, and we want to build on that momentum.
Ted Sarandos: Now, we've seen an opportunity to take our slate to the next level, especially in the US, where we can have an outsized impact when we create a big, buzzy show that members love and talk about all over the world. Now, I'm incredibly thrilled to have Peter Rice joining as our new Chief Content Officer. I want to give you some history. I've known Peter for about 15 years, and I've got to tell you, the outpouring of excitement about him coming to Netflix from across the industry and from the creative community has been nothing short of overwhelming. He's one of the really rare people in the industry who's led TV networks, movie studios, streaming services. His creative instinct and his business acumen are remarkable.
Ted Sarandos: He's really an at-scale quality and volume operator, and he does it across every imaginable form of entertainment: network, prestige cable, streaming, theatrical and TV films, and live sports. Most importantly, Rob, Peter Rice understands talent relations, and in a competitive market, creative talent have choices of where they want to work, and we want Netflix to always be the place that they love to do the best work of their life. Peter is the exact right person to lead those efforts in the US and around the world. Now, that's a key aspect of what I believe Peter can improve on looking forward.
Spencer Wang: Thanks. Thanks, Ted. We have a follow-up question that's on the same topic. This comes from Matt Condron of Citizens Bank. With Peter Rice stepping in as Chief Content Officer, what do you see as the biggest opportunities to evolve Netflix's content strategy under his leadership? Should we anticipate any meaningful changes in the types of content you prioritize, how you allocate content spending, or your overall approach to driving engagement? Is this more about improving execution within the existing strategy?
Ted Sarandos: Yeah. Thanks, Matthew. Look, our business and our business flywheel are working. There is no need for a fundamental shift in the strategy. We do need better execution in the US. Our content around the world is largely working, as you heard a couple examples there from Greg. We see titles across LATAM, EMEA, APAC, driving engagement, subscriber growth, revenue, and profit.
Ted Sarandos: The US is also working. It is just not growing as fast as it could or as fast as we would like. So we had some really solid doubles and triples this year, but the other territories count on some of those titles being home runs so that they will travel around the world. So we are focusing on that execution. When we talk about success in APAC, India is a great example, but that success is also happening in Korea and Japan.
Ted Sarandos: When you look to EMEA, we look to the Nordics, which is a very mature market for us, and that content slate is killing it there. It is proof that when we have the right focus, make the right choices, and deliver creatively, we can drive outsized impact on the business around the world. Peter brings expertise in both art and commerce, television and film. It is kind of that exact balance skill set that will help guide us to our next chapter. There is a ton to be excited about in our Q4 slate and a ton to be excited about in 2027. I believe that Peter will actually be able to have an impact on those projects that are in the works, even in the short term. So we are very excited to have him join.
Spencer Wang: Thanks, Ted. The next question comes from Dan Kurnos of StoneX. The question is, I wanted to touch on your recent headcount reductions, which is the largest since 2022. I recognize that you may not want to get into specifics, but how should we think about the thinking behind it?
Greg Peters: I can provide some color here. Go back to we have got a big and ambitious mission. We aspire to entertain literally the whole world. Fulfilling on that big mission requires us to be incredibly disciplined about where we focus, where we invest, how our people work, where our resources go.
Greg Peters: When you have driven considerable top-line growth as we have over the last several years, and you are in a highly dynamic market that is constantly changing, I do not think it is unusual then to find that there are some areas that we built quickly and we ended up over-invested in, or there are opportunities to adjust how we are operating to best drive the business through the next stage of growth. We prefer to make these adjustments organically and iteratively. That is the best way to do it.
Greg Peters: We think it's our mission basically to constantly be trying to tune and adjust. Sometimes the team needs a forcing function. The company needs a mandate that requires the whole organization to ask hard questions about where can we be more efficient? Where can we make tough decisions about where we can trim or redirect how we're investing? We do not take these decisions lightly, but we also believe we have a responsibility to make hard trade-offs in service of our members, our partners, our employees, our investors, and ultimately, our long-term growth. That was the simple thinking behind it and what motivated these recent changes.
Spencer Wang: Thanks, Greg. Building off of that, our next question comes from Doug Anmuth of JPMorgan. Can Netflix increase revenue growth at a double-digit pace in 2027? What are the key levers to get there, and is it sustainable?
Spence Neumann: Spencer, I'll take this one. Got to contribute a little bit to this call. Doug, I appreciate the question. We're delivering strong growth in 2026 to start with, and that's because all three revenue levers that we have, they're working and they're contributing. That's member growth, pricing, and ads. We expect to deliver strong revenue growth into 2027 as well with those same three levers. We know there's questions about view-hour growth. We've spoken about that. Greg and Ted talked about it just now. To be clear, we want to grow view hours faster. We're not satisfied. We're working on it. But again, as both Greg and Ted articulated, that would be an accelerant to what is already underlying healthy revenue growth. We saw that in India. We just talked about that strong slate.
Spence Neumann: Big bump in view-hour growth, nearly 20% revenue growth, and that's just one of those multiple success stories across regions that Ted also mentioned. But even with modest view-hour growth, the modest view-hour growth that we're delivering, we're delivering that increasing value to our members across quality, quantity, and variety of viewing with a steady drumbeat of big hits in most regions.
Spence Neumann: That's really the great thing about our model. It's that stability of our growth engine. We're not overly dependent on any one title, nor outsized performance by any one region to deliver healthy growth. So it's premature to issue full year 2027 guidance. We'll do that on our next call or our Q4 call. But our financial objectives are unchanged. We look to sustain double-digit revenue growth, we look to expand margins, and we look to increase free cash flow.
Spencer Wang: Thanks, Spence. The next question probably falls in your court as well. This one comes from Michael Morris of Guggenheim. The Q4 guidance includes about 120 basis points of cost tied to the headcount reductions. What annual run rate savings do you expect, and how much of that should we assume is reinvested versus supporting operating margin expansion in 2027?
Spence Neumann: Well, made to the point again, in terms of specific guidance, we are not going to specifically quantify the expense impact in 2027. But as we did note in our letter, that hard work that Greg walked through, that prioritization ensures that we can continue to invest aggressively into the highest impact areas to improve our service, drive innovation, drive growth. So we are really focused on finishing this year strong. We will provide 2027 guidance in January, including that margin guidance. But there is no change to our philosophy of obviously investing in our business to drive that growth and innovation and also steadily growing margin each year.
Spencer Wang: Thanks, Spence. We have two questions that are somewhat related, so I will bunch them together. The first version comes from Vikram Kesavabhotla of Baird. How has the integration with TF1 in France performed in its first few months? How has this experience impacted your perspective on distributing other services through Netflix, and what are the guidelines you are using to evaluate these types of partnerships going forward? The related question comes from Matthew Condon of Citizens. As you think about the evolution of the Netflix offering, what is your appetite for third-party content partnerships or add-on services that could be integrated into the Netflix experience? Do you see an opportunity to broaden the value of the platform through aggregation without necessarily owning or directly licensing all that content?
Greg Peters: Yeah, maybe to start with the answer to this one, just stepping back with a little context because I know these seem like new and novel techniques for us or approaches, but they actually serve a goal that has been with us for as long going way back to when we started the streaming service. That has been consistently expand the entertainment offering, provide more value to members. Our members consistently tell us that they want more from us. We see that in the preferences of how they use the service.
Greg Peters: So delivering on that desire over many, many years has been a goal, and I would say it has been the primary driver of our industry-leading subscriber reach and retention. So we are totally focused on that. We are always seeking new ways to expand our offering, new ways to provide more professionally produced film, TV, live events, more core entertainment value.
Greg Peters: And that means we do things like licensing. It also means we look for new creative partnerships like we did with TF1. Maybe one second on why partners are interested in working with us. We have broad distribution reach. We have a top-of-class product experience, which is a good home for all the work that they do and the content that they create. We have industry-leading monetization, and all of that makes us a great partner for studios, for networks, for creative talent. We can find new audiences, we can drive incremental revenue for them.
Greg Peters: That is why they want to partner with us. So specifically to your question on TF1, we are very pleased with the early performance that we have seen in that integration. We have been able to enhance an already very compelling service for our French members with even more local, popular French programming.
Greg Peters: We have seamlessly integrated the TF1 product experience in a way where it supports their brand, but it also keeps things distinct. We think this approach is advantageous for both them, supports their value proposition, and us. It is good for the customer too, because it signals what they are getting. We are growing the TF1 viewing on our service every month. So we are constantly improving that product experience. We see a whole runway and line of improvement that we know we will be able to fulfill from our previous history about being able to improve these things. Additionally, the early analysis and testing that we have done indicates that the TF1 engagement is incremental to our platform. So essentially, all things are working about that partnership.
Greg Peters: As for what to expect going forward, we certainly believe we can replicate similar positive results with other partners where this approach meets the needs of the partner as well. Those are opportunities that we are going to sequence. We will prioritize with all the other growth opportunities we have. We have a lot going on that we are going after. Then for the second question, add-on services, by which I believe that Matthew was asking about, which I think are other subscription or hybrid ads subscription services that the customer could choose to add to their offering. Those would be yet another way to expand our entertainment offering. We think that the same core benefits to the partner, incremental reach, incremental monetization, would apply in that model as well.
Greg Peters: We also think that there is much about the product experience that we have built that would work for that kind of service integration as well. So, there is nothing to announce today, but you should expect that we are going to continue to find new ways to bring more core entertainment value to our members.
Spencer Wang: Thanks, Greg. I will follow up next with a couple questions on content from Sean Diffley of Morgan Stanley. Please discuss how you are approaching theatrical going forward. I believe you have released 30 movies in the box office. Excited for Cliff Booth with IMAX and Narnia next year. Do you see the potential to build more buzz by going to theaters first, or is it very much a project-by-project decision? What is the right amount of time with respect to the theatrical window?
Ted Sarandos: That is a great question. Great set of questions, I should say. But reminder, we are a streaming-first business. That is our core. But we consider every time we have a new film, the film itself, the audience for the film, and the filmmaker when we are trying to come up with the release plan. Yes, we are going to release about 30 films theatrically this year, pretty much what we did last year.
Ted Sarandos: Each one of these have their own kind of bespoke re-release pattern. We start off by looking at the projects we have, asking ourselves, how do we best serve movie lovers, many of whom are our members, who want to see that movie in a theater? How do we do it without actually harming the view value to Netflix? Part of that is looking at specialty theatrical releasing.
Ted Sarandos: We have done that for the better part of a decade. At the other end of the spectrum are the big family movies that get a ton of rewatching, as well as first-time streaming on Netflix. We look at these two categories of films and treat them totally differently. For specialty releases, we are doing a 47-day window platform theatrical release for "La Bola Negra" right now. It is this fantastic Spanish language film.
Ted Sarandos: Then we also upcoming have a theatrical release for "The Mosquito Bowl," a bit shorter. We are partnering with IMAX to release the David Fincher film, "The Further Mis-Adventures of Cliff Booth." Worth repeating over and over again because it is so exciting for us too. In that one, we have done a deal with IMAX to put them on the biggest screens for a couple of weeks, four weeks before the Netflix release.
Ted Sarandos: For those big family movies I talked about, we have already announced we have a 45-day window and a wide theatrical release for Greta Gerwig's new movie, "Narnia: The Magician's Nephew," and for our animated feature, "Charlie vs. the Chocolate Factory." Both films have big global IP and big global fandom. We are very excited about how that will play out next year. Our theatrical strategy has evolved. It has evolved to include a traditional 45-day window for a handful of films. The other one that has been important to folks is that we are also now reporting box office grosses for those releases when we do it. That is new, and it looks like we picked a good title to start with "La Bola Negra." We reported our first box office reporting this week for its opening weekend.
Ted Sarandos: It opened with more than $69,000 per screen average, which is the second highest per screen average ever for a non-English language film in the US, second only to Parasite, a film that went on to win the Oscar for Best Picture. We are really excited about where we sit. Now, of course, we have 1 week of public reporting of box office under our belt, and we are real happy about it. Let's check in again in about 6 months.
Spencer Wang: Thanks, Ted. Sean also has a follow-up question. How would you describe the third-party licensing market? It seems the Disney deal for Ice Age and other content is a win-win, and this follows renewing The Walking Dead and getting Power. How should we think about the mix of self-produced versus licensed content on a go-forward basis?
Ted Sarandos: Well, remember, original exclusive titles have always been the anchor of the service. We saw that value more than a decade ago when we got into the original production business. It is why we continue to expand our original content investment across all different kinds of genres and all geographies. But we are very happy to license second-run titles that complement our original exclusive offering. It is our broad distribution, our best-in-class technology. This makes us ideal partners for studios and networks and creative talent. As a result of those things, we continue to have strong access around the world to content. I want to tell you about a couple. Those are great examples on The Walking Dead. That is an evergreen franchise with lots of episodes, and people love it. Power is a great show that was just under-distributed.
Ted Sarandos: On Netflix, it will introduce a whole new wave of viewers to the Power universe. So that is really exciting. But I really want to focus on 2 recent deals that we are very excited about. You mentioned the Disney deal we just launched in October. Now, that deal brought all the Ice Age films to Netflix, along with a bunch of other Disney series and some upcoming films. To your point, it is a win-win deal.
Ted Sarandos: The reason it is a win-win deal is that we benefit by expanding the entertainment offering for sure. Disney benefits from the revenue and from putting that content in front of our large global member base. Now, our members benefit, of course, because they get the addition of Disney content. We already are seeing some of those benefits from the Ice Age movies. All 5 of them hit our top 10.
Ted Sarandos: That is really exciting. This benefits Disney because as they gear up to release their next Ice Age movie in the theaters in February, it is called Ice Age: Boiling Point, more people will be recent fans of the Ice Age franchise. By the way, yes, Netflix just plugged a Disney movie on our earnings call. You are welcome, Josh. Another deal to talk about is actually in Brazil. Last week, we and Globo announced our largest content license agreement between the two of us ever. This is the most meaningful licensing deal we have ever done in Brazil. We are excited to work with Globo. They are the leading series and film producer and distributor in that country. They have also been a long holdout licensing content to us locally.
Ted Sarandos: We have, in the past, put a lot of Globo content on Netflix around Latin America and around the world, but just not in Brazil. So we are excited to be this new stage of our business. We believe it was going to benefit both of us and our members in Brazil. It includes local titles from across all different genres. The Oscar-winning movie, I'm Still Here, is in there. The International Emmy-winning telenovela, India: A Love Story. This deal spans a healthy mix of local, regional, and global rights. So we are very excited about that. Just a step forward with Globo and Brazil is a very exciting time in our existence together. The access to licensed content and which titles are available, this will always have some ebb and flow to it.
Ted Sarandos: But we expect to have opportunities throughout for the best series and the best films with all the suppliers. It is a little complicated because all of our suppliers are also our competitors. But our deals bring in much needed revenue. They certainly build awareness, and the benefit of that awareness transfers back to them because it helps grow the value of their IP. So these deals really are win-win. As we sit here today, we are not really dependent on any single supplier. But we are thrilled to be in business with just about every supplier in the world.
Spencer Wang: Thank you, Ted. I will now move us on to the topic of advertising. We have several questions on advertising, given the slight change in the outlook for this year. But we will go with the question from Vikram Kesavabhotla of Baird. He asks, "How is the advertising business progressing relative to your expectations this year? What are you observing with respect to the demand for your inventory and the breadth of advertisers on the platform? How are your recent technology investments influencing performance at this stage?
Greg Peters: Our ads business has delivered really impressive growth since we have launched, and we do see a long road of continued growth ahead of us. Since that launch point, we have been committed to building an innovative advertising platform, a differentiated offering for our clients, bringing the best of digital advertising to the best of TV advertising, all while respecting our member privacy and ensuring that we also retain our first-party data advantage. Our integration models, our partner integration models preserve that advantage while getting to the best targeting that we can. We set big growth targets for our ads business this year. We established an aggressive product roadmap that was consistent with that strategy. Just note, I think that the build-out that we have been on is the fastest build-out of a comparable ad tech stack in our industry.
Greg Peters: We are currently a bit behind our aggressive target for the year. We are still growing, just to set the context or put this in perspective, we are still growing our ads business over 80% this year. So excited about the rate that we are going on. I think noting that if you are sufficiently aggressive with your roadmap, you are going to occasionally be behind some milestones. Specifically in this case, we have seen some delays in the rollout and partner integrations for some of those new ads products.
Greg Peters: Getting to the integration model that we want sometimes takes a bit more work with our partners, but we strongly believe that a modest short-term hit for a better long-term strategic position is a good ultimate trade-off. We also do not see this impacting our long-term gains. In fact, pushing for this barely achievable deliverables model tends to maximize our overall velocity.
Greg Peters: It is a strategy that we have used to good effect historically many, many times. We see the benefits when we continue to roll out other products like new ad formats, which help with our growth. Stepping back just to take a look, our priorities for this ad business are unchanged. We want to advance our full funnel optimization solutions. We want to deliver new ad formats, new ad products. We want to increase the availability of our first-party measurement and reporting. To the question specifically, general demand remains strong, breadth of advertisers continues to expand, and ultimately advertisers want our new products and features, and that is a big mechanism of growth for us. We are very focused on getting those out to them as quickly as we possibly can.
Spencer Wang: Thanks, Greg. Another question on the advertising business. This is from Robert Fishman of MoffettNathanson. Ahead of launching ad tiers in 15 new countries next year, any update on the gap in average revenue per membership between the ad tier and the standard non-ad tier in the US and other existing international markets?
Greg Peters: Yeah, super excited to do our first expansion of ads countries since we launched. To answer the question, just start by noting that we manage the ads business for total revenue and growth. We look at ARM and fill rates as means to an end, not an end goal in and of itself. That said, there is still a gap between the combined ad tier ARM and then ARM for standard without ads.
Greg Peters: But that gap is narrowing, and that gap means under-realized revenue growth for us in the near term. It means it is an opportunity. We can improve our ads capabilities. We can close that gap over time. We have seen exactly that process happen over this last year. We have expanded demand sources. We continue to execute quickly on our own ad tech stack. We are adding more features, more ads products, more measurement.
Greg Peters: We are making it easier for folks to transact with us. All of those things drive demand. They drive competitiveness. Those yields increase fill rates. Those push ad ARM higher. And of course, while we are doing that, we are also signing up more ads plan members. So that drives inventory up. That creates more room for us to grow into. So this dual growth phenomena where we are growing inventory and growing into our monetization of that inventory, I expect that that is going to persist for some time, likely with gradual closing of that ARM gap as we have seen because we are going to drive improved ad tech product, go-to-market capabilities, all which drive better unit performance and monetization for the next several years.
Spencer Wang: Thanks, Greg. We will take one last question. This one is from Sean Diffley of Morgan Stanley. What have you learned about churn and engagement following the most recent round of price increases compared with prior pricing cycles? As penetration increases in more mature markets, where do you see the largest remaining sources of membership and revenue growth? Is it pricing, advertising, or international penetration?
Greg Peters: Well, on the first part of Sean's question, the price changes in 2026 have gone well. So across all market types where we have done price changes, the member response, you mentioned churn engagement. Engagement usually is not really impacted by these things. But that member response is consistent with prior price changes and our expectations.
Greg Peters: And again, we think that this is a strong indicator of the value that we are delivering to members as measured by the quality, the quantity, the variety of viewing that is healthy. And maybe just one also, an external reference point for that value. Take the US as an example. Netflix subscribers are paying the least per hour of viewing compared to other SVOD offerings in the country. In some cases, they would have to pay more than double per hour for a competitive service.
Greg Peters: We think that that's a really good marker of how much value we are delivering per price. Also note that we saw continued healthy retention in every region, churn globally in the US improved year over year, so better than forecast. Those things also reinforce the signs of that value and make us increasingly confident in that. To the second part of your question, we operate around the world, roughly 190 countries globally. These countries vary a lot. They vary by our penetration level there. They vary by market maturity, which means the presence of necessary or enabling market conditions. Think smart TVs, good connectivity, payments methods, all the things that enable customers, consumers to sign up for our service and have a good experience. These countries vary also by whether we currently have an ads product.
Greg Peters: We're seeking to expand the number of countries there, but that's an important part of the mix. As such, the drivers of business growth really have different weights across all those different countries and country types. You can take our most mature markets, just think the US, UK, Australia. We're more deeply penetrated, so our revenue growth drivers in those markets are going to skew towards ARM and advertising growth. In newer markets, think India, Indonesia, Colombia, we've got plenty of room to grow members.
Greg Peters: So we're going to continue to offer plans with accessible entry points. We expect member growth to be the most significant driver of overall revenue growth in those kinds of countries. We got a lot of markets that are in the middle, where we believe we can get really a balanced combination of both member and ARM growth.
Greg Peters: That includes ads countries like Mexico and Japan. We've got a lot more folks that we can sign up in those countries, and we can also deliver a lot more value into the offering in those countries, which drives ARM and ads monetization, as well as countries without ads like Philippines and Turkey where the same both member growth and ARM growth opportunities we believe exist there as well.
Spencer Wang: Thanks, Greg. I want to thank everybody for joining us for our Q3 earnings call, and we look forward to speaking with you next quarter in January. Thanks.
Greg Peters: Thanks.
