Netflix 2Q15 Earnings Call Notes

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Not rushing the ASP, but do want to keep it moving higher. Going to do it gradually and give incentives to do it

” Well, Rich, our entry level plan in the U.S. is actually $7.99 for our standard-def one-stream plan. So it is incredibly affordable, and that’s part of what’s propelling our growth. We also want to motivate people to be able to move up to the two-stream and the high-def and also the ultra-high def plan as you referred to.

Over the last year, we’ve raised ASP about 5%. We’d like to keep that moving. So we’re going to continue to have incentives for people to move up in the plans as suits their usage pattern, but we want to take it very slow. Things are going well. There’s no reason to be disruptive. We’re not planning anything in the U.S. this quarter. It’s really focused on going very steady, very slow; and over the next decade, I think, we’ll be able to have more and more content and add more value and then to be able to price that appropriately.”

There are plenty of ways to raise price

“I’m sure there are other ways to do it, and the way that we’ve chosen is working very well for us. So then we tend to focus on the core, getting more content, more streaming, better usability and the structure on the price tiering is unlikely to change”

Shows are becoming great brads on their own

“We’re launching new shows that have become great brands on their own, but also as these shows grow into their second and third and fourth seasons, they’re actually more attractive on their own. So we’re adding more breadth of content, more original series; and those series have become bigger and bigger brands that down the road will become subscriber events as they grow.”

Imitation is the best form of flattery, we’re glad to be leading

“imitation is the best form of flattery. And so our user interfaces get imitated quite frequently across the world; and we’re glad to be leading and innovating in that space.”

We’re launching content that appeals to everybody

“I think what you’ve seen, Rich, is that we are launching content to multiple demographics and in all genres (06:45). So the reason why you are seeing the kind of engagement that you are seeing is that we’re finding content that everyone can love’

We have to be like HBO before HBO is like Netflix

“When I said that we wanted to get to be HBO before they got to be like Netflix, I meant that we’d have to get very good at original programming before they get really great at the technology and the direct-to-consumer relationships that they’re only starting to invest in now.”

We’re just getting in early and learning internationally

“If I think about Brazil, we were pretty weak in the first year and now it’s a rocket ship (13:02). And so, we’re going to get in and really start the learning process, what’s getting watched, why; what’s generating buzz, why. And then in every nation we’re learning. And if you think about it, around the world everybody wants this on-demand Internet TV. It’s just a better experience than linear TV. So I’m really very confident that Internet TV is going to continue to grow.”

Hulu didn’t work in Japan because their pricing was too high

“But the initial missteps, where pricing was too high, it was ¥2,000 or about $20 at that time a month, had no local content. So it seems pretty substantial missteps. In contrast, our pricing will be more aggressive than theirs was. We’ll have a local content, we may have some local originals. ”

The number of people online who can pay for NFLX is huge, it’s up to us to execute

“when we look at the global Internet, if you look at people who are in the future going to be on the Internet, are interested in video entertainment, watch some TV and have enough money to pay for a service, that’s a very large potential market. How much of that we’ll get, how relevant we will be in Turkey, how relevant we’ll be in Indonesia? That’s very open-ended question, it depends on what kind of job we can do, how well we execute.”

I’m out of the stock commentary business

“Well, I think it probably shows why at least I should keep my day job and not try to be a stock picker, because when the stock was half this price I described it as euphoric. So it’s a mystery to me. And what we focus on is how to get incredible content, stream it beautifully, market it in every country, grow the member base; and I think I’m out of the stock commentary business.”

Key product initiatives are improving personalization, using big data

“the core is really continuing to improve the personalization, being able to more and more accurately present content on the screen, whether that’s a TV screen or a phone screen that a consumer is just very motivated to click on and watch. And we’ve seen tremendous benefit as we’ve done more and more of that big data work. ”

Everyone is maintaining their share on the internet, but there is just a massive shift to the internet

“Amazon is growing a very quickly in terms of total viewing hours, but so are we. And so what’s happening is everyone is maintaining their relative share, but the total amount of Internet viewing is growing at a very vigorous rate. So I think they are experiencing significant success on their investments, as is Hulu. I think we’ll see that with HBO Now, because there is massive move from linear programming on to the Internet.”