Netflix 2Q16 Earnings Call Notes

posted in: Notes | 0

Netflix’s (NFLX) CEO Reed Hastings on Q2 2015 Results

Pretty confident that it’s not competition it’s churn

“we’re pretty confident it’s not competition and then again if it was saturation, what we would be seeing is hit to gross ads more than we would in terms of churn. So, other possible explanations were that we did something on our service, around that week, but we’ve looked at everything and the fact that its coincident with the group of trend data we included really indicates that people don’t like price increases, we know that.”

Netflix originals have licensing value

“And I would just add real quick, one of the most positive developments from our original programming has been today an original show from Netflix can be just as attractive as a show from any network in the United States, when licensing for territories around the world.”

Hastings kind of dodges a question about overall viewing

“Viewing overall is pretty seasonal. So you have to look at it on a year-over-year basis. But on a year-over-year basis, total viewing which is the fact that we sometimes releases up, forget you have the good numbers, but think of it as we were I think it was 13 million a quarter ago and it was maybe 10 million a year ago.”

We’ve had down quarters before

“And you have to remember Scott, that when we look at it we’ve been doing this a long time. We’ve had these short quarters before. Nine years ago in 2007 we actually went down in subscriber. So, this quarter we’re growing, but not as much as we want, but in 2007 we went down from 6.8 million to 6.7 million in this Q2, which is a generally seasonally tight quarter for us. And it didn’t feel great going down, but now here we are at over $80 million. So, you just got to take a long term perspective and Internet TV is going to be an enormous market”

Payment systems unequally developed around the world

” around the world eCommerce is unequally well developed. So in some markets there is very strong eCommerce payment platforms like the Netherlands. In other markets like Cambodia or Vietnam, it’s challenging today we only accept international credit cards.”

Ted Sarandos

Original content has proven to be a capital efficient investment

“Long term, I think that’s certainly a probable mix may be even a conservative one, but I think the growth of those original films, series, series for kids, documentaries, have proven to be great investments in terms of their efficiency relative to other high profile content that we license, which is encouraging us. I think it’s made our rest of world launch possible by having content that people want to see in markets where we haven’t yet operated.”

Appetite for licensing slows as originals volume increases

“Yeah definitely. I think as we — our appetite for licensing off net decreases with our appetite to increase our originals volume and as long as the customers are happy with the transition it encourages us to being aggressive in that space.”

Our relationship with content vendors remains strong

“Well the relationship remain very strong. We continue to do business with every studio, every network in every territory. They’re in the business of selling their content to the highest bidder. So I don’t — I’m not concerned that they would sell it for less to Hulu than they would to us because they have participation problems with the talent that they have to work through.”

Content cost is like player personnel costs

“Yes, you had mentioned also pricing and I’ve mentioned this before and I think it still holds true. You should think about content cost like player personnel cost. At any given season, a super star goes free agent and that particular player’s prices goes to the roof, but player personnel cost, they remain pretty flat and that’s the case here. Every one’s in a while there is a breakout very competitive title, and the price for that goes up, but the overall spend you have baked into our business model.”