Netflix 4Q16 Earnings Call Notes

posted in: Notes | 0

Netflix’s (NFLX) CEO Reed Hastings on Q4 2016 Results

No plans to change pricing

“You should expect us to continue to invest in the consumer experience, making the content incredible and we don’t have any plans for any near-term changes. So, I would just continue to look at as a model us as expanding the membership base at these terrific rates.”

Planning to grow profits bit by bit from here

‘Yes, we don’t really believe in hockey-stick kind of businesses, like suddenly we’ll turn significantly profitable at 200 million members. We think it’s much smarter to grow into that bit-by-bit. So, expect us to modestly move up operating income and operating margins as we have from 4% to 7% and continue a slow and growing into that as we grow larger.”

Provide incredible value to the consumer

“I think that’s perfect David. Our North Star is providing an incredible value to consumer because upon that you can build a very large and very profitable franchise. But it starts with an amazing value for consumers which is a great service and amazing content behind that.”

You never want an ultimate vision because when you get there there’s more to do

“You never want to characterize something as an ultimate vision because when you get there, there’s always more that you want to do. And so we’re taking it year-by-year, we’re growing around the world, we’re thrilled with our global expansion, ex-China we’re really focused on all the different markets, Asia still doing work, in Europe we’re building up our content production, muscle, we’re able to produce shows now in many countries around the world. So, think of us just continuing to iterate on the basic cycle of more content, better product that combines as a great service with a great price and hopefully with that, we can attract many more people to join Netflix and then that fuels the whole cycle. So, we’re just going to lather, rinse, repeat again and again for the next couple years and expand that. We have a long way to go. When you think about how many movies and TV shows we don’t have.”

David Wells

You’re starting to see the benefit of multiple years of original content

Yes, Doug, I would just add to that that we’re — you’re now seeing the benefit of Netflix having sort of its third, fourth year of original slates. So, we’re now getting — as Ted mentioned Narcos season two comes out, but we’ve got new seasons as well. So, you’re getting the benefit of shows that might take hold in their second or third season, but some new shows as well, like Stranger Things did for us in the third quarter and continue to be popular through the fourth quarter as well.

Planning to spend 6 billion on content

“Sure Doug and we updated our long-term letter a little bit in this respect as well. So, think about 6 billion in content, a billion in tech and dev, somewhere around a billion in G&A to sort of round out the operating profit expense lines and that should get you there.”