Netflix 4Q15 Earnings Call Notes

Reed Hastings

In App payment is a nice addition

“customers have always been able to sign up on IOS but they had to do it in the mobile web Safari Browser and now they can do it in app. And it’s a positive, it’s not transformational but it’s really nice positive and a particular in new markets as we expand around the world where we’re less note and less trusted, the comfort for customers in terms of using the Apple payment mechanism versus entering their international credit card information is helpful.”

Content is the key to get the incremental people to join in the US

“I’ve been hearing a lot about it but nothing yet has compelled me to join. And so the big driver is getting people excited about whatever title we have and then making it easy for them to join. So whether it’s integrating on the Smart TV or integrated into the MVPD set-top or the Apple TV those are the things that make it easy to fulfill that desire.”

Local content helpful for building momentum in foreign countries

“the first year in the UK was a really tough market, so it’s usually successful for us now but it’s not true that it always well. We saw the same thing in Brazil for different reasons. So being light in the beginning doesn’t worry as a bit. And what we’ve seen in market after market like Spain, Italy, France, Germany, is this building momentum as we do more and more local content.”

Global piracy is a big problem

“Overall global piracy is a big problem and we’re working with all the content owners partially to be a great carats and also to have the other services like HBO and Amazon be great carats. And so we can work together on this antipiracy agenda.”

Ted Sarandos

Original programming growing as a percent of total spend

“We’ve been on the trajectory accelerate original programming. I mentioned a couple weeks ago, we’re going to launch 600 hours of new original programming this year alone. So it is a function of as our budget continues to grow, as our subscriber base grows, we are licensing programming and we are creating programming. As a percentage of our spent, original spending is growing, but as an absolute there are licensing dollar are continuing to grow as well.”

A lot of kids programming coming out too

“there is a large volume of specifically if kids programming coming out when normally people think if Netflix’s original programming, they were thinking about our sophisticated dramas and adult comedies more so than our kids programming, but quietly but I am asking a very big selection of original kids programming at Netflix.”

David Wells

Invested in a pretty robust payments team to understand payments around the world

“I’ll take that one. So I think we – you know we’ve got pretty robust payments teams that we’ve invested internally in building that out, getting smart in terms of the payment systems across the world, we’re pressing on gift cards and prepaid cards that might open up you know to the market to those people that don’t have access to a credit, debit card. But in rest of world, again it’s pretty early days and I think we’ll take the approach that we took in Latin America which is just to look at our next best opportunities to open up additional pockets of the market.”

Our international pricing is for the elite. Think of them as the iPhone owner

“Well we’re starting off definitely appealing to elite. I mean I mentioned that in Russia and Eastern Europe you know we’re still in English. In Vietnam and Cambodia, we’re in English. So we’re serving elites. You can think of them as a shorthand as iPhone owner, so that they pay $800 for an iPhone, they are comfortable with entertainment in English, and so for them you know $8-$10 is a sweet spot price. Certainly in future years you know as we do more and more and trying to expand it to the mass market, you know we can look at additional pricing option, but we feel good about our pricing and the value for these global originals right now.”

Increasingly spending licensing dollars on content that’s successful in other ways

“Increasingly we are spending most of our licensing dollars on content that’s successful in that way from small things to other way to big things like Oscar nominated movie “The Big Short” we’ll have the Pay TV window around the world, so people will be able to watch that movie on Netflix wherever they are.”

Netflix 3Q15 Earnings Call Notes

Reed Hastings – Founder and Chief Executive Officer

Internet TV is fundamentally better than linear TV

“it’s fundamentally that internet TV is better than linear TV. The consumers can watch when they want, on what type of device they want, and the content has just got better and better.”

Have a lot of good content coming in next year

“We have the Disney pay-one deal coming in the U.S. in the third quarter. Third, fourth quarter next year…And so we got just a tremendous content coming in. I am sure there is a lot of competitors, but there always have been”

Counter-cyclicality in Brazil

“Brazil what we’re seeing is this with a tough economy, a value-based product like Netflix, that’s very inexpensive is really appreciated. And so even though there’s tight economic times currently, that has not held back our growth.”

The media companies are cautious about dealing with SVOD broadly. Hulu is more of a cord cutter’s dream than NFLX

“the caution it’s SVOD wide. So when you think about new content on Hulu, I mean Hulu is even more of our cord-cutter’s dream than Netflix is, because it’s got the network shows day after. So you really want to read it. A lot of the concern is about SVOD generally, which is to be understood.”

We’re hoping for movies that premier on Netflix and in theaters at the same time over the next two years

“what we’re hoping for over this next two year as we launch, so really incredible movies that are highly original and premier on Netflix as well as in the movie theater simultaneously that we can do better putting the money into those kind of spectacles that we create more consumer desire and awareness through that vehicle than through this additional pay-one licensing.’

We’re very happy with AWS

“AWS has been a great supplier to us. They demonstrated again and again strong market leadership, strong attentiveness to our account. We could not be happier with AWS. And they’ve always kept that separate from Amazon retail. ”

Paying Apple a 30% fee for in app purchase to get better access to international markets

“higher motivation on our side to get access to that incredible iPhone customer base around the world.”

“You would see an increase in COGS to deal with the fees to Apple. That’s where it would show up. But it’s essentially the gross revenue the 7.99 or 9.99 that shows for us.”

What’s known as channels is going to become apps

“everybody has got to get into streaming. It’s been our main message for several years, that what is known as channels is going to become apps. And that all of these providers need to have great apps on a phone, on a tablet, on a TV, so it’s completely consistent with all of that.”

We are just focused on having great content

“And what we see is if we have great content, then consumers watch our service and enjoy it and tell their friends about it. And it kind of doesn’t matter that there is also a great sports game on or there is also a shows on Verizon or on Comcast…What has affected us is when we have great show like Narcos that just takes the world by storm. So that’s what we’re focused on, how do we have more incredible shows.”

Being aggressive to secure content

“We’re going to work really hard to expand our movies and TV shows so quickly in such a compelling way, that lots of the viewing for movies and TV shows is through Netflix, which is sort of what makes us want to focus so much on that area.”

Everyone is racing to make a great app

“the next couple years, when you have this new phase of the market, I think everyone is just racing to make a great app like Netflix, like HBO Now, those things.”

It’s possible that bundling may be appropriate at some time, but our instinct is to build our brand

“At some future time the bundling may be appropriate. Of course, we’ll keep an eye and watch the Hulu Showtime take rate to see, to confirm that there is very little traction of that. So we’ll be open minded. But our instinct is focused on making Netflix the passion brand in this space.”

David Wells – Chief Financial Officer

Disappointing sub growth due to credit card transition

“I would say that in terms of additions they were pretty strong through the quarter in terms of flat year-over-year. In net additions they were down year-over-year, and that we explained and attributed to our involuntary churn or payments-related churn. We think partially that was due to the transition to the chip cards, which is still ongoing. ”

There may be more to it, but the chipcard stuff isn’t helping

“Like I said, it’s likely multifactor. There may be other things going on here, but certainly the transition to the chip cards is not helping, and that has to be a factor in it. And we’re only partially the way through, so the U.S. issuers are going to continue that in Q4.”

We may be in the market raising capital next year to pay for content

“given our plans to expand content and given the fact that we’re on pace to use about $1 billion this year and no indications that that would shrink next year, we wanted to give some headway or some inside into the fact that we may be back in the market next year.”

Theodore Sarandos – Chief Content Officer

There is some caution in dealing with us

“The media business is absolutely influx. As Reed said, you’ve had this growing move away from linear and towards on-demand, both watching and spending. So the future of how the networks and studios deal with Netflix, and Hulu, and Amazon Prime Instant Video, is certainly going to determine their future. So there is a lot of caution. And you see how volatile the market can be just with a turn of a phrase last quarter”

Trying to move sellers into a global license framework

“it’s definitely been the drive of myself and my team all year, trying to move the sellers into a more of a global mode. Remember, they are mostly situated as regional sellers of content, sometimes the rights are fragmented in their ownership. But in the cases of the deals we did this past quarter, they were controlled by one entity and typically solved by multiple regions and we corralled the deals into the corporate offices, and were able to license the world on those titles.”

It turns out that tastes are rather global

“it turns out that tastes are rather global too. So it’s actually really well lined up.”

Japan is less local than we expected

“we went in expecting Japan to be much more local than it turned out to be. It’s more local than other territories, but not as local as conventional wisdom would have had.”

Andrew Sohn Notes SKIS, DAL, YUM, NFLX, DPZ

Andrew Sohn, a junior at Columbia University, has started to contribute to Avondale’s company notes database. Below are quotes from some of the calls that Andrew has read this week.

 

SKIS- Timothy Boyd, President and CEO

 

Macroeconomic headwinds were balanced out with increased demand in discretionary spending

We still felt we could reach last year’s numbers due to the pent-up demand and the excellent conditions that existed at our areas. Well that’s in fact what happened. We finished pretty much in level on both revenue and EBITDA year-over-year, and we view EBITDA as the primary benchmark for the successful execution of our strategic plan. Our properties once again demonstrated their ability to perform despite some significant weather challenges. This performance illustrates these properties consistency year-in and year-out.

 

Acquisitions to come

In terms of our acquisition status, we continue to look at several different opportunities. They all vary in size, scope and strategic value. As I have described in the past, this process involves working through these deals in the summer months and ultimately closing in the fall prior to the ski season. We are currently in this process right now and we are optimistic that we will be able to complete one or more of these acquisitions this fall.

 

Day and overnight drive ski industry

I think it’s important to reiterate how this season again demonstrated how the day and the overnight drive segments of the ski industry, which our portfolio represents continue to be very consistent performers. Going forward we also believe these type of properties will continue to represent attractive investment opportunities.

 

Strong demand for skiing

In terms of some of the trends we are seeing for next season, we believe the outlook is very positive. Obviously, we can’t predict the weather, however, we are still seeing strong demand for our product. Clearly, last season’s strong performance in spite of some of the weather setbacks demonstrates that continued strong demand. Growth in our early season pass sales is another significant indicator of our strong demand.

 

Great discretionary spending

This past season, as Steve mentioned, we saw an uptick in revenue and retail, ski school and food and beverage. We believe at least partially this was attributable to the lower gasoline prices. Since almost all of our customers drive to our facilities, we see this additional disposable income as a very favorable trend for us going forward.

 

 

DAL-Richard Anderson CEO

 

Expansion into Latin America

Our stake in GOL will further this effort as the largest domestic carrier in Brazil and it will provide significant long term upside in the region for Delta particularly as we move toward open skies with Brazil, when we couple our investment in GOL with the significant investment we have in AeroMexico we have the foundation for the strongest network in Latin America.

 

Ed Bastian President

 

Reducing winter capacity in the pacific

As we’ve laid out previously, restructuring our Pacific network is one of our biggest opportunities for margin improvement going forward and the early results of these efforts are positive. As part of these efforts, we’ll be reducing our winter capacity into Pacific by 6% to 8% including retiring six of the 747s and cancelling the loss making Seattle Canada service.

 

YUM-Greg Creed, CEO

 

China recovery is a rocky road

There is no doubt in my mind that we will make a full recovery over the long term and return to historic average unit volumes. We have the two strongest brands in China by a wide margin, but frankly the recovery is taking longer than we would like. We need to be more aggressive, more innovative and much more disruptive to step change the business… In any event, our top priority is to get our China business back on track and we are making steady progress as evidenced by our first and second quarter results. As we’ve discussed, we expect to have a strong second half of the year based on continued progress in China and fully expect YUM! to deliver at least 10% EPS growth in 2015.

 

 

Growth in existing spaces is a key strategic play

Additionally we continue to rollout our premium coffee. As of quarter end we offered our coffee in over 2,000 stores, providing an incremental sales lift of about a point of the stores offering coffee. The key to success in this business is grow existing or create new sales layers to build on. We’re excited that premium coffee is already driving sales and profits, while giving us another platform to grow from going forward.

 

 

Pat Grismer, CFO

 

KFC doing well in foreign marktes

An important element of this is robust franchise led international development as KFC opened 122 new international restaurants in the quarter and is on pace to set a new record this year opening 700 new international restaurants outside of China and India, including a recent new market opening in Myanmar, demonstrating the strength and broad appeal of this iconic global brand.

 

KFC thriving, Pizza Hut and Taco Bell more of a challenge

Outside of China we expect KFC to have another solid year and Pizza Hut to fall well short of its ongoing growth target despite the improving results we expect in the balance of the year. For Taco Bell, although we expect solid performance in the balance of the year, we expect much more moderate profit growth as we overlap stronger sales and margin performance from last year.

 

NFLX-Wilmot Reed Hastings, CEO

 

Undergoing cautious expansion

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.

 

Why Hulu struggled in Japanese markets

Well, Hulu had a couple of missteps. But now, today, four years later, under new ownership, they’re actually growing and seeing some real success in Japan. 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. And Japan is a unique market because it’s very brand sensitive. So Japan will probably be our slowest market to get to certain penetration threshold, but it may be one of our best markets in the long-term because when the Japanese society embraces a brand, it’s a very deep connection, very long-term.

 

Theodore A. Sarandos, CCO

 

Latin American expansion

Absolutely. We’ve recently expanded beyond our own original shows. The only way to watch those shows in Spanish in the U.S. is on Netflix with subtitles and dubs available that we’re making for Latin America. And now we’ve licensed a lot of programming from Latin America into the U.S. and are getting incredible viewing on shows that were successful for us in Mexico that are now drawing huge numbers in the U.S. And, again, that’s a very different demographic than we’ve targeted before and are just barely starting to touch them by getting hundreds of thousands of hours of days on single shows. So really, really impressed with the relatively quick take-up on these shows.

 

 

David B. Wells, CFO

 

Deeper expansion might require different content creation streategies

As we penetrate deeper into the markets, there might be a question in terms of do we have to add more of the local mix into that and that will have implications for our content spending in each market, but right now what we’re seeing is that our current mixture is working across the markets.

 

NFLX still very much in growth mode

The move towards the global right will be one that will take a couple of years, few years to really flow through. Similarly through our move towards exclusivity, and in terms of the P&L implications for international margins. It really is going to be more about the penetration growth and the rate of growth in that market to begin with.

 

 

DPZ-Mike Lawton, CFO

 

Growth in new store openings and existing stores was strong

Our domestic and international divisions posted very strong same-store sales growth. We opened a significant number of new stores and our EPS grew 20.9% over the prior year…The drivers of this growth included domestic same-store sales which rose by 12.8% in the quarter. The increase this quarter was comprised of franchisees same-store sales which were up 12.8% and company-owned stores which were up 12.5% and this was due primarily to strong order growth.

 

Growth in foreign markets is strong too

Our international division had another strong quarter as same-store sales grew 6.7% lapping a prior year quarter increase of 7.7%. Our international division also grew by 172 stores made up of 178 store openings and 6 closures.

 

Revenue drivers:

Turning to revenues, total revenues were up $38.2 million or 8.5% from the prior year. This increase was primarily a result of three factors. First, higher domestic same-store sales and store count growth which resulted in increased royalties from our franchise stores and higher revenues at our company-owned stores. Second, higher supply chain center food volumes as well as increased sales of equipment to stores in connection with our store reimaging program. These supply chain volume increases were partially offset by lower commodity prices. And third, higher international royalties again from increased same-store sales and store count growth, which were partially offset by the negative impact of foreign currency exchange rates.

 

Patrick Doyle, CEO

 

Digit sales huge part of growth

Markets outside of U.S. are doing about 40% of sales from digital channels and while there are markets showing high levels of experience and excellence on the digital front, the opportunity exist to introduce and grow technology within many others. We look forward to helping our master franchisees established a digital presence or reached full digital capability within their market.

Netflix 2Q15 Earnings Call Notes

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.”

JS Notes: BAC, CSX, ICE, JPM, NFLX, WFC

We’re excited to announce that Jeremy S., an investment analyst here in Southern California, has started to contribute to Avondale’s company notes database. Below are quotes from some of the calls that Jeremy has read this week.

 

Netflix CEO Reed Hastings believes the business is significantly under penetrated in international markets

“For most global Internet firms, the U.S. is 20%-35% of usage and revenue; we’re not anywhere close to that yet but we’re continuing to invest in international.” 

Netflix Chief Content Officer Ted Sarandos says the company is seeing the highest returns of its capital in its own original content 

“What we’re seeing is that dollars invested in our original programming are more efficient in that for every dollar spent, we get more bang for the buck in terms of hours viewed. and hours viewed leads to higher retention, more word of mouth, and more brand halo.”

 

 

Bank of America CEO Brian Moynihan says the bank has been laying off employees in various departments to drive efficiencies but the bank has also been adding headcount in sales and relationship-focused bankers

“We continued to reinvest in sales capacity. So just in our consumer business, headcount is down year-over-year but we have a thousand more sales people roughly out there selling. And so the idea is to continue to drive sales people into the businesses.”

 

 

Intercontinental Exchange CEO Jeff Sprecher on how they’ve grown different verticals of the business over the years

“Well, we have our historical data business that we grew organically, which was all commodities data set. And when we acquired the New York Stock Exchange, we acquired along with it obviously the data from trading U.S. equities and equity options. And then we acquired the Liffe Exchange, which gave us really an interest rate data footprint. We’ve built a new company called ICE Benchmark Administration, which is the company that took over the LIBOR administration, the Gold Fix and the ISDAFIX.  So we’ve got this new footprint of what are really regulated benchmarks going forward, very global, very important regulated benchmarks.  But what you’ve seen is the evolution of my company from trading into clearing and now increasingly into data and indices.”

Intercontinental Exchange CEO Jeff Sprecher sees growth in the derivatives business coming from Asia 

“We’re betting that Singapore is that nexus for all of Asia, which would include China, Japan and these growth areas of Malaysia, Indonesia and, Vietnam.”

Intercontinental Exchange CEO Jeff Sprecher sees significant operating leverage inherent in the data intensive business model of the stock listings and benchmark listings business

“There is also a very big footprint in our business that’s no longer volumetric.  Things like over-the-counter clearing where daily volumes are not reported but are growing tremendously, and then we’ve ended up with a very large data and listings business. But basically recurring revenue business that is growing against a relatively fixed cost. So, similar model to when the business went from analog to digital on trading, which the allure of that was this fixed technology cost against growing volumes.”

Intercontinental Exchange CEO Jeff Sprecher on the recurring nature of the NYSE listings business model=

“The listings franchise on the New York Stock Exchanges is a business that has been growing. There’s been a lot of IPOs in the last year or so.  And that is a massively recurring business with at least 2,500 listed companies, lots of ETFs and other things that are providing annuity revenue against a very fixed cost base.  So, you take all that together and about 40% of our business is in a form that is much more recurring than it used to be in the past.”

 

 

Wells Fargo CEO John Stumpf said that physical banking branches will remain a key part of how they intend on serving customers even though consumers are adopting mobile banking on a massive scale

“We’re in the information business as much as on the retail we’re in the financial services business, so this is really about connecting all the channels, not about trying to drive customers into what’s cheaper for us. That’s not how we think about that. We think about what’s best for the customers, and branches still remain an enormously important part in that.”

Wells Fargo CEO on John Stump discussed the firm’s recent bolstering of its investment banking unit

“The way we think about business here is around relationships, relationships with team members. My 11 direct reports have an average of 28 years with the company. We think of relationships with our customers, our communities, our shareholders. Buffett’s been an owner of ours for 25 years. We love long-term things, so as it gets to investment banking activities, we think of that as another solution, another product, another service.  Most of the revenue that comes from that business is from existing customers who have been doing business for a long, long time.  I only care that we do the right thing for customers.”

 

 

JP Morgan CFO Marianne Lake said a number of macroeconomic events occurred which helped JP Morgan’s transactional revenue

“A number of macro events occurred in the quarter including central bank actions, the Swiss Bank decoupling, stronger dollar and oil price volatility which supported market performance broadly and currencies, emerging markets, rates, commodities and equity.”

JP Morgan CFO Marianne Lake said loan performance in the bank’s energy exposure weakened during the quarter as a result of lower oil prices

“This quarter’s reserve build was at downgrade in the E&P portfolio and if the current price environment continues, it’s reasonable to expect some further reserve builds during 2015 but relatively modest.”

 

 

CSX CEO Michael Ward sees a robust pricing environment for transportation companies who are moving large physical goods

“We still see capacity as been very tight.  If you notice our minerals business was I think around 11% or so based on a lot of highway infrastructure, projects going on particularly in the region and country that we serve, so we’re seeing truck capacity staying relatively tight. Coast wise barges have been very strong and strong demand, so we still see capacity fairly tight and we still see a strong need for transportation, pricing does seem to be very robust if you look at the spot truck load market it is remaining fairly strong. So we see that it’s still a very strong, robust pricing environment.”

Netflix 1Q15 Earnings Call Notes

Focused on content

“We have continued the focus on the same things over the last couple of years, improving the content, improving the streaming, improving the user interface. And we have seen the rewards of that in continued growth.”

Internet TV is growing

“And so all of that compounded to really push us forward and certainly what you are seeing is all of Internet TV growing. ”

We think we can get to 60-90m subs in the US. Most internet companies have 65-80% of usage coming from international

“I mean at a $25 billion to $30 billion market cap, there is a lot of growth pressed into it, I think you would agree. And so yes, 60 to 90 million feels great for us. We are continuing to grow. That’s the 60 to 90 million in the U.S. market. Of course, the really big upside beyond that is in international. For most global Internet firms, the U.S. is 20% to 35% of usage and revenue. We are not anywhere close to that yet, but we are continuing to invest in international.”

HB at $15 is great value

“I think HBO at $15 is a great value. I mean I have traditionally paid more than $15 for my cable company for it. So I think they are doing great work with their premium content. It does create obvious underline of just how great the value is of Netflix with prices ranging from $7.99 to $11.99.”

Margin target is 40% in 2020

“That’s also why we put in the letter that our target remains the same, 40% in 2020.”

More pricing options for 4k TVs

“We have got a great mix of pricing plans and options and for those who get a new 4K television and they are excited about 4K content, we are the leading service in the world for 4K and that plan is a little more expensive at $11.99. So as more 4K TV is sold, we will get people to upgrade to the $11.99 plan.”

We’ve been shutting down VPN access where we can

“with VPN usage, that’s where someone, to bring up Poland again where we are not yet operating, has the money to pay for content they want to access content, they want to pay for that content. Netflix is not yet in Poland. And so they will use the VPN to come to the U.S. virtually over the Internet, pay for content. So it’s certainly less bad than piracy, it’s not something we encourage.’

VPN is whack a mole, but we’re winning with access. The best way to combat it is global licensing

“It’s one of the many things that we have discussions with the studios about an ongoing basis and we do continue to work with them and work with these VPN. But to be honest with you, it’s kind of a whack-a-mole to get ahead of the different usage of VPNs become kind a lifestyle thing for a very small segment of the population. The real great news is, in the piracy capitals of the world Netflix is winning. We are pushing down piracy in those markets by getting the access. So the best way to really make the VPN issue a completely nonissue is through global licensing that we are continuing to pursue with our partners.”

9.8 B in streaming content commitments

“we have grown from $9.5 billion in streaming content commitments in the table to $9.8 billion. That’s about a 31% year-over-year growth rate and our streaming revenue has grown at 31% year-over-year as well.”

Hollywood is still willing to sell Netflix its content

“I am not seeing any actual evidence at the table in terms of that there is any reluctance to continue to sell. They are definitely trying to juggle the terms of their core business versus the license business, but that’s true not just of us, but they are also seating these opportunities for themselves where you see the networks launching their own on-demand services. So I think they really are trying to find the right balance.”

Everyone is scrambling to figure out how they do apps etc

“Clearly over the next 20 years Internet TV is going to replace linear TV. And so I think everyone is scrambling to figure out how do they do great apps, how do they things like noggin are fantastic and that will just keep getting built up and so it’s a transition into figuring out the Internet.”

50% of our business should be our owned content

“if we are successful in building out the content and if we want to get to ever-increasing mix of original content, meaning that up to 50% of our business is really our own owned content, then we are going to continue to invest in that content and that will require more and more cash”

We’re glad that people are looking at internet like a utility

“we are very encouraged by the general consumer perspective and political perspective that broadband access is so important that it is a utility. It is like power distribution where it’s a natural monopoly in the last mile. ”

Sports going on line frees people up to be more a la carte

“the great thing, Michael, about the emergence of sports online, is it frees people up to be more à la carte which gives us more money to be able to spend on Netflix. ”

Smart TV is one of our fastest growing categories

“Now we have seen smart TVs just continuing to grow and grow in usage and sales. Virtually every new TV sold now is a smart TV, at least at the middle and high-end and it’s natural for people to use. Now, do they also watch on tablets? Yes and on phones. So really all those categories are experiencing absolute hours growth, but on a percentage basis, smart TV is one of our fastest-growing categories.’

If I knew what was going to happen with Forex…

“if I knew what was going to happen with foreign-exchange, I would probably quit and then run a hedge fund.”

We are just open minded, curious, we are a learning machine

“you are nice to say we pivoted perfectly, but I think you are forgetting about certain incidents four years ago. But we have succeeded in getting through them and the key thing is that the company is very agile. We are just a learning machine. When you think about how Ted has grown our original content muscle is just so impressive. How are continuing to expand to international, it’s just like were learning country by country. We don’t get everything right upfront, but we fix that. So I think the fundamental is, we are just open-minded, curious, we are learning and then frankly it’s that Internet TV is growing around the world at incredible rates. And so were really propelled by that big macro trend.”

Netflix 4Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Internet video in every home

“if you step back and you say is Internet video going to be in every home in America in 10 years, that’s a pretty clear yes. So, tons of potential there and we’re very excited about just continuing to improve our service.”

Pushing for global content rights

“we’ve been pushing on that dimension to be able to get the global rights where we don’t have to go country by country across 200 countries but instead can provide to produce our upfront money, guaranteed money and get great access.

Mexico has 65m broadband households

“It’s a market with about 65 million broadband households. So if you take that 5 million number that we talked about and 65 million in terms of addressable, we think we got a lot of room for growth in the market.

Original content has had global appeal

“this has been so encouraging how truly global these brands have been. So when we set out our original program for the beginning, obviously our markets were pretty limited and we were thinking about them mostly as U.S. shows and they would travel like other U.S. shows have. And we’ve been really enthused to see particular in our Western European launches shows like Orange is the New Black and House of Cards, even in later seasons performing tremendous for us because people hadn’t got around to seeing them yet and we could get the brand out there and push it out there.

Learned our lesson on giving full year guidance

“we’ve learned our lessons on giving full year guidance on numbers so we tend not to do tha

Could drive more revenue by pricing for Ultra HD

“if you look ahead two years, four years from now many of the TV’s sold at Best Buy will be Ultra HD and lots of our content will be Ultra HD and it’s a natural match…it’s seems fair and natural for them that just like you pay for difference between standard def and HD that there is a difference between HD and Ultra HD. So that’s the way that we got incremental revenue without making any changes ourselves by just letting the tide come to us.

Original content is very competitive

“On the original side it’s a very competitive market and we’re fortunately positioned ourselves as kind of a premier destination for the biggest and best projects. We don’t say yes to all of them and we see them show up at other places but we do think that we’re the first or second go-to for most of the projects that we’re looking for.

If HBO tries to match NFLX its disruptive to them

“ To the degree that they go really aggressive and match Netflix’s price for HBO, then it’s extremely disruptive to their current ecosystem since the prices are higher than that.

Sling TV is just a start

“It’s a great start. Charlie Ergen has been a great entrepreneur and I think he sees the future that its internet centric and it may not be the perfect offering today, but it’s got $20 a month very attractive pricing and he’s been an incredible entrepreneur in terms of starting with something small like early DISH and building it in to the internet and DVD, so it’s great for him and add some competition in that market, but I don’t think it materially changes the desire to have Netflix with our unique and exclusive shows.

30-40% of viewing on personal devices

“We’ve said personal devices PC, tablet phone that varies by market some sort of 30%-40% of viewing and TV based viewing being the large green share doing being the majority of it. No particular change in those metrics.

Consumers are careful about using mobile devices in non-wifi because of caps

“So we see a lot of tablet and smartphone usage but almost always on WiFi networks and then they’re careful about how they use the cellular networks because of the caps and the fear of [overages].

Internet TV is getting validated

“So the fundamental thesis is getting validated, that’s great. And for us it’s both on competition and its more consumers coming in the market, speeding up because Internet TV is becoming so mainstream.

The internet as a utility is great for NFLX

“what’s been great for Netflix is the general idea of the Internet as a utility open to all not for discriminatory use, as it really take whole…we appear to be on the edge of an acting Title II and generally codifying the idea that at least in the U.S. the Internet is a utility for broad social good and wide open access. And that over time if it happens will significantly insulate us from any accelerating tax for interconnections.

Disney content creates synergy

“we’re excited about the Pay 1 opportunity with Disney because those movies are not just movies. They’re amazing family content that get flexed over and over again forms great loyalty with our subscribers and it’s a real trust brand for parents as well.

Netflix 3Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

The whole society is moving to internet video

“everything that we’re seeing is completely consistent with the whole society, not only the U.S., but around the world is moving to Internet video and Internet television. And so, I think, it’s completely consistent with what we’re seeing. And we’re seeing – we saw Stars a week ago announced that they’re doing an Internet video services is HBO. Perhaps, there’ll be other providers over the coming weeks. And so, think of all the big networks are moving to Internet video, and it’s just becoming a very large opportunity.”

Don’t think that HBO’s over the top offering is a big change in the competitive landscape

” On the consumer side it’s one more channel, so already consumers subscribed to us and Hulu, and Amazon and they do pay-per-view and they do DVD and they do cable. So, there is so many great sources of entertainment and consumers subscribe to many of these.

So, there is not much of a change in the direct competitive landscape. We and HBO have completely different content. So, I don’t think it’ll be a significant impact at the consumer level. As we bid for content, that’s more significant”

We just didn’t grow as much as we thought

” we just didn’t grow as much as we thought, we were going to in terms of bringing folks in. So across a number of markets, we were lighter versus our forecast than we expected”

Binge watching is universal

” think of basic consumer behavior as they want control, they want internet video, because they get to watch under the screen. They get to watch anytime they want. They get to binge watch. Those are very universal value. And so, we’re gaining increasing confidence that Netflix is highly relevant around the world, and that’s why we’re just, looking forward to continue to expand next year.”

We have enough cash for the next few quarters

” I think that we have $1.7 billion in cash. I think we’re okay for the next few quarters. But we continually look at this. And if we continue to do expand both content and international as we expect to do, then you should continue to see some pressure on the cash on the free cash flow.”

On net neutrality: We don’t ask them to pay for content, they shouldn’t ask for us to pay for their network

“Well, the simple version is they collect revenue on the Internet from their customers and that pays for the network, and we don’t ask them to pay for our content. And we don’t think they should ask us to pay for their network. So, that’s the basis of the no-fee interconnect.”

Netflix 2Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Strong international growth

“we’ve seen really is just tremendous adoption of on-demand viewing consumers around the world whether it’s Argentina, Brazil, Finland, the UK it’s been really quite consistent”

An enormous moment in history

“we really see that this is an enormous moment in history as on-demand Internet services are coming to the floor around the world.”

Internet brownouts?

“in cable industry there has been constant conflict between the networks and the cable distributors leading to black outs and brown outs trying to figure out pricing. And we would hate to see ISPs brownout or blackout certain Internet sites in while they tried to extract payments. That just ruins the consumer experience this idea that when you sign up the Internet you can get everywhere.”

Little differences in each market

“in every market around the world there are new answers. Just to give you an example in Brazil there is a tremendous payment complexity plus the leadership of TV Global. In Canada, there is the CRTC; in the UK the BBC is quite unique in its role in society. So think of us as adapting to the local conditions in each case.”

Challenge is to understand all of the nuances and become a global company

“our challenge and excitement around company is becoming a great global company where we really understand the new each of these markets and do a great job for consumers around the world. ”

700-800m broadband households worldwide

“700 million to 800 million are today is broadband households.”

Moving to more original content

“big into our margin guidance is our content spend and we want to move a lot of it to originals most of because we have founded it’s given us new brand strength as those shows have been successful and they continue to prove to be successful and let them move down that further.”

So much content being produced

” content is still great and there is so much are being produced you can barely watch it all in our lifetime…So, we are going to continue pushing on that path and originals is going to be a important component of that all the time but we will also I think we would always be a very valuable ultimate buyer for networks because so much of that content is never been seen by the public.”

How they beat a competitor in the UK

“But what we did is we focused on television content, they focused on movies, we focused on incredible streaming performance that you never got buffering, working with all the integrators. And fundamentally it’s a focus thing, which is, it’s everything for us whereas this was a project for someone within a larger company and then now two and a half years later of course LOVEFiLM has folded up as a brand so we are tremendously excited about the opportunity to continue to move forward.”

We don’t necessarily have to beat all of our competitors, just focus on creating our own service that people want

“f you think historically in the U.S. like HBO and Showtime, they are not really competing against each other except for content they are competing to get part of someone’s entertainment budget and in the same way we are like that in the new markets. So, we don’t need to beat some new competitors, we just need to create an incredible service that all of that all of the citizens in each country that we serve want to be part of Netflix.”

Netflix 1Q14 Earnings Call Notes

A digest of some of the top insights that I’ve gathered from this week’s earnings calls.  Full notes can be found here.

One or Two dollar increase to new subs only

“if we want to continue to expand to do more great original content, more series, more movies, we have to eventually increase prices a little bit. We are not doing much. We are doing $1 or $2, depending on the country and all the existing subscribers keep their current price. They don’t get it increased.”

Tiering sounds like it’s interesting to them

“we have tiering today, and it is definitely something we are thinking about in terms of expanding the options that consumers have. Some of that being on the criteria that you referred to.”

Original content costs are high because it’s competitive to create top quality shows

“I think what’s happening is that we are committing to larger budget shows not that the same show is more expensive to make year-on-year. We are looking at kind of shows that we are competing with. We are still only competing with kind of the top end of cable for those shows. So when you think about it like a sports team where the bidding gets quite high on a couple of key pieces of talent, but the overall salaries, they are kind of in check.”

Original content spend going to get bigger and bigger

“that we sort of migrated away from the 10% number just because that number is going to grow. It is going to get bigger and bigger and bigger.”

We think we can have 3x more subs than HBO

“in the fullness of time we can be two to three times larger than domestic HBO, linear HBO which would be 60 to 90 million subscribers in the U.S. and that model anticipated that as we got to 40, we would get better, as we get to 50 we would get better. So I would say all of those improvements in the model that we think of our built-in to our 60 to 90 million member projection for the domestic market and so we stand by that.”

The more subs we get the better the product offering

“Every year that we add another five or six million members, makes us feel a little bit more confident of getting into that range which is great. And then, with that we are able to add more content and continue to make the service better.”

Member satisfaction drives growth

“I think most of the growth, Doug, is coming from member satisfaction. When members are really satisfied they tell their friends about the service and they retain better. So it is really driven from member side and when we have great shows coming and unique exclusive and things that make people so passionate about Netflix, then they are again more likely to tell their friends and more likely to stay. And so it’s a mix of both of those things. But fundamentally, it’s member satisfaction.”

Not trying to copy HBO per se

“HBO is an example of that great marketing. But we are not trying to copy them specifically. We are learning and doing best practices as they have been doing for a while.”

We didn’t think we should have to pay Comcast, but we did

“we did end up choosing to pay Comcast to improve the video quality that our members experience. We don’t think we should have to, but in the short-term we felt like we had no choice.”

We are against the Comcast TWC merger

“we are in opposition to the Comcast, Time Warner merger because we are really concerned about what happens when the combined entity, if the merger were to go through, would have with over 60% of U.S. homes passed and eventually over 50% of U.S. homes subscribing to cable Internet and that’s a worrisome factor”

I don’t really get this, but seems important

“in the original days of the Internet, it was the opposite, which is the ISP paid Level 3 for interconnect and it’s only the very large ISPs that now are able first to demand they are not paying and now to demand payment from the transits. So there’s been a real shift in the last five years, but Brian Roberts is incredibly thoughtful. I mean I would say, if there is anyone that you wanted to trust with controlling half of the U.S. internet, you might pick Brian Roberts. He is very thoughtful, very long-term about it and very reasonable. But I don’t know that we want anybody to control half of the U.S. internet and that’s the real basis of our objection to the merger.”

Netflix moving faster than the studios

“I think we could bring a lot of efficiencies as a global buyer. Just today the studios and networks aren’t setup to be global sellers yet.”

Netflix a top destination for premium shows

“I think the Netflix is a number one or number two spot destination for these shows almost across the board these days. We are very proud of that and happy with that”

You have to adjust

“If we are very fortunate, we will have programmed it completely correctly from day one. More likely we will figure out some stuff’s working, some stuff’s not. We will adjust the formula, but what we have become really convinced about is around the world, people want the convenience of Internet on-demand video and that that really is a very big and broad need.”