00:00Take a look at shares after hours down nearly 9%. A lot of disappointment, clearly, when it comes to
00:06the guide. Just to set the scene here, I'd love to hear your reaction.
00:11Well, nobody likes to guide high anymore because it doesn't make any economic sense for any CEO to
00:17be overly optimistic. So I think that they're playing the Apple playbook, which is keep
00:22expectations low. But I think these are great numbers. There's no parsing about it. I think
00:28what people wanted was even better. They didn't really up their guidance for the year or other
00:33things that I think people were hoping for. And so we see a little pullback in the stock.
00:37But Netflix is in a phenomenal position. They continue to just basically print money.
00:43They have a ton of free cash flow to reinvest into the business or to distribute to shareholders
00:49one way or another. So this is just a core holding for us. And I think they pulled a masterful
00:55gambit
00:56with the way they handled Paramount and Warner Brothers. So they're now the top player in the
01:02entertainment industry. And I think that'll be forever. Well, you know, you mentioned,
01:06you know, what happened with Warner's and we did see them boost their full year free cash flow
01:12outlook. A lot of that has to do to that breakup fee that they got $2.8 billion. I mean,
01:17as an investor
01:18in the stock, how would you like to see them sort of spend that breakup fee? Where would you like
01:23to
01:23see the money go to? Well, you know, after hours, they could just buy back stock. You know,
01:29I think that the stock is actually relatively cheap compared to Netflix's historic valuation. And I think
01:36the market price hasn't really fully recovered from all of the merger stuff. And so, you know,
01:42as an investor returning capital shareholders, that's what they should do. If they can't invest
01:47it in the business, they return it to shareholders. And Netflix is pretty aggressive about doing that.
01:51So so this is a great shareholder friendly company. And that's why we like it.
01:56Yeah. And they point out to that cash flow, big cash flow number also accounts for the fact that
02:01they pause that buyback program on the Warner Brothers side. I mean, they kind of flick at it
02:06very quickly here, basically just kind of reiterating what they had in that letter from February,
02:10where they basically said Warner Brothers would have been a great addition and it would have
02:13accelerated their strategy. But in their words, at the quote, the right price,
02:16when you look at sort of the idea of what Warner Brothers could have brought to the table
02:21and what Netflix has going forward here, should we be looking at Netflix maybe
02:26be having the potential to outpace Warner Brothers in terms of performance going forward? I don't just
02:31mean in terms of the stock, but I'm talking about in terms of viewership, subscribers, et cetera.
02:35Yeah. In fact, that's what's going to happen is and why we're so bullish is what they actually did
02:41was they stuck, you know, Paramount Skydance with a huge ball of debt that they'll never be able to
02:47pay off on top of the fact that everybody in Hollywood hates the deal because they know it's
02:51going to be layoffs and less production because they've got to pay ridiculous interest on all this
02:56debt. And so what they did was instead of having a bigger, stronger competitor, they forced that
03:02person to pay so much money that now it's a weaker company and has a lot of issues even just
03:08to
03:08complete this merger. And so they actually have less competition now. The way we look at Hollywood
03:14now is it's a two horse game between Disney, Hulu and Netflix. And that's basically it because
03:20everything is either cut up or falling apart or not sure where it's going to end up or how it's
03:26going to be. So Netflix is in the driver's seat because Disney still hasn't fully articulated their
03:31streaming strategy in a way that would be competitive to Netflix. So so what's happened
03:36now is they are the entertainment industry or what we call they're the cable company for the world now.
03:43And they could just grow forever. Yeah. And I answer that question to kind of set up to this idea.
03:49We're having a debate with some of our colleagues about the pending departure of Reed Hastings,
03:53who's not going to stand for reelection to the board. I mean, this would effectively end
03:57this at least his formal role in any sort of company management. Obviously, he gave up the CEO
04:02chair to Ted Sarandos and Greg Peters a while ago here. But when we talk about the innovation that he
04:08brought, particularly that big pivot to streaming, I mean, obviously, the mail order business was a
04:12huge gamble. But even that pivot to streaming, a lot of people had no idea what he was doing.
04:16And then when I look at Ted Sarandos and I look at how he has basically become a Hollywood mogul
04:21to a
04:21certain extent. Oh, yeah. Peter's a little bit there. What what did what is the leadership of
04:26this company going forward? Is this how is this business going to be run? I mean, what do you
04:31think their vision Sarandos and Peter is assuming they are going to be the shepherds for this for
04:36the next few years? What does that look like to you? Well, Ted Ted is the king of Hollywood in
04:42a way
04:42that we haven't seen since 100 years ago, you know, yeah, with just this kind of dominance and and
04:48also his relationship with so many in the creative community, despite changing the format in a way
04:55that a lot of people didn't like, you know, people know if they want to get a project done, they
05:00should
05:00probably call Ted first. You know, he really hasn't been that involved. And I think exiting the board
05:05probably has something to do with his political ambitions, which may or may not be true that and I'm hoping
05:10that he does actually spend his time trying to make this country a better place. And so exiting the board
05:15now
05:16makes a lot of sense for him and also to protect Netflix if there's any blowback for taking any
05:21political, you know, route. But he's talked about these kind of things in the past. So moving forward,
05:27though, Netflix is about Ted and Greg. It's it's really about Ted. And he's just in his prime just
05:34dominating right now. So so that's what it's all about. And what we see in the future is more of
05:39the
05:39same, which is how do we make sports a bigger part of what we're doing, but not paying ridiculous fees
05:46for sports
05:47rights. How do we continue to make the best content, whether it be shows? They're buying a lot of content,
05:52actually, from some of their competitors. Even if you go on right now, Anaconda is one of the top movies
05:58on Netflix
05:59right now. They didn't make it, you know. And so they're still buying content from people who realize they can
06:04monetize their
06:05content better on on a competitive streamer versus their own, which is like crazy to me. So I think
06:11they've got a lot of levers and they're doing well with video games right now. This is something a few
06:16people are starting to notice, but they really have now starting to attract younger people to their gaming
06:22platform. And that is a huge opportunity if Netflix can monetize their IP and gaming. So we like the
06:29direction of the business and we're happy that they're focused on what they're doing and not trying
06:32to eat up a big merger that would ultimately kill them. Right. Absolutely. And I do want to
06:37talk a little bit about, you know, you describe this basically as a two horse race. It's Disney,
06:42Hulu, and then it's Netflix. You called Ted Sarandos the king of Hollywood, which is
06:47quite a crown to carry. And I just wonder, I mean, what are the risks here? Because, you know,
06:52the way that you're phrasing it, it sounds like this is Netflix's game to lose. So what would a misstep
06:56look
06:57like? Well, the risk to Netflix, I mean, the internet goes out. I just don't know, like,
07:06what would hurt them now when this was the risk that they actually won the merger? See, if they
07:14would have bought Warner Brothers, Netflix would have been at great risk absorbing this dog. You know,
07:20Warner Brothers has killed every company that it's who has bought it. And it has been five now,
07:25you know. And so it's going to kill Paramount Skydance, just like it killed the other four
07:29or whatever. So I was really worried about that. And what we were betting on that they were just
07:34trying to drive up the price and get out. And that's what ended up happening. And that's why
07:38we're more bullish than ever, because they're going to really be stuck with this. So it really is
07:44Netflix's game to lose right now. But when you think about losing in a generation that basically
07:49watches YouTube and Netflix, there is no losing for them. What they need to focus on is not
07:57getting lazy, continuing to make good content, have high standards of what the expectation for that
08:03content is, and not getting lazy and just throwing money at all these projects, because they're the
08:07top. And so as long as they continue to make high quality content, people will come. Just like
08:12there's some great Disney movies coming out this year. They've got three great movies on tap.
08:18And if you put out the stuff, people will watch it. And so as long as Netflix keeps making good
08:22content, they'll continue to print money forever, I think. So kids today, they watch YouTube and
08:29Netflix, and that's pretty much it. Yeah, it's pretty wild. And in your view,
08:33Netflix just has to keep grinding here. But I do want to talk about the point you made that
08:37they buy a lot of content. It's not just Netflix content that's on Netflix. That's right.
08:42And they're also a buyer of Warner Brothers Discovery content as well. Yes, it's all over their
08:47streamer right now is Warner Brothers content. Well, I'm wondering, I mean, then if you do
08:52see a situation hypothetically where, you know, Paramount Warner Brothers Discovery, you know,
08:58that is sort of an albatross. And that's a company that's weighed down from here and not firing on all
09:04cylinders. I mean, I have to imagine at a certain extent, that would be bad news from Netflix if there
09:09were less people less firms producing quality content. Yes, but you know, I live here in LA. And
09:18there are so many people working on quality content that, you know, Netflix can find it
09:26on every corner here. You know what I mean? So it's really, I think, having less competition
09:34in content is actually bad for Hollywood as a whole, because I want to see all the studios survive and
09:41grow and prosper because it's good to have lots of competition and great content, you get better
09:47content with more competition. So there's something to that. But I don't look at it that way. I think
09:52that business is sort of like a contact sport and, and you got to play for your monopoly. And that's
09:58the
09:59way you win is by having a monopoly. And, and the biggest, the mag seven, the biggest, most successful
10:04companies in America are all monopolies or duopolies. And Netflix is now a monopoly. And that's where you
10:09want to be. And so any way you look at it, if I'm a producer, and I'm working on a
10:14project, I'm calling
10:15Netflix no matter what. And that's just the way it is.
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