00:00Geetha, you had a no doubt coming into this report, and I'm just going to quote it directly.
00:04You said there was going to be a lot of focus on plateauing engagement,
00:07content creation, AI concerns, muted margin guidance, and an M&A overhang. I know we only
00:12learned so much from the actual report that they put out, but what did we learn? And are you feeling
00:17any better about Netflix now than where you were a few minutes ago? Not really, Romaine. So, you
00:23know, we were kind of looking for some kind of, you know, guidance raise, either the revenue numbers
00:28or the operating margin. They really didn't do either of that. And then, of course, the all
00:32important number was the third quarter guidance, which, as you pointed out, came in way below
00:37consensus. So, 11.7 percent is what they're guiding to. Consensus was expecting just a touch
00:42above 13 percent. So, again, not a lot to get excited about and really kind of feeds into that
00:48whole bearish argument about all of the things that you highlighted, you know, especially plateauing
00:53engagement. Well, let's talk about plateauing engagement because we did hear from the company
00:57that the amount of time that people spent on Netflix grew 2 percent in the first half of 2026.
01:04The company highlighting that they had competition from the World Cup, the Winter Olympics, among
01:09other things, that 2 percent figure. How do you feel about that?
01:16Yeah. So, I mean, we've kind of I mean, this is part, you know, partly because of the law of
01:20large numbers
01:20and, you know, to kind of to be expected, I think. But, you know, we've been used to seeing in
01:26the past,
01:27Katie, engagement growth growing in the mid-teens. So, when you kind of see this really dramatic
01:33slowdown to the low single digits, obviously it does spook investors. Then again, you kind of, again,
01:40look at, you know, those World Cup numbers and this is exactly what I think investors were fearing.
01:44Like that is definitely going to have a demonstrable impact on the 3Q guidance. And voila, you know, we did
01:50see the 3Q
01:51guidance come in a lot lower. So again, you know, and then there's, of course, that Nielsen report,
01:56which points to Netflix engagement or a share of TV viewing time in April, which was the lowest in
02:03about 10 to 11 months and far lower than, you know, the 9 percent that they saw at the end
02:07of 2025.
02:08We were we were at about 7.8 percent. Meanwhile, you see YouTube consistently growing. So so this is where
02:14really a lot of the fear is is kind of coming in. And today's report really does nothing to
02:20assuage that. Well, that's what I'm curious about, too, because we talk about their competition with
02:26YouTube and they articulated that on the on their conference interview several times. But it's a
02:32totally different format, at least generally the types of videos that you get on YouTube are a lot
02:36different than the type of content that you're going to get on Netflix. So it's not necessarily a
02:40one to one. And do you have any sense here as whether Sarandos and the other executives
02:45would try to push a little bit more into the type of content that you do see on YouTube?
02:51Or can they sort of turn things around with, I guess, the more traditional big movies, big,
02:57you know, series shows that they are used to putting out? Yeah, I mean, absolutely. They are
03:02definitely going to put out more of the traditional content, as you pointed out, you know, the shows,
03:06the movies. And that is exactly what they were going after with that Warner purchase.
03:11But they're also realizing that they have to compete against short form content. And at the
03:15end of the day, everybody only has 24 hours. And it's about how much time are you going to be
03:20able
03:21to spend on the Netflix platform? And so they have to kind of come up with a better strategy for
03:26content
03:27diversification. And they're doing that. So in the beginning of August, we are going to see them
03:31debut some short form content. They're getting content from, you know, different publishing sources.
03:36BuzzFeed, Condé Nast, People, Variety. So that's really kind of them taking on YouTube in a very
03:43small way, but still kind of going after that content. But at the end of the day, you know,
03:48again, they are competing against all of these social media platforms. It's not just the big
03:53streamers like a Disney or an Amazon Prime Video. So they do have to articulate, you know,
04:00better strategic direction, I think. Yeah, absolutely. And you think about Meta too. I mean,
04:05announcing that it's also exploring new formats. Instagram for TV, that's a platform that Meta is
04:11looking at. And we know that Instagram has had success when it comes to reels. And so, I mean,
04:17Keetha, when you add it all together, you think about the competition that they're seeing from the
04:21short form side. Do you have the confidence that, okay, yes, they need to do something there, but
04:26do you have the confidence that they'll actually be able to gain some traction in that space? Because,
04:31I mean, it's pretty saturated at this point. And it seems like everyone is trying to engineer their
04:35own strategy. I think, you know, in the near term, we're obviously going to see, I think, a lot of
04:41noise, a lot of volatility. At the end of the day, you know, they speak a little bit about this
04:45in their
04:46investor letter about those AI related savings. And I think it comes down to how they can harness and
04:53harvest those savings into more differentiated content. So, yes, you know, allocating a little bit of that for
04:59short form content, but then really going after the content that is going to help them monetize
05:05better, which is advertising. So really kind of getting more into live and sports.
05:09They've dipped their toes a little bit, but it's just not been enough. Because if you look at their
05:12content budget, it's $20 billion this year. They spend about less than 4% of that on sports
05:19content. They really need to, I think, really beef that up pretty dramatically. I mean,
05:23when you look at Disney, it spends about 40% of its budget on sports rights. So,
05:28you know, they absolutely have to do something to move the needle here.
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