1/ Time for the #NetflixEarnings Report Threads.
2021 Q2 on 20July21.
This thread will be strategy, financials and subscribers. Content will get its own thread. (With way more charts.)
2021 Q2 on 20July21.
This thread will be strategy, financials and subscribers. Content will get its own thread. (With way more charts.)
2/ Without having looked--honestly, I just spent the last 100 minutes reading the 10K and updating my charts/graphics--I think lots of people are going to hop on Netflix for a down quarter.
But the mood felt like it was going to be a miss...
But the mood felt like it was going to be a miss...
3/ ...and beside two key numbers, this doesn't feel that bad.
But I should try to give a bigger thesis. Right? Like something flashy? Viral like?
But I should try to give a bigger thesis. Right? Like something flashy? Viral like?
4/ If I had to put something on it, I'd say that Netflix really is hitting middle age. And that means that it is maturing across many markets.
5/ I read two strategy nuggets (and we usually get more in the live call). First, this: 
6/ Emphasize the "mobile" in the Netflix of it all. For all the hype about people "watching Netflix on their phones", frankly, they don't.
Or more accurately, a vast majority of Netflix viewing (in mature markets like Europe/Canada/US) is NOT on phones.
Or more accurately, a vast majority of Netflix viewing (in mature markets like Europe/Canada/US) is NOT on phones.
7/ 50-70% is on living room TVs. Another big chunk is on desktops/laptops. (I know, still.) And a lot more is on tablets. (Still mobile, but a lot don't travel outside the home.)
Video games is Netflix's way to worm more time onto your phone.
Video games is Netflix's way to worm more time onto your phone.
8/ Also, the key is that it is included. Meaning the only way this helps margins is by being so valuable that it keeps subscriptions longer.
9/ In some ways, my worries about the Google Stadia or Amazon video games are less reasonable comps, since they didn't focus on mobile.
However the ability to produce great games is a skill, one that Disney couldn't learn.
However the ability to produce great games is a skill, one that Disney couldn't learn.
10/ I'd add, we still don't know how well Apple's Arcade is doing. And they own the App Store!
11/ I trotted out "NeverFlix" yesterday, and honestly that's my take to "Play Something".
The problem is folks want linear viewing. But instead of solving for that, Netflix has unwieldy work arounds. Just program linear feeds.
Seriously.
The problem is folks want linear viewing. But instead of solving for that, Netflix has unwieldy work arounds. Just program linear feeds.
Seriously.
11/ Subscribers
Here's the bad numbers: UCAN lost 430K subscribers.
Here's the bad numbers: UCAN lost 430K subscribers.
12/ One of my boldest calls and favorite articles was this one from back in September 2019.
There are TONS of analysts out there who easily thought Netflix would get to 95M US subscribers. You can see this in their models.
Me? I said 70 million.
entertainmentstrategyguy.com/2019/09/25/why…
There are TONS of analysts out there who easily thought Netflix would get to 95M US subscribers. You can see this in their models.
Me? I said 70 million.
entertainmentstrategyguy.com/2019/09/25/why…
14/ Now, midway through this period, Netflix flipped definitions on us. Changing from US subscribers to "UCAN" including Canada.
Which is why it *looks* like I'm way wrong. because UCAN is at 74 million...
Which is why it *looks* like I'm way wrong. because UCAN is at 74 million...
15/ ...but since Netflix provided historical data, we know that Canada is about 9.7% of the total.
Using that, Netflix in the US is 66.8 million in the US.
Right where they started the year.
Using that, Netflix in the US is 66.8 million in the US.
Right where they started the year.
16/ Frankly, it's hard for me to see these down quarters and not think that growth in mature markets is definitely slowing.
The top seems much closer to 70-80 million than 90 or even 120M in the US.
The top seems much closer to 70-80 million than 90 or even 120M in the US.
17/ EMEA felt shockingly small too.
18/ Financials.
I don't talk enough about Netlfix's gross margin growth. Frankly, that's been their goal and they've really delivered on it.
I do have some questions about how much content amortization goes into it, but assuming not that much, it's impressive.
I don't talk enough about Netlfix's gross margin growth. Frankly, that's been their goal and they've really delivered on it.
I do have some questions about how much content amortization goes into it, but assuming not that much, it's impressive.
19/ The caveat of all time? Free cash flow.
For this to be a "secret big win" for Netflix, they needed to have estimated above break even for the year. Notably, they're holding to the "at breakeven".
For this to be a "secret big win" for Netflix, they needed to have estimated above break even for the year. Notably, they're holding to the "at breakeven".
20/ Meaning that yes, last year's free cash flow, for now, remains a "Covid Caveat".
Content in a separate thread coming soon!
Content in a separate thread coming soon!
21/ I lied. One more.
This is crazy to me! Not investing in content, or UX or strategic growth. But share buybacks!!!
This is crazy to me! Not investing in content, or UX or strategic growth. But share buybacks!!!
https://twitter.com/HedgeyeComm/status/1417579893131448320
22/ Second PS. @MasaSonCap is reading a lot into this paragraph that is the boldest statement yet from Netflix that M&A is possible.
https://twitter.com/MasaSonCap/status/1417584236450746372
23/ From a company that has done like 3 deals all time, yeah this could be something.
(Financing is still tough.)
(Financing is still tough.)
• • •
Missing some Tweet in this thread? You can try to
force a refresh
