1
00:00:00,400 --> 00:00:04,800
Well, let's go ahead and Jump 
Right In Netflix is down 25%. 

2
00:00:04,800 --> 00:00:07,800
Plus after hours, they release 
their earnings, just a few 

3
00:00:07,800 --> 00:00:10,300
minutes ago, I took the look at 
the earnings. 

4
00:00:10,300 --> 00:00:13,900
I looked at them ahead of time, 
and I think this sell-off is 

5
00:00:13,900 --> 00:00:17,300
kind of deserved. 
This report was disastrous the 

6
00:00:17,300 --> 00:00:19,700
last time that they sold off. 
I didn't really think that. 

7
00:00:19,700 --> 00:00:22,100
In fact, I thought it was a 
little bit overblown, we can 

8
00:00:22,100 --> 00:00:25,500
look at Netflix has a unique 
stock for me because it holds 

9
00:00:25,500 --> 00:00:29,600
two consecutive records of the 
biggest sell off after biggest 

10
00:00:29,600 --> 00:00:31,700
sell off. 
After earnings, this company 

11
00:00:31,700 --> 00:00:33,700
just drops Like a Rock after 
earnings. 

12
00:00:34,000 --> 00:00:37,500
The first time was right here, 
it dropped 20% in one day and 

13
00:00:37,500 --> 00:00:40,700
then it trade down to 30% within
just a couple of days, then we 

14
00:00:40,700 --> 00:00:43,400
had Bill Ackman, buy into it, 
the stock traded up a little 

15
00:00:43,400 --> 00:00:46,500
bit, got some relief and then it
started to trade downwards. 

16
00:00:46,800 --> 00:00:50,100
Now they release this disastrous
earnings report that will jump 

17
00:00:50,100 --> 00:00:53,900
into and they're down another 
25% 2260. 

18
00:00:54,500 --> 00:00:58,400
So what we're looking at here, 
just to put this in perspective,

19
00:00:58,800 --> 00:01:02,900
is what happens when a A growth 
stock, a Growth Company stops. 

20
00:01:02,900 --> 00:01:06,500
Growing investors are pricing 
the company for growth. 

21
00:01:06,500 --> 00:01:08,800
That's what you're paying for 
your buying, the company now 

22
00:01:09,200 --> 00:01:12,600
assuming it's going to continue 
to grow at a certain rate or at 

23
00:01:12,600 --> 00:01:16,400
least within a certain you know,
probability distribution. 

24
00:01:16,400 --> 00:01:19,100
You think it's going to grow 
this way and then it goes, nope,

25
00:01:19,100 --> 00:01:20,900
we're done growing. 
We're not growing anymore. 

26
00:01:20,900 --> 00:01:23,500
In fact we're doing the opposite
of growing that is what's 

27
00:01:23,500 --> 00:01:27,100
happening with Netflix. 
The company is now turning from 

28
00:01:27,100 --> 00:01:30,800
a growth story into a non growth
story and it's Price low enough 

29
00:01:30,800 --> 00:01:33,500
to be a value story. 
So this stock really doesn't 

30
00:01:33,500 --> 00:01:36,700
know where it's in and I think 
that this sell-off actually 

31
00:01:36,700 --> 00:01:40,400
makes sense in this situation. 
This is one bad earnings report 

32
00:01:40,600 --> 00:01:43,100
and I haven't listened to the 
call with Reed Hastings and Ted 

33
00:01:43,100 --> 00:01:45,200
Serranos, but they have a lot of
explaining to do. 

34
00:01:45,200 --> 00:01:47,900
So let's go ahead and jump right
into the investment shareholder.

35
00:01:47,900 --> 00:01:51,700
Letter, released from Netflix, 
all outline the big, the biggest

36
00:01:51,700 --> 00:01:54,300
things that are positive. 
The few things that are positive

37
00:01:54,600 --> 00:01:56,900
and the really bad things in 
this report because there's a 

38
00:01:56,900 --> 00:02:00,000
couple key things that I think 
are art disastrous. 

39
00:02:00,100 --> 00:02:02,600
We bad. 
So we'll get to a fellow 

40
00:02:02,600 --> 00:02:04,800
shareholders. 
Our Revenue growth has slowed 

41
00:02:04,800 --> 00:02:07,100
considerably, that's the first 
line in. 

42
00:02:07,100 --> 00:02:10,900
This is how their revenue growth
is slowing and it has it has 

43
00:02:10,900 --> 00:02:13,400
slowed down a little bit as a 
result of our forecast. 

44
00:02:13,400 --> 00:02:17,100
Below streaming is winning over 
linear as we predicted and 

45
00:02:17,100 --> 00:02:19,400
Netflix titles are very popular 
globally. 

46
00:02:19,900 --> 00:02:23,700
However, relatively High 
household penetration, when 

47
00:02:23,700 --> 00:02:26,100
including the large number of 
household sharing accounts 

48
00:02:26,100 --> 00:02:29,200
combined with competition is 
creating Revenue growth. 

49
00:02:29,200 --> 00:02:33,400
Headwinds So Netflix right off 
the bat is naming account 

50
00:02:33,400 --> 00:02:36,900
sharing and competition as to 
things that are getting in the 

51
00:02:36,908 --> 00:02:39,400
way of their growth, their 
outline, both of those things, 

52
00:02:39,800 --> 00:02:41,900
just a letter go or two letters 
ago. 

53
00:02:41,900 --> 00:02:45,300
So two quarters ago, they were 
shrugging off competition that 

54
00:02:45,300 --> 00:02:47,300
even outline it. 
As a factor acting like it was 

55
00:02:47,300 --> 00:02:49,500
no big deal. 
All of a sudden competitions, a 

56
00:02:49,508 --> 00:02:53,400
big deal for Netflix, so that's 
the first thing they were 

57
00:02:53,500 --> 00:02:56,300
shrugging off competition. 
Now, they list as a thing in the

58
00:02:56,300 --> 00:03:00,000
way of their growth and a few 
years ago, like back in. 

59
00:03:00,100 --> 00:03:03,100
Thousand, fifteen and sixteen. 
There's tweets of Netflix in 

60
00:03:03,300 --> 00:03:06,100
encouraging people to share 
accounts, even outside of the 

61
00:03:06,100 --> 00:03:08,900
household. 
Now, they're saying that they 

62
00:03:08,900 --> 00:03:11,700
don't have the same Runway of 
growth and the account sharing 

63
00:03:11,700 --> 00:03:13,400
is actually getting in the way 
of them growing. 

64
00:03:13,400 --> 00:03:15,000
So they're trying to address 
that as well. 

65
00:03:15,400 --> 00:03:19,500
But these are two things that up
until now weren't that big 

66
00:03:19,500 --> 00:03:22,700
problem for Netflix, at least 
for the investors, they looked 

67
00:03:22,700 --> 00:03:25,100
at this as not being an issue. 
People, shared the accounts that

68
00:03:25,100 --> 00:03:28,800
lowered the turn rating and then
competition wasn't a big issue. 

69
00:03:29,100 --> 00:03:31,900
Now, it seems like that's Lately
change continuing on. 

70
00:03:31,900 --> 00:03:34,300
They say the big covid. 
Booster streaming obscured the 

71
00:03:34,300 --> 00:03:37,900
picture until recently, while we
look to re-accelerate our 

72
00:03:37,900 --> 00:03:40,700
Revenue growth through 
improvements to our service and 

73
00:03:40,700 --> 00:03:42,900
more effective. 
Monetization of multi household 

74
00:03:42,900 --> 00:03:46,900
sharing will be holding our 
operating margins around 20%. 

75
00:03:46,900 --> 00:03:49,600
That's good. 
So their margins are staying 

76
00:03:49,600 --> 00:03:51,000
steady. 
That's about where they have 

77
00:03:51,000 --> 00:03:53,300
been historically. 
I think that's a good point for 

78
00:03:53,300 --> 00:03:55,800
their operating margins Key to. 
Our Success has been our ability

79
00:03:55,800 --> 00:03:58,700
to create amazing entertainment,
all around the world present to 

80
00:03:58,700 --> 00:04:01,500
in highly personalized ways. 
If and when we're viewing than 

81
00:04:01,500 --> 00:04:04,100
other competitors, these are 
Netflix as core strengths and 

82
00:04:04,100 --> 00:04:07,900
competitive Advantage together 
with our strong profitability. 

83
00:04:08,100 --> 00:04:10,600
We believe we have the 
foundation from which we can 

84
00:04:10,600 --> 00:04:14,800
both significantly improve and 
better monetize our lung our 

85
00:04:14,800 --> 00:04:18,300
service longer term. 
So that's their kind of 

86
00:04:19,000 --> 00:04:21,800
sugarcoating language, right? 
We still have a bright future. 

87
00:04:21,800 --> 00:04:23,700
We have a lot to learn. 
We can improve different things.

88
00:04:24,300 --> 00:04:26,400
This isn't good though. 
Let's go ahead and look at their

89
00:04:26,400 --> 00:04:29,100
growth Outlook. 
Now what they do here 

90
00:04:29,300 --> 00:04:33,100
undergrowth Look in their letter
is kind of repaint the picture 

91
00:04:33,100 --> 00:04:35,600
of Netflix with kind of 
nostalgia. 

92
00:04:35,600 --> 00:04:38,600
Talking about how they created a
streaming service and people 

93
00:04:38,600 --> 00:04:41,100
love TV and movies and games 
stuff that we've already heard 

94
00:04:41,100 --> 00:04:43,700
before. 
I don't want to re reiterate and

95
00:04:43,700 --> 00:04:46,800
regurgitate all of this stuff 
but they still believe that 

96
00:04:46,800 --> 00:04:50,300
Netflix will continue to grow as
there's more Broadband homes and

97
00:04:50,300 --> 00:04:51,900
so on and so forth. 
That's basically what this is 

98
00:04:51,900 --> 00:04:53,300
saying. 
So let's go into the for 

99
00:04:53,300 --> 00:04:55,200
different reasons. 
Why Netflix thinks hit their 

100
00:04:55,200 --> 00:04:57,900
growth has slowed down and 
completely stopped at this point

101
00:04:58,300 --> 00:04:59,900
first. 
It's increasingly clear. 

102
00:05:00,100 --> 00:05:02,600
Is that the pace of growth in 
our underlying addressable 

103
00:05:02,600 --> 00:05:05,400
Market Broadband. 
Homes is partly dependent on 

104
00:05:05,400 --> 00:05:07,400
factors. 
We don't directly control like 

105
00:05:07,400 --> 00:05:10,600
the uptake of connected TVs 
since the majority of our 

106
00:05:10,600 --> 00:05:13,600
viewing is on TVs and the 
adoption of on-demand 

107
00:05:13,600 --> 00:05:17,400
entertainment and at a cost. 
So this is all stuff outside of 

108
00:05:17,400 --> 00:05:19,900
Netflix's hands. 
We believe these factors will 

109
00:05:19,900 --> 00:05:23,800
keep improving over time. 
So that all Broadband households

110
00:05:23,800 --> 00:05:26,300
will be potential. 
Netflix customers, I think 

111
00:05:26,300 --> 00:05:28,900
that's kind of a lame excuse. 
There's plenty of 

112
00:05:29,100 --> 00:05:31,900
internet-connected Swords out 
there that don't currently have 

113
00:05:31,900 --> 00:05:34,700
Netflix. 
So to blame that on broadband 

114
00:05:34,700 --> 00:05:37,300
connection I think is like I 
don't buy it. 

115
00:05:37,300 --> 00:05:41,200
I think this is a super flimsy 
excuse by Netflix s in addition 

116
00:05:41,200 --> 00:05:44,600
to our 222 million paying 
households we estimate that 

117
00:05:44,600 --> 00:05:47,500
Netflix is being shared with 
over 100 million households, 

118
00:05:47,800 --> 00:05:51,800
including over 30 million in the
US and Canada region account 

119
00:05:51,800 --> 00:05:54,400
sharing as a percentage of our 
paying memberships hasn't 

120
00:05:54,400 --> 00:05:57,200
changed much over the years. 
But coupled with the first 

121
00:05:57,200 --> 00:06:00,700
Factor, it means it's harder to 
grow membership in many markets 

122
00:06:00,800 --> 00:06:03,500
and issue that was obscured by 
our covid growth. 

123
00:06:03,600 --> 00:06:06,400
So they're basically saying we 
just grew so much because of 

124
00:06:06,400 --> 00:06:11,000
covid that that cast a shadow on
these underlying issues that we 

125
00:06:11,000 --> 00:06:13,700
otherwise could have been better
identified. 

126
00:06:13,700 --> 00:06:17,000
I think that's what they're 
saying basically, covid growth 

127
00:06:17,000 --> 00:06:18,600
obscured us seeing this as a 
problem. 

128
00:06:18,900 --> 00:06:22,700
Now again, I see this as kind of
a flimsy flimsy excuse. 

129
00:06:22,900 --> 00:06:26,300
This is consistent with how 
Netflix is always grown 30% of 

130
00:06:26,308 --> 00:06:29,200
their accounts being shared 60% 
of them being paid. 

131
00:06:29,400 --> 00:06:32,300
That's Sickly how they've grown 
since the beginning. 

132
00:06:32,300 --> 00:06:34,500
So, nothing's really changed. 
They've had the stat of the 

133
00:06:34,500 --> 00:06:37,900
entire time, but now all of a 
sudden when growth slows down 

134
00:06:38,200 --> 00:06:41,000
there highlighting, this is a 
big issue that suddenly needs to

135
00:06:41,008 --> 00:06:42,900
be addressed kind of 
disappointing. 

136
00:06:42,900 --> 00:06:46,200
I'd assume the management would 
have been able to identify this 

137
00:06:46,200 --> 00:06:50,200
as a potential problem long 
before their growth like stops 

138
00:06:50,200 --> 00:06:52,300
overnight, right? 
So that's another thing that I 

139
00:06:52,308 --> 00:06:53,900
consider to be really 
disappointing. 

140
00:06:54,000 --> 00:06:56,800
Then they go on with the third 
reason competition. 

141
00:06:56,900 --> 00:06:59,900
This is their third reason for 
viewing with a linear TV. 

142
00:07:00,000 --> 00:07:03,900
Evie, as well as YouTube Amazon 
and Hulu YouTube has grown 

143
00:07:03,900 --> 00:07:06,800
massively over the past three 
years channels like Mayan are 

144
00:07:06,800 --> 00:07:09,500
upgrading their production, 
putting more effort into it, 

145
00:07:09,700 --> 00:07:12,100
they're getting editors and some
people are getting writers and 

146
00:07:12,100 --> 00:07:15,400
stuff so you to is becoming a 
massive competitor in the video 

147
00:07:15,400 --> 00:07:18,300
space as well. 
And all of this stuff takes time

148
00:07:18,300 --> 00:07:21,300
away from potential time. 
You could be watching Netflix. 

149
00:07:21,800 --> 00:07:24,800
So they say, however, over the 
last three years as traditional 

150
00:07:24,800 --> 00:07:27,800
entertainment companies, realize
streaming is the future. 

151
00:07:28,100 --> 00:07:31,400
Many new streaming services have
also While our us viewing share,

152
00:07:31,400 --> 00:07:34,400
for example, has been steady 
according to Nelson, we want to 

153
00:07:34,400 --> 00:07:37,300
grow that sure faster, higher 
view shares an indicator of 

154
00:07:37,500 --> 00:07:40,300
higher satisfaction which 
supports the higher retention 

155
00:07:40,300 --> 00:07:43,700
and revenue. 
This is I think a more valid 

156
00:07:43,700 --> 00:07:45,800
excuse. 
I think this is something that 

157
00:07:45,800 --> 00:07:49,200
Netflix didn't anticipate having
a pandemic and every single 

158
00:07:49,200 --> 00:07:51,200
company moving immediately into 
streaming. 

159
00:07:51,400 --> 00:07:53,900
That's something that I think 
would be difficult to anticipate

160
00:07:53,900 --> 00:07:55,200
companies like YouTube have 
grown. 

161
00:07:55,200 --> 00:07:58,500
So substantially in Amazon has 
put so much money into it over 

162
00:07:58,500 --> 00:08:01,800
the years that I think there. 
Now being more competitive and 

163
00:08:01,800 --> 00:08:04,600
here Netflix shows this graph 
that's kind of you know a 

164
00:08:04,600 --> 00:08:07,600
portrays it a positive thing 
that they're still increasing 

165
00:08:07,600 --> 00:08:10,100
and even growing their their 
timeshare of the US. 

166
00:08:10,600 --> 00:08:12,700
But competition is certainly a 
factor. 

167
00:08:13,000 --> 00:08:16,600
So out of these excuses so far I
think the competition is the 

168
00:08:16,600 --> 00:08:19,900
most valid Factor when I look at
all the competitors to Netflix 

169
00:08:19,900 --> 00:08:22,800
that are rushing, their services
in the streaming and pouring 

170
00:08:22,800 --> 00:08:26,000
tens of billions of dollars, I 
think that has to take away some

171
00:08:26,000 --> 00:08:29,800
of the focus of what used to be 
the only good streaming service.

172
00:08:30,100 --> 00:08:32,200
Flicks used to be the only good 
one now. 

173
00:08:32,200 --> 00:08:35,100
They're probably amongst the 
best but there's other good 

174
00:08:35,100 --> 00:08:38,400
alternatives for that. 
They say macro factors including

175
00:08:38,400 --> 00:08:41,299
sluggish, economic growth, 
increasing inflation, 

176
00:08:41,600 --> 00:08:44,700
geopolitical events such as 
Russia's invasion of Ukraine and

177
00:08:44,700 --> 00:08:47,700
some continued disruption from 
covid are likely having an 

178
00:08:47,700 --> 00:08:50,300
impact as well. 
And I don't really buy this 

179
00:08:50,300 --> 00:08:53,400
excuse that much as well. 
Macro factors are suddenly the 

180
00:08:53,400 --> 00:08:55,800
reason that Netflix isn't 
growing inflation. 

181
00:08:55,900 --> 00:08:58,300
Well tell that to all the 
restaurants that are getting 

182
00:08:58,300 --> 00:09:01,200
record sales or Disneyland. 
That's completely packed. 

183
00:09:01,200 --> 00:09:04,400
You're losing customers in the 
u.s. when people are willing to 

184
00:09:04,400 --> 00:09:07,800
spend thousands of dollars to go
to Disneyland people, obviously 

185
00:09:07,800 --> 00:09:10,700
have enough money to buy 
Netflix, they're choosing to buy

186
00:09:10,700 --> 00:09:13,200
other streaming services. 
So, I think the most valid 

187
00:09:13,200 --> 00:09:16,000
reason, out of all of these is 
probably competition. 

188
00:09:16,100 --> 00:09:17,800
I think that's what's eating 
away at their growth. 

189
00:09:17,900 --> 00:09:21,400
Now, moving on past, their list 
of excuses, we get into the q1 

190
00:09:21,400 --> 00:09:24,700
results and the queue to 
forecast, both of them are 

191
00:09:24,700 --> 00:09:29,000
terrible, the q1 results are 
terrible and the Q to forecast, 

192
00:09:29,000 --> 00:09:31,800
our disastrous. 
So let's go ahead and Jump Right

193
00:09:31,800 --> 00:09:32,900
In. 
They say that paid. 

194
00:09:32,900 --> 00:09:37,900
Net additions were - 200,000. 
So this is the first time that 

195
00:09:37,900 --> 00:09:41,200
Netflix has ever in. 
Its history, ended a quarter 

196
00:09:41,200 --> 00:09:44,300
with less subscribers in, they 
started with, they literally 

197
00:09:44,300 --> 00:09:47,000
have less subscribers now than 
they did 90 days ago. 

198
00:09:47,400 --> 00:09:51,100
Now this quarter was disastrous.
It was way below their 

199
00:09:51,100 --> 00:09:54,400
expectations, they were 
forecasting 2.5 million net 

200
00:09:54,400 --> 00:09:58,200
additions and they have four 
million the same quarter a year 

201
00:09:58,200 --> 00:09:59,800
ago. 
So it was already way. 

202
00:10:00,000 --> 00:10:03,700
Below what investors were 
expecting and they also had a 

203
00:10:03,708 --> 00:10:05,000
little bit of an excuse this 
quarter. 

204
00:10:05,000 --> 00:10:07,100
They have something that they 
can, kind of point the finger 

205
00:10:07,100 --> 00:10:08,400
at. 
They can say hey we pulled out 

206
00:10:08,400 --> 00:10:11,600
of Russia because of the war 
going on and problems there and 

207
00:10:11,600 --> 00:10:15,100
that lost us 700,000 paid net 
ads. 

208
00:10:15,300 --> 00:10:18,700
So if you actually remove 
Russia, they still gained 500 

209
00:10:18,700 --> 00:10:21,700
thousand. 
Subscribers, a basically tiny 

210
00:10:21,700 --> 00:10:25,300
amount way below forecast, 
that's if you factor in Russia 

211
00:10:25,300 --> 00:10:28,700
and the 700,000 subscribers they
lost, but if you don't factor in

212
00:10:28,700 --> 00:10:31,700
Russia there down to Thousand, 
which is a number, everyone's 

213
00:10:31,700 --> 00:10:35,000
paying attention to. 
So that's kind of, you know, 

214
00:10:35,000 --> 00:10:37,800
it's terrible, it's a bad 
quarter but not absolutely 

215
00:10:37,800 --> 00:10:40,300
disastrous because outside of 
Russia, they're still 

216
00:10:40,300 --> 00:10:43,100
technically growing, right? 
This last quarter, they're still

217
00:10:43,100 --> 00:10:45,900
growing but this continues to 
get more concerning. 

218
00:10:46,200 --> 00:10:48,500
If we read on, they say the main
challenge for the membership 

219
00:10:48,500 --> 00:10:52,300
growth is continued, soft 
Acquisitions across all regions.

220
00:10:52,600 --> 00:10:55,500
So they're not really growing in
any region, which is troubling 

221
00:10:55,800 --> 00:10:59,700
retention was also slightly 
lower relative to our guidance 

222
00:10:59,700 --> 00:11:02,100
for Or cast. 
So retention going. 

223
00:11:02,100 --> 00:11:05,300
Lower means turned going up a 
little bit and I think that turn

224
00:11:05,300 --> 00:11:07,600
is going up because of the 
increased competition. 

225
00:11:07,800 --> 00:11:11,100
There's so many services that 
people might cancel Netflix to 

226
00:11:11,108 --> 00:11:14,900
try out HBO for a month or 
Showtime or Amazon Prime or 

227
00:11:14,900 --> 00:11:16,500
whatever. 
Now, they still point out that 

228
00:11:16,500 --> 00:11:19,200
the retention is very good. 
They say, although it remains at

229
00:11:19,200 --> 00:11:22,300
a very healthy level, We Believe
amongst the best in the 

230
00:11:22,300 --> 00:11:24,600
industry. 
Recent price challenges are 

231
00:11:24,600 --> 00:11:27,500
largely tracking in line with 
our expectations and remain 

232
00:11:27,600 --> 00:11:32,000
significantly Revenue positive. 
They In emea, which is Europe, 

233
00:11:32,000 --> 00:11:35,400
the Middle East and Africa, they
were down three hundred thousand

234
00:11:35,400 --> 00:11:38,000
paid net ads. 
Now again, if you exclude Russia

235
00:11:38,000 --> 00:11:40,700
out of this in the one-time 
impact of that they were still 

236
00:11:40,700 --> 00:11:45,400
up 400,000 but not a lot 
400,000, excluding Russia. 

237
00:11:45,500 --> 00:11:48,500
If you factor in Russia then 
they're down three 300,000. 

238
00:11:48,900 --> 00:11:52,200
We saw the slowdown, in our 
business, in Central and Eastern

239
00:11:52,200 --> 00:11:55,200
Europe, in March coinciding, 
with Russia's invasion in 

240
00:11:55,200 --> 00:12:00,300
Ukraine, paid net additions in 
Latin America totaled - Thousand

241
00:12:00,500 --> 00:12:02,900
similar to recent quarters. 
We believe the combination of 

242
00:12:02,900 --> 00:12:06,700
forces including macroeconomic 
weakness, and our price changes,

243
00:12:06,800 --> 00:12:08,900
where a drag on our membership 
growth. 

244
00:12:08,900 --> 00:12:11,300
Now, they highlight that the 
United States, and Canada, paid 

245
00:12:11,300 --> 00:12:15,800
net additions of - 600,000. 
So they lost over half a million

246
00:12:15,800 --> 00:12:19,600
subscribers in the US was 
largely the result of our price 

247
00:12:19,600 --> 00:12:23,200
change which is tracking in line
with our expectations and it's 

248
00:12:23,200 --> 00:12:27,000
significantly Revenue positive. 
So they're basically saying we 

249
00:12:27,000 --> 00:12:29,800
realized we'd lose a little bit 
of subscribers in the US. 

250
00:12:30,000 --> 00:12:33,400
Over half a million which isn't 
a substantial amount but we 

251
00:12:33,400 --> 00:12:35,600
increase prices enough to more 
than make up for that. 

252
00:12:35,600 --> 00:12:38,700
So it was a revenue positive 
move there. 

253
00:12:39,100 --> 00:12:41,600
It's still troubling to see 
them, lose subscribers in any 

254
00:12:41,600 --> 00:12:45,200
case, but at least this was 
factored in, we're making good 

255
00:12:45,200 --> 00:12:47,800
progress in the asia-pacific or 
receiving nice growth and a 

256
00:12:47,808 --> 00:12:51,000
variety of markets including 
Japan, India Philippines Taiwan 

257
00:12:51,300 --> 00:12:54,300
and Thailand. 
So that's the only area by the 

258
00:12:54,300 --> 00:12:56,400
way that they grew was 
asia-pacific. 

259
00:12:56,400 --> 00:12:59,700
Every other region in the world,
Netflix lost subscribers. 

260
00:12:59,900 --> 00:13:02,900
If we look at their forecasts 
for Q2, this is really where it 

261
00:13:02,900 --> 00:13:04,400
gets terrible. 
Here we go. 

262
00:13:04,500 --> 00:13:07,800
They say as a reminder the 
quarter, the guidance we provide

263
00:13:07,800 --> 00:13:12,900
is our actual internal forecast 
at the time report for Q2 2022. 

264
00:13:13,200 --> 00:13:18,100
We forecast, paid net additions.
This is for next quarter of - 2 

265
00:13:18,100 --> 00:13:19,900
million. 
They're forecasting. 

266
00:13:19,900 --> 00:13:24,200
The loss of another two million 
subscribers verse the 1.5 

267
00:13:24,200 --> 00:13:25,600
million that they made a year 
ago. 

268
00:13:26,000 --> 00:13:28,300
So Netflix is forecasting that 
they're going to continue 

269
00:13:28,300 --> 00:13:32,000
shrinking at least for another 
Order our forecast assumes 

270
00:13:32,000 --> 00:13:35,400
current trends persist such as 
slow acquisition in the near 

271
00:13:35,400 --> 00:13:38,700
term and price changes plus 
typical seasonality. 

272
00:13:39,000 --> 00:13:42,800
So Q2 paid, net ads are usually 
less than Q 1 paid net ads. 

273
00:13:42,900 --> 00:13:45,400
Now they say that we project 
Revenue to grow approximately 10

274
00:13:45,400 --> 00:13:49,500
percent year-over-year and Q2 
assuming a roughly mid to high 

275
00:13:49,500 --> 00:13:52,400
single digit year over year 
increase in average revenue 

276
00:13:53,100 --> 00:13:58,500
monthly on a on a foreign 
exchange neutral basis so that 

277
00:13:58,500 --> 00:14:01,200
is the positive news that Guess 
they're forecasting Revenue 

278
00:14:01,200 --> 00:14:03,400
growth but the big headline 
there is that they're losing 

279
00:14:03,400 --> 00:14:05,200
subscribers. 
The business is shrinking. 

280
00:14:05,200 --> 00:14:07,000
It's honestly amazing. 
What's happening? 

281
00:14:07,000 --> 00:14:09,600
This company is not growing 
anymore and they're saying that 

282
00:14:09,600 --> 00:14:10,800
they're going to start 
shrinking. 

283
00:14:10,900 --> 00:14:14,200
So after that we have the cash 
flow and capital structure and 

284
00:14:14,200 --> 00:14:18,000
this is one of the few little 
bright spots in this report free

285
00:14:18,000 --> 00:14:20,800
cash flow, the metric. 
People typically say they look 

286
00:14:20,800 --> 00:14:22,800
at what the company like this. 
But nobody's looking at this 

287
00:14:22,800 --> 00:14:25,500
metric, it amounted to eight 
hundred and two million dollars 

288
00:14:25,800 --> 00:14:28,500
verse These seven six hundred 
and ninety-two million expected.

289
00:14:28,500 --> 00:14:32,000
So they came in Above 
expectations, with free cash 

290
00:14:32,000 --> 00:14:34,100
flow and they are free. 
Cash flow generative company. 

291
00:14:34,400 --> 00:14:36,900
So, that's one of the things we 
expected out of Netflix, they're

292
00:14:36,900 --> 00:14:38,300
going to be free cash flow 
generative. 

293
00:14:38,500 --> 00:14:40,900
What we did not expect out of 
Netflix, is that they're going 

294
00:14:40,900 --> 00:14:43,400
to start losing subscribers 
quarter-over-quarter. 

295
00:14:43,600 --> 00:14:46,400
That is completely against 
expectations of any investor in 

296
00:14:46,400 --> 00:14:48,600
the company. 
So that is a quick look at what 

297
00:14:48,600 --> 00:14:51,900
I think are the important parts 
of the earnings report to 

298
00:14:51,900 --> 00:14:54,300
summarize. 
What we just looked at, we have 

299
00:14:54,300 --> 00:14:58,100
the positive tear Netflix beat 
their earnings per share by 62 

300
00:14:58,100 --> 00:15:00,100
cents. 
That was actually pretty Can't 

301
00:15:00,100 --> 00:15:02,800
beat and this would be a 
positive thing if they didn't 

302
00:15:02,800 --> 00:15:04,800
have so many negative things. 
Overshadowing this. 

303
00:15:04,800 --> 00:15:06,900
So that was certainly a positive
thing. 

304
00:15:06,900 --> 00:15:08,800
But investors aren't really 
paying attention to it. 

305
00:15:09,100 --> 00:15:12,300
They also have free cash flow of
eight hundred and two million. 

306
00:15:12,400 --> 00:15:15,400
So eight hundred and two million
dollars, free cash flow, 100 

307
00:15:15,400 --> 00:15:18,700
million above expectations, 
certainly a positive thing. 

308
00:15:18,900 --> 00:15:21,100
Netflix is beating their 
earnings, they're generating 

309
00:15:21,100 --> 00:15:23,600
free cash flow. 
Those are both good things. 

310
00:15:24,000 --> 00:15:26,900
We have the revenue growth, 
expectations of 10% for next 

311
00:15:26,900 --> 00:15:30,300
quarter even though they're 
having troubles the That they're

312
00:15:30,300 --> 00:15:32,700
still growing. 
Revenues is a positive thing. 

313
00:15:32,900 --> 00:15:36,100
And in some cases, Revenue 
growth might be more important 

314
00:15:36,100 --> 00:15:40,000
than just subscriber numbers 
like in the u.s. they increase 

315
00:15:40,000 --> 00:15:43,700
the prices per subscriber, that 
lost them about 600,000 

316
00:15:43,700 --> 00:15:45,500
subscribers. 
But overall they're still 

317
00:15:45,500 --> 00:15:47,400
growing revenues as a result of 
that. 

318
00:15:47,600 --> 00:15:49,700
Now, we get into the bad part 
here. 

319
00:15:50,200 --> 00:15:54,300
Plus 500k subscribers, this 
quarter minusing Russia. 

320
00:15:54,700 --> 00:15:57,700
So if we take out Russia, they 
gained 500 thousand subscribers.

321
00:15:58,100 --> 00:16:01,600
If we don't take out Russia, if 
Include that in the calculation,

322
00:16:01,800 --> 00:16:04,900
Netflix has less subscribers 
this quarter by the end of it 

323
00:16:04,900 --> 00:16:06,800
than they started with. 
And this is something that in 

324
00:16:06,800 --> 00:16:09,300
and of itself is shocking. 
But I think that even more 

325
00:16:09,300 --> 00:16:12,500
shocking thing is, Netflix, 
expects this to continue for at 

326
00:16:12,500 --> 00:16:14,900
least the next three months for 
next quarter. 

327
00:16:14,900 --> 00:16:19,100
They're forecasting, a loss of 2
million net subscribers so 

328
00:16:19,100 --> 00:16:21,500
they're going to lose an 
additional 2 million subscribers

329
00:16:21,900 --> 00:16:24,100
in addition to losing 200,000, 
this quarter. 

330
00:16:24,400 --> 00:16:28,500
So as of right now, Netflix has 
basically said we're done 

331
00:16:28,500 --> 00:16:29,800
growing. 
We're going. 

332
00:16:29,900 --> 00:16:32,300
Try to re-accelerate Growing. 
But as of right now for the 

333
00:16:32,308 --> 00:16:35,100
foreseeable future and what 
we're forecasting, we're done 

334
00:16:35,100 --> 00:16:37,100
growing. 
And fact we're shrinking and the

335
00:16:37,100 --> 00:16:39,700
only way that we're really 
growing revenues or free cash. 

336
00:16:39,700 --> 00:16:44,100
Flows is by cutting away on our 
budget and increasing prices. 

337
00:16:44,400 --> 00:16:47,100
This is not the story that 
they've been sharing for the 

338
00:16:47,100 --> 00:16:49,700
past couple of years. 
The story that they're sharing 

339
00:16:49,700 --> 00:16:53,400
is that there's 700 800 million 
total addressable subscribers 

340
00:16:53,400 --> 00:16:55,500
out there and have plenty of 
room for growth. 

341
00:16:55,500 --> 00:16:57,300
And they'll be able to add 
hundreds of millions of 

342
00:16:57,300 --> 00:16:59,700
subscribers to the company. 
Well, now, it seems like there's

343
00:16:59,800 --> 00:17:02,700
struggling to add any, they're 
not growing at all. 

344
00:17:02,700 --> 00:17:06,300
So overall, when I look at this 
news, my initial reaction is one

345
00:17:06,300 --> 00:17:08,099
of surprise. 
I am surprised by this. 

346
00:17:08,400 --> 00:17:10,400
I'm not surprised by this 
quarter. 

347
00:17:10,500 --> 00:17:13,700
The quarter, they just reported 
losing two hundred thousand, net

348
00:17:13,700 --> 00:17:15,300
subscriber gains as 
disappointing. 

349
00:17:15,599 --> 00:17:17,900
But they can kind of blame that 
on one-time events. 

350
00:17:18,300 --> 00:17:20,099
You know. 
They had the Russia thing, they 

351
00:17:20,099 --> 00:17:24,000
pulled out there that put them 
into the - subscriber net 

352
00:17:24,000 --> 00:17:27,400
additions for 1/4 but that is a 
one-off event and I'm a 

353
00:17:27,408 --> 00:17:29,600
long-term investor. 
So I'm looking at the long-term 

354
00:17:29,600 --> 00:17:31,800
of the Company. 
I have the short shelf life 

355
00:17:31,800 --> 00:17:34,800
stuff and the long shelf life 
stuff and basically what they're

356
00:17:34,800 --> 00:17:38,900
saying is not only are we going 
to lose subscribers this last 

357
00:17:38,900 --> 00:17:42,300
quarter but we're forecasting 
even more losses in the next 

358
00:17:42,300 --> 00:17:45,200
quarter. 
So the question is, whether or 

359
00:17:45,200 --> 00:17:48,500
not, this is a bigger more 
persistent issue with this whole

360
00:17:48,500 --> 00:17:53,200
business model, can Netflix grow
past, 220 million subscribers is

361
00:17:53,200 --> 00:17:55,900
that possible. 
If Netflix can't grow past 220 

362
00:17:55,900 --> 00:17:59,400
million subscribers can Disney, 
their goal is 350 million and 20

363
00:17:59,800 --> 00:18:02,500
For how are they supposed to get
the 350 million? 

364
00:18:02,700 --> 00:18:05,900
If Netflix which has 
substantially more content can't

365
00:18:05,900 --> 00:18:08,700
even get past 220. 
So this raises a lot of 

366
00:18:08,700 --> 00:18:11,900
questions about the entire 
streaming industry and what this

367
00:18:11,900 --> 00:18:15,200
means because right now, Netflix
is basically saying we've hit 

368
00:18:15,200 --> 00:18:18,100
our wall and it's 220 million 
subscribers. 

369
00:18:18,400 --> 00:18:21,400
We are not growing past that. 
So overall, I'm pretty shocked 

370
00:18:21,400 --> 00:18:23,400
by this news. 
I am going to be considering it 

371
00:18:23,500 --> 00:18:25,800
thinking about it, over the next
couple of days, I'll be 

372
00:18:25,800 --> 00:18:27,500
listening to their earnings 
report as well. 

373
00:18:27,900 --> 00:18:30,700
And the big thing that I'm going
to be trying to Herman over the 

374
00:18:30,700 --> 00:18:34,800
next couple of days is if this 
is a one-time thing, if this is 

375
00:18:34,800 --> 00:18:38,300
just a tough year for the 
company, or if this is an 

376
00:18:38,300 --> 00:18:42,400
inherent business model problem.
Can Netflix eventually grow 

377
00:18:42,400 --> 00:18:46,100
past, 220, million subscribers, 
or is the story completely dead?

378
00:18:46,100 --> 00:18:49,200
Because right now they're 
actually making that a question.

379
00:18:49,300 --> 00:18:51,900
So that's my thoughts right now.
Not the outcome that I wanted, 

380
00:18:51,900 --> 00:18:54,300
but hey, that's how it goes. 
You win some, you lose some. 

381
00:18:54,400 --> 00:18:55,700
I appreciate all of you 
watching. 

382
00:18:55,700 --> 00:18:57,100
Even the haters. 
If you want to leave your 

383
00:18:57,100 --> 00:18:59,200
comments, you can do so in the 
comment section below. 

384
00:18:59,800 --> 00:19:02,000
I appreciate all your input. 
See you in the next one.