Get started. Again, I'm John Hodulik from the Media and Telecom team, and for our next segment, we welcome Ted Sarandos, the Co-CEO of Netflix. Thanks for joining us again this year, Ted.
Glad to be here. Thank you.
Before we begin our Q&A, Ted has some prepared remarks in which he will make some forward-looking statements, and actual results may vary. With that, take it away, Ted. Thank you.
Good afternoon, everybody. It's so good to be here today. I always like being in New York in December. So Greg Peters and I have been co-CEOs of Netflix for just a little under a year now. So I wanted to start with a couple of observations about the industry and about Netflix. So first and foremost, entertainment has always been an industry of change with new technology, competitors and consumer behaviors creating new business models. So today, choice and control are the price of entry in modern entertainment, and choice and control is streaming. So it's what consumers want, it's how our industry stays relevant and growing in the face of intense competition from new forms of media. And think about it like TV, cable and paid TV, home video sales, home video rental, all of which significantly changed our industry.
Streaming has opened up tremendous opportunities. So there are more TV shows and films being created today than ever before, creating more choice in movies and TV for consumers, more chances that a creator will get their voice heard, and a vastly expanded audience for the stories that they make. So take TV, which has always been a very local business. Streaming has made it possible for Wednesday, a very American story, to find huge success all over the world in countries like Korea and Japan, which haven't typically embraced U.S. stories. Or for Squid Game, a quintessentially Korean story, completely rooted in Korean cinema, to become the most watched TV show ever, including in the U.S., where foreign language TV has never typically generated a large audience.
So for Netflix, the transition from DVDs to streaming, from U.S. to global, from second run to original, was hard. These were big bets, and they took significant time, effort, and investment, but we knew to get to the long term, we had to get there, and it's paid off. So since our global launch in 2016, we've invested heavily in our original content slate and our content programming slate, with our content amort up three times from $5 billion to $14.5 billion a year, while also steadily increasing our operating margins, which are up five times from 4% to 20%. And we've grown our free cash flow from -$3.3 billion in 2019 to up to nearly $6.5 billion this year alone. So as you can see, streaming is a good business.
It's just a hard one. So with so much change in the industry, Greg and I spend a bunch of time trying to determine what are the things that we should do differently and what are the things that we should hold consistent. So our focus has been on constant improvement, better slate, easier discovery, more fandom. These initiatives have served us really, really well through the years. So far this year alone, we've had the number one title in the U.S., 42 out of 44 weeks, according to Nielsen. Viewing on Netflix is many times greater than our nearest competitor, and that matters, because when people watch more, they're happier, they place higher value on our service, which means they stick around longer and they recommend us to their friends.
So that engagement really packs a punch, and not just for fans and business, but for the creators and for our competitors sometimes. So it's a very virtuous cycle that everyone really benefits from. Take something like Breaking Bad or Schitt's Creek or Shameless or Walking Dead. These shows existed, they had cult followings on television, but once they came to Netflix, sometimes in season, we turned them into award-winning and commercial hits for both Netflix and the originating network. So bringing new popularity to the shows and extra revenue to the creators and cast. Netflix has also brought new life to old shows, like Full House and Gilmore Girls, and The Office and Friends.
And, many of you may still be midway through a season of Suits right now, but when we launched Suits on Netflix this summer, it broke all U.S. viewing records, despite having already been on the USA Network and two competitive streaming services for a couple of years. So we did all that, all at the same time, building a library of original content that drove more engagement, revenue, and profit than any of our streaming competitors to date. And what we've learned in 2022 is that balancing consistency with adaptability is important to maintain our long-term growth. So looking ahead, we see big opportunities to broaden our entertainment offering, to increase the value to our members with more variety, more of our non-English slate growing, our investment in games, our sports shoulder programming, and live events.
We can have a chance to deepen our connection with fans through marketing and consumer products, and through innovations like the Bridgerton Ball, the Squid Game, Squid Game Trials, and the Netflix House, all in works right now. We will also be looking to diversify our revenue through advertising, but being able to offer a low price that is highly competitive. And if we continue to execute well on the core while establishing ourselves in these areas, we think there's a ton more room to grow. This is a $600 billion opportunity revenue market across pay TV, games, and branded and even branded advertising. Today, Netflix accounts for less than 10% of total TV time in our most popular countries, and only 5% of that revenue.
As I said from the beginning, it all starts with the consumer, because when we delight our members, we can drive more engagement, more revenue, more profit than any of our competitors, and create a wildly successful business and a brand that will strengthen and grow over time. Thanks a lot. Thank you. ...How are you, John?
I'm doing great. How are you?
Great.
Great, thanks for the overview. I think that sets up a lot of, basically-
I didn't answer everything, did I?
Uh, close.
Okay.
This might be short.
Okay.
No, I think we've got a lot to go through here. And, again, this time of year, I think it's always a good place to start with talking about your priorities as you look out into 2024.
Yeah. Well, kinda as we kicked off there, the priority is, you know, really continuing to strengthen the core. So improving the selecting process, improving the content. I'm very proud of our films, our series, and all that growth, but I think there's plenty of room to grow in terms of constantly improving it, and we see that through improved engagement across the content that we're investing in. We're looking to also diversify our revenue pool through advertising. We're getting that ad tier to scale. To, you know, today, we have about 15 million MAUs. It's grown from... We had 5 million just in May, so you can see the kind of rate of growth that we're talking about.
But we're also, you know, and along the way, we've got to create products that consumers love and that advertisers love too. So you saw recently we did the deal with Nielsen to give them better measurement tools and getting better insight tools, and then we've got to create better and better products for them that differentiate us from everybody else. But I believe our advertisers wanna be as close as they can to the brands that people love, and the chances in entertainment that that's gonna happen are much higher on Netflix than anywhere else in the world.
Right. Let's talk about content first, and then as that relates and really obviously drives engagement. First, let's talk about the strike. Obviously, it changed a lot of things in 2023 and looks set this to do the same in 2024, a number of movies pushed out or films pushed out.
Yeah.
Does that give you guys an advantage as you look out into 2024?
Well, it's one of those times where nobody says we have too much content, when you run into interruptions. The one thing, not that COVID was good for anybody, but it did help us develop a muscle about how to kind of manage the slate, and manage delivery in an unpredictable time, like the strike proved to be. So, like I said, that's been good for us, is that we've always had very deep slate. So we didn't really have much interruption in our delivery to our members. We were able to shuffle things around a little bit, and then a lot of our programming, international programming was unaffected by the strike, and those shows have gone great.
So this year, we're looking forward to our on-schedule return of things like new seasons of Bridgerton and Cobra Kai, Emily in Paris. We've got incredible on the international slate, Senna from Brazil, which is, you know, based on the most celebrated Formula 1 driver ever. It's an incredible-
Yeah.
-really incredible project we're excited about. Parasyte: The Grey from Korea. So there's some really high-profile international programming flowing, too.
Right. I read recently that you guys are sort of pulling back on the, on movies, right, for 2024, in terms of the total number of movies put on the site. Can you talk a little bit about the strategy there? I think you were doing over 50, you know, more than one a week, and now that looks like it's being tightened up.
There's a couple of. Once we ramped up at that kind of aggressive pace because there we had no access to licensed films. So we really hadn't. And we started with a zero library. So we've only been doing original film for five years. So what's happened over the last couple of years is that the availability to license has opened up a lot more than it was in the past. Including, we have these Pay-1 deals with Sony and with Universal, that, like, right now, it has delivered the new Spider-Man movie, the new Super Mario Bros. So our access to programming through other channels is there. And so we're really but in that pool that we're still continuing to do, it's an incredible breadth of offering.
So Leo, the animated feature from Adam Sandler, which is crushing it right now, one of our best—actually is our best launch of an animated feature yet. And then couple that with Rebel Moon. Zack Snyder is like, his Star Wars. It's Zack Snyder's Star Wars. It's an incredible, kind of big-budget action movie. And then right now, between now and the end of the year even, the films that are, you know, more in that kind of sweet spot around the Academy time, like Maestro, the May December, that's just made the New York Times best 10 list, and Leave the World Behind, which is opening next week with Julia Roberts. And it's a...
We have an incredible, diverse, broad slate of originals that we can now complement with first window and second window licensed titles as well.
Yeah, it really does seem like a buyer's market for licensed content right now. And seems like all the and all the sort of traditional media companies are getting back into the licensing space after pulling back. Do you think-
Yeah.
Do you think this is sort of that can continue, or do you think it's part of, you know, a function of the strike, or maybe weakness in linear TV, or how do you see the market?
It's the more natural state of the business.
Yeah.
I mean, they've always built the studios to license. The unnatural state was, I think, the kind of, you know, forced vertical integration. So I think that there will be opportunities for us to license, and I think more than just opportunities for us. I mean, I said it in the speech, and I do mean it: I think we've added a ton of value when you're licensed to Netflix, value that you can then turn into something else. The example in Suits, the... There was this show that didn't make a lot of noise in USA. It was certainly available on Hulu, and it was certainly available on Peacock and on Amazon for two years before it came on Netflix.
And that, that power that comes from that recommendation engine and that distribution platform, they can get a lot of people talking about it. And then the compounding benefit of everyone's talking about this show-
Right
... and then everyone's using Netflix, so you got this powerful, you know, self-reinforcing cycle. And where that comes out is, for the last several years, the guy who created Suits had a spin-off show that he was trying to sell everywhere in town. Everybody passed, including us and including NBC, and now they're making it.
Right.
There's a huge new interest in Suits. I would probably argue that next year you'll probably see a bunch of lawyer shows.
Yeah.
But Suits itself, I mean, we added a ton of value to that IP. So the creators get a bunch of benefit from it, the owners of the IP get a bunch of benefit from it, and more importantly, the fans get a bunch of benefit from it, from having the show that otherwise would have disappeared into obscurity.
Yeah. So I think that's just one of the probably the best example of, you know, a company using or, or Netflix basically, you know, taking a piece of content and it blowing up. And it, it almost appears like Netflix is becoming sort of a promotional tool for content creators, right? And I think of Dune, which is now on, on the, on the site, on the platform, and with Dune Two coming out, and also more recently, GTA, right? The, the trailers-
Yeah, yeah
... which I think the trailer drops later this week, and then that way we get the game.
I like the way you're thinking about this, John. Now I just got to get them to pay me.
Well, that's what I was thinking. So are those deals that have that aspect to them, are they more attractive to you because there is the secondary benefits, and what do you think about that getting flipped eventually?
I think, I mean, self-serving as this sounds, I think we should win the jump balls.
Right.
But I think licensing to us has the added benefit of enhancing the value of your IP on top of the revenue stream. I think we should win those jump balls. And I do think, look, there's been a history of, you know, it's a very competitive business, and folks don't want the shows that didn't work on their network to work somewhere else. Sometimes they go to the extent of never releasing them again, so that never happens. But I think the opportunity for something to get a second life and work is the payback on it is enormous. It's so great for them. I think about, like, you know, Sony right now is making a movie of Cobra Kai. Why do you think they're doing that? Because Cobra Kai was a monster on Netflix.
Right.
So I do think, and that was IP that, you know, had failed elsewhere.
Right.
So.
Interesting. So, as we think about your content budget, I think next year is, like, $17, you know, post-strike, $17 billion. Under what cir-- you've talked about that, that's about the right level, but that could increase over time. Under what circumstances would you guys need to see to say, "Hey, it's time for us to increase the investment"? You know, you've seen, like, this steady march up, like I mentioned, about, on our content spend rel- you know, matching our growth.
I think we always kinda try to stay within about a half step of our growth in terms of investing in programming. Although I think what we do every time we invest in more and more programming, we generally add value to the consumer. So they generally see the value. It gives them, you know, more stickiness to us because they go, "The likelihood is I'm watching something on Netflix. I'm not going anywhere this month." So I think that's had a very positive payback, and you just got to stay closely aligned to that growth. We think at that $17 billion level, that aligns with our growth. If we surpass that, and if we accelerate on that, we'll revisit that as well.
Yeah. I know. So, are there any genres that, in terms of content, that you feel you're underpenetrated? And, as I think about it, asked another way: Where are the pockets of engagement? Because we look at the Gauge numbers pretty closely, you know, when they come out each month. Where do you think, and obviously, there's still the lion's share is within broadcast, and this would be a great segue into the sports side, but,
I'll mark sports with it.
Okay. But for now, like, where do you think those pockets of engagement are that you can exploit to grow engagement on your platform?
Look, I look at these things like, where are we in our life cycles? We're 10 years of making original anything, about five or 5.5 years into film, about 4 years into unscripted. We're just starting on things like our local language unscripted initiatives. In many parts of the world, the television watching is dominated by unscripted television. Think about even in the U.K., the top 50 that gets published every month, the lion's share of those shows are all unscripted. So our local language and we've had our own big successes in the U.K. with Beckham. And so as you, you'll see. I think we'll do in terms of underpenetrated today, where we think we'll be focusing a lot more energy is a local language unscripted.
We do some things like local language versions of our shows, but generally, I think there are some new franchises like Physical 100 in Korea, as an example of unscripted local language show that actually found big audience outside of Korea as well. So for me, I think that's one area. The other is feature animation. I know this sounds kind of old-fashioned, but since Nielsen's been tracking streaming, eight of the top ten movies ever streamed are all animated features, or it's by view hours, so it is a lot of repeat watching and those kind of things go into it. But it adds a ton of value, and there's plenty of appetite for more than the few films a year that we're currently doing.
Like I said, I think going from CB to Leo has been, you know, success to success for us in a very new business. These films do have very long development and production cycles. So, we're excited there, and then we're enhancing our own animation now with our deal with Skydance to put out a couple of their films per year, too, starting next year.
How should we think of the growth and engagement? I realize the Gauge is just the U.S., so it's just one market.
Yeah.
But you guys are high single digits now. It's been, you know, at least so this year, relatively flattish. I mean, how should we think about that in terms of the upside from here, in terms of engagement?
Look, I think if you look at the ramp-up of competition over the last couple of years, the fact that we've been flattish is pretty remarkable. And I do think, you know, more forward-looking, we were adding content, you know, adjusting prices every little step along the way, and our competitors seem to be reducing content and raising prices. So I kinda like that math for us. And I think in general, I think-
Putting their content on your platform.
Yeah, those are all good things. Those are all good things. And so I do, I do think that there's enough, you know, will the business consolidate a little bit here and there? Look, I think they're trying to find profitability. They're trying to navigate their linear businesses or trying to navigate their legacy businesses that are under a lot of pressure right now. And I said we only had to navigate out of the DVD business and into the streaming business in a way, you know, fundamentally, where they were in conflict with one another... engineering resources, marketing resources, all those kind of things.
But I think about if I was trying to make money in theatrical and trying to manage my network and sell advertising and trying to attract people to my streaming service, advertisers to my streaming service while they're fleeing my network, I think that it's a tough job. It's a tough job. So I can't—I don't know, I wouldn't... We don't spend that much time thinking about how our competitors are navigating these things. We have our own problems to worry about. But I would say that it's hard to imagine that it just keeps running status quo.
Got it. So switching to advertising, now, at the very outset, you guys cautioned the patience that it would take time for the ad business to scale. Is it, at this point, as you look back, is it happening at about the pace that you originally expected?
Yeah, in that we launched it fast. You know, we built it and launched it within six months. I wouldn't have guessed that we could grow the install base as fast, you know, from five to 15-
Right
... as quick as we did just since May. So we didn't really have... You know, we had realistic expectations for where we knew we're a company that can get impatient. So, we're not in that space yet, where it's just taking too long. It feels like it's building pretty organically and pretty nicely. And what's interesting, too, about 30% of our new signups are signing up in the ad tier, which kinda gives us good confidence that there is organic demand for it at the current price point.
Right. And there was that... So you guys are putting through a price increase here in the U.S.?
Yeah.
Well, first of all, I guess, how does the ad tier, you know, affect how you think about pricing and pricing power, both here in the U.S. and sort of in other markets? And that 30%, where do you think that can go as you toggle some of the-
It's hard to say. Remember, we have a large install base, so the question is gonna be that we don't see a lot of plan migration once you join Netflix. I think people are pretty thoughtful about what they want, and we've really prided ourselves on getting people to what they want quickly. You know, making it easy to figure out how to navigate. So people pretty much make a decision: Are you in or are you in the ad tier, are you not? And I think in general, that they wouldn't have... Most of the people who use Netflix today were never presented that option.
Right.
So there are folks who would say, "Yeah, I'll take Netflix at a significantly lower price, and I don't mind ads." And we've never really given any optionality to that member yet. So that's what we're in the process of doing now. And ideally, we're gonna end—I think there's plenty of organic growth for that to be a meaningful business. So it doesn't really help us to jam somebody into a tier they don't want, because I imagine it'll have negative retention effects.
Right. But I mean, do you think about pricing as a way to drive people? I mean, clearly, it's much cheaper, obviously, the ad tier, and you've raised prices on some sort of the other tiers.
Yeah.
I mean, is there much room to do that, to-
Yeah, there should be-
grow that base?
There should be a measurable and a gap between the two tiers so people can make good choices.
Gotcha.
Yeah.
Aside from sort of growing the base of subscribers, I mean, what are the other sort of steps you that you need to take internally or that we could all watch for, that sort of suggest that the ad tier is on track and the ad business is growing into this, you know, what could be a gigantic business?
Yeah, look, I think if you saw today that there's a GroupM, put out a study-
Yeah
... today, that you know more than half of the linear ad load now is going to streaming going into CTV streaming. And I think it's, for me, it's it just gives you a sense of the... Because we're in very, very early days.
Yeah.
So for me, it's like the opportunity is: How is this gonna be better than linear television for advertisers and consumers? So how can the advertising be more relevant? How could the advertising be delivered competitively? I think right now, let's just get to where they are now.
Right.
We have a great history of innovating in this space. This is right at our core.
Right.
Personalization, storytelling, world-building, all those things, all those things that advertising takes to be great in advertising, those are right at our core. So I don't know if there's exact flags, you know, that I'd say when you get to your slate, that flag. But I would say that you'll see us continue to grow. It'll have positive impact on the business over the next couple of years, and that's the right kind of way to measure the time on it.
Gotcha. One of the things... So we had Magna and the two other speakers on our ad panel this morning, and we went through all the numbers, and one of the things they all pointed to, but one in particular, said the ads on Amazon and the sort of opt-out strategies versus opt-in is gonna create a new pool of sort of connected TV advertising.
Yeah.
Is that good for you guys or is that bad for you? I mean, on one side, it could help sort of accelerate the shift from sort of linear TV to connected TV, but on the other hand, it creates a lot more inventory.
Well, look, you've got to, you've got to be where the, where the eyeballs are. You have to be where the consumer is. So that's what advertisers are looking at, that's what every, every one of my direct competitors should be looking at. I got to be where the, where the, where the viewer is. And to me, it's like their move to CTV is gonna pull more people from linear to, to CTV, which is good for everybody. It raises all boats. Yes, it creates more inventory, but you've got to be... You then have to compete for the eyeballs. And that's the thing that we're, you know, that I'm very confident that we've been doing and will continue to do, is compete for the eyeballs better than everybody else.
Right.
I think that's what we have to. You know, that's, that is the cost of entry. So you have to. It's great, you could talk about things all day long, but you've got to have the shows that people love. You've got to have films that people love, and you've got to get the engagement for it. You said you look at Gauge. We do, we look at that a lot, too.
Yeah.
Because it's important to see how those things move and migrate. So, for us, I think, like, if you've got the eyeballs and there's more, you don't have to worry about the competitor's inventory. They're gonna follow the eyeballs.
Yeah, makes sense. Now, this question we could spend all day on, but how do you think of competition outside the U.S.? I mean, when we talk about competition, we use- I mean, obviously, we're very US-centric-
Yeah
... U.S., North America-centric, and we know who all the players are, and most of us in this room probably have most of these services. But how does it, that compare to what you're seeing in sort of other big markets outside the U.S.?
Yeah. Well, remember, I think, watching U.S. content on a streaming service was a pretty niche-y behavior outside of the U.S.... for a long, for a long time. I would say when we first got launched our streaming service globally, it was barely had subtitles and dubs in some of the content. You had to have a international credit card. So basically, if you lived somewhere else, spoke English, you had a international credit card, this service was for you. To where we are today with local payment, local payment and local creation, that we're a relevant media player in almost every country we operate in today. So, I think that's...
We followed the same path, but on a much more accelerated basis in the last three to five years, of building up our international programming. So programming, but also the thing that's the hardest, which is the product-market fit. Is this the right price? Is it... are we addressing the fans with the right programming that they need, that they say, "Yeah, I'm willing to pay for that. And more than that, I'm willing to pay for it every month, and I'm willing to come back because I expect you're gonna entertain me next month?" So that product-market fit is different in every country.
The one thing about the scale of the business is that when we first launched, when we did Latin America first, and what we learned first is that almost no Latin American country is like one another. So the chances that we're gonna learn something in Latin America that's gonna help us in Europe is very low.
Yeah.
Then we figured out that once you get to Europe, you're hardly learning anything in Germany that helps you in the U.K. So it's actually being on the ground and having people on the ground running those businesses that understand the local culture, the local ecosystem, the local payment methods, all those things, that really do vary country to country, and we've been able to build on that scale by investing in those international—in that international presence.
It feels like a lot of. I think we're just at the beginning of this, but when you talk about sort of what's going on in the traditional media ecosystem, potentially pushing down content spend, raising prices, do more licensing, I think as part of that, there's just the early stages of pulling out of local language programming. I mean, are you seeing that? I mean, there's not a lot of local language programming anyway in the other studios.
Yeah. Yeah.
It sounds like if there's gonna be some content rationalization, that's where it happens first.
It does feel that way, and I think it's probably more of a DNA thing of the American studios. So most of them have run their international businesses from Southern California.
Right.
There are some on-the-ground folks, but most of the decision-making is made in Southern California. I really pride myself on what we've been able to do in terms of putting decision-making in territory. Nobody in Los Angeles or Los Gatos would have made Squid Game.
Right.
It took their folks in Korea to understand that. They wouldn't have made it... If we did make it, we would have never made it as well. So I do think it's that there really is part of the global DNA that we've had, probably that we didn't have 100 years of legacy of managing it from California.
Right.
It's another one of, kind of the benefit of that for us.
And the last one, the sort of ecosystem, there's definitely the first signs of consolidation. So you saw, Paramount and Showtime being put together, the bigger one in the United States here. You know, sometime early next year, Disney and Hulu. Hulu is effectively gonna go away. It'll be one service. And now, at least thematically here in the media, there's talk of you know, companies getting together, and-
Yeah
... I mean, do you guys see that as a positive thing? I mean, there'd be one less service, maybe a higher price service in Disney+ -
Yeah
... but they're just less, it's just less crowded.
Yeah, I don't know if it fundamentally changes much. I think, like I said, you forget that people are migrating from a universe of 500 channels.
Yeah.
Switching apps is not that much more complicated than switching channels.
Right.
So I do think, you know, in some ways, I don't know that it really. If it's the same offering at roughly the same economics, I don't know what it does really to the consumer landscape. So in general, I don't know that it could be that, you know, change that much for us. They'll find some scale in the business, all those things that are not really consumer-facing, they'll find improvements on. But in terms of being more competitive, I'm not sure how that plays out.
Gotcha. I see. Maybe a couple on password sharing. On the call, Spence suggested that the solution to password sharing should drive subscriber growth for the next several quarters.
Yeah.
So, why is it happening over sort of a protracted amount of time? And then maybe, you know, you guys put out that number of 100 million. I mean, how are you guys at sort of getting to where you guys thought you'd be in terms of monetizing that 100 million?
completely satisfied with the pace of it, and deliberately, it's rolling out- rolled out slow because what I just said about country to country learnings-
Right
... imagine country to country, device to device, household to household differences in how you do things, how you nuance the language, how you nuance the offer, how you pace it out, being locally compliant with regulatory models that have, that, that have impact some of these things. So it's good to, it was good to take it slow, and that's what we're doing. I think we're so that's, that is why we're not just to do it in one fell swoop. We get to learn from it. Everyone at our core, we're an AB test culture. This kind of give us a series of AB tests that we could do around the world on this.
Gotcha. And, I mentioned sports earlier. Obviously, it's really what drives viewership and still, I think, subscribers on the, on the linear bundle, increasingly. You guys recently hosted your first live sporting event.
Did you watch?
I did not watch.
Ah.
I'm a golf fan.
Anyone, any golfers watched the Netflix Cup? Not a one. All right.
Well, it was during the day, right? And I believe during-
It was a Tuesday afternoon, yes.
I'm an F1 fan, too.
Yeah.
I was, like, right in my-
Yeah
... in the daily-
You already woke up at 3:00 A.M. to watch Formula 1.
Yeah, exactly. Yeah. So are you guys. Should we expect more of that? I mean, it, it seems like you guys are slowly, you know, finding opportunities. Well, really, not just sports, but live in general.
Yeah, look, on sports itself, I mean, one thing that I think we really have found our groove on is the sports adjacent, kind of the drama.
Beckham was another one, which is-
Beckham was a monster. And figure, Beckham is one of the biggest stars in the world. The guy is one of the most recognizable faces and names on the planet, and he gets a show on Netflix, and his social media grows by 1 million in one week.
Wow.
So this is, again, that distribution platform, that recommendation-
Should be paying you.
Exactly!
We got to make it right.
Sending us a check. But we look at that and say, what people really care about is these, like, in sports, of course, they want to see the match... but between the matches, there's an unbelievable wealth of stories, and we've done so great in terms. And again, back to virtuous cycle. The PGA for Full Swing, the PGA has been around for a long time. Right after the Full Swing came on Netflix, the attendance of the PGA, the PGA matches all went up. The viewing of the championship went up by 3.5%, or 30%, sorry, 30% in the U.S. So enormous lift in viewers.
The folks who, every time we do one of these shows, the athletes are a little skittish about, "Do I get in or not?" So the first season athletes are generally not always the most known.
Right.
What happened was, the week after Full Swing premiered on Netflix, all of a sudden the gallery following those athletes grew up. Remember, they have to get up early, they start golfing at 6:00 A.M. in these rounds. They all of a sudden show up, and there's an enormous gallery of fans. Their social media climbs, their endorsement money grows. So if you talked about Formula 1, since Drive to Survive, we all know the value of what it's done to the sport, but the value of each individual team has skyrocketed as well, and the revenue from sponsorship has skyrocketed from all that. So for me, there's a very lucrative business for us to help grow- help them grow the league, and then for us to tell the stories. That's something that we can outcompete everybody on.
So if I'm a network and I lose the NFL to another network, that other network's gonna do just fine carrying that sport, and the fans are all gonna move from network A to network B. So for me, it's like, where we can really differentiate and outcompete everybody is in the storytelling of sports, the drama of sports. And we are even something as, like, Tour de France.
Yeah, how does that-
The Tour de France. Unbelievable, and most of it in French.
Did you guys do this most recent tour, or no?
It's coming up. We'll see it, yeah.
That should be phenomenal.
Well, that's-
The tour was at-
... the fun part about these shows is when something happens on the court or on the field, people start saying, "Now, I can't wait to see that on the show.
Right.
That's what happened with, with Hamilton's-
Yeah
- controversy last year.
Now we-
Oh, I can't wait to see that on Drive to Survive.
Yeah.
So, that's a fun thing that we get to do, that we really add value to, to the athlete, to the sport, and to the fan, and that we are differentially good at it. I mean, there are sports reality shows on every, you know, on a lot of places, but none of them have fundamentally transformed the sport that they're covering the way we have.
Right. And then maybe taking that to live, should we see not just sort of some shoulder content and maybe some sort of, you know, opportunities where... But more, do we expect to see more live content that brings audiences together?
Yeah, what I'm trying to do—what we're trying to do with live, and Bela Bajaria, the Chief Content Officer, is kind of running this with her team on what, how they program. And the key where I said is, let's focus where live actually is the creative part of it. Well, why is the liveness better? You know, why is this better because it's live? And if it's actually better because it's live, then let's do it live. Chris Rock's Selective Outrage as an example, it was enormous. Relative to his last comedy special, was... Not only was the viewing much higher, but the coverage of the event itself was enormous. Now, that's—you know, people were waiting for a year to hear Chris, you know, give his redo and tell what happened at the Oscars.
Right.
He was incredibly disciplined, not telling it elsewhere until the special came on, but it created a real live event. The Netflix Cup, yes, it was Tuesday afternoon, and it was a good way for us to cut our, cut our teeth around it. But a beautiful thing happened on that Tuesday afternoon. On the fifth hole of the Netflix Cup, it's called the Squid Game hole, and there was... For that 15 or 20 minutes of television, you have competitors from Full Swing and Drive to Survive playing against each other. You've got Bert Kreischer, who's a Netflix discovery, really, on our Netflix Is a Joke brand, calling the action. You've got the characters from Squid Game lining the hole.
You've got the red light, green light doll's head on the Sphere in Vegas, just wrapping around, freaking everybody out. And you've got a $4.56 million hole-in-one for the hole-in-one prize on the hole. It was like this perfect-
Yeah
You know, coming together of all of our brands, our entertainment, our sports, and our comedy brand in one—in one place. And the thing that they did so beautifully for the Netflix Cup is, and something that's almost impossible, make something big in the middle of something huge. So Formula 1 in Vegas was huge, and I'm telling you, during that Netflix Cup, we had a huge event going on in Vegas. And advertisers loved it. They loved being part of it. They loved the brand integrations. So I think you'll see more of it. And I think, again, the liveness of it, you know, on Tuesday afternoon, not so exciting, but I think on, you know, on Sunday afternoon, a bit of a different story.
And, and so it gave us the ability to cut our teeth on something like that and really realize the potential of all the creative aspects of covering something like that.
Gotcha. One quick question on video games. Just sort of, again, almost similar to the ad tier, are you guys sort of where you expected to be? I mentioned the GTA licensing. Should we expect to see more of that kind of thing? And do you- At this point, do you guys still feel that the organic path is better than sort of a... Especially, I know you made a bunch of smaller acquisitions, but, like, sort of a bigger, more, you know, sort of fulsome-
Yeah, look, I think the bet here is that the engaging games. Again, back to what I said about advertising, world-building, storytelling, engagement, brand fandom, all the things that's right, right, that are right in our core. They certainly attract a different demographic. I think it's kind of. I think because one of our really popular games we had was our version of Too Hot to Handle. What was great about that game is that. Now, again, these are pretty small numbers. We're new at that. But a bunch of the folks who played the Too Hot to Handle game had not yet seen the show, and actually had so much fun playing the game, that they started watching the show. So a really nice kind of IP development that we can do.
Again, ways to bridge season-to-season engagement with the brands. And that brand and that retention and that, you know, gives us kind of increased value for Netflix, for the gamer. And it scratches a little bit of the user-generated itch with folks, 'cause while you're not actually on Too Hot to Handle, you're playing Too Hot to Handle with the game. So I think there's a bunch of positives in the business around it. We've acquired some game studios that produce these originals, and we also like our other content verticals, you know, a mix between licensing and original programming. And I do think it's the way you should think about it is, how you're watching it, is, you know, just like you do with unscripted, like we did on film.
Have I heard of these games? Are people talking about them yet? And that'll increase, and that's increased. It's a good way to give you a sense of, are we getting into the ecosystem, you know, with these games? And if they are, then we're adding value.
Okay. And now my last question: How do we think of sort of spending on initiatives like this or new content versus just overall margin expansion? How do you balance the two? Because, you know, that's, you can spend more and maybe margins come down, but you get more growth. I mean, how, how, how-
Yeah, like I said, I think we've had a healthy margin expansion and grown content spend, and grown our content offering. Because I think what happens is it really is self-fulfilling. As we've added more programming, more at bats, then you get better and better and better at doing it. I think if you get small improvements in the programming, you get more usage out of the programming you have, so the ability to invest becomes more and more efficient. With the size of our distribution platform, a creator could monetize better with us than almost anyone on the planet, which is... So that's why we have to keep chasing, and I think we can do both. I think we've been disciplined enough to do both.
Very few companies, I think, are built to do both, you know, spend and grow really fast and expand margin, but we've been doing it. As you said, we've gone from, you know, from 4% to 20% in our margin. So I do think that we're, we're gonna committed to do both, and we know whether we can, whether we can.
Great.
Is that it, really?
That's it.
Right.
We reached the end of our time. Almost the end.
I would like to, if you don't mind, stealing the last couple of minutes. There was a lot of your first question, like, you know, how are you feeling about the slate and everything with the strike and other things? First, I should also note that we're mostly just thrilled that the strike is behind us and getting back to what we do best and what our writers and actors do best, and all of our below-the-line folks, which is make great stories for the world. So I'm really excited about that. And we do have a great year coming up, so if I can take a few minutes to indulge me, and if we can kinda stop the live stream, and I can share with you guys in the room anyway a look at what we got coming up.