Welcome to
the Netflix Q2 2017 Earnings Call. I'm David Wells, CFO. I'm joined today on the company side by Reed Hastings, our CEO and Ted Sarandos, our Chief Content Officer. Even viewing us today will be Doug Mitchelson from UBS. We're going to try something little different and have one interviewer just for a little bit more continuity.
And I think Doug will have our first question being our only interviewer. Before we get started, we will be making forward looking statements, so actual results may vary. Doug, over to you for our first question.
Thank you so much, David. I wanted to start simply by asking if there's anything notable in the quarter. We need to develop 5,000,000 net adds in Q2, all
time record for 5,000,000 net adds in Q2, all time record for Q2s, up sequentially from Q1, I mean, notable beyond that. I think we're just seeing that the rewards of doing great content focused on the quality of the service are paying off.
I think I went through some of the points that you guys have in the letter this quarter. And one of the first ones that caught my eye was due to our amazing content. So, Tez, would you put that amazing in there? Can you update and give us some thoughts around how content includes the quarter?
Look, I think it was the combination of a lot of great things. 13 reasons why, started right at the end of the quarter, rolled into some of our biggest content brands, new seasons of House of Cards, Orange Is The New Black, ending the quarter with Ocha. So I just I think it was the combination of a lot different things, kind of a reinforcement that as long as we're programming to a wide variety of taste that we and keep the quality level high, that we can turn some success off of that.
I think congratulations on all the Emmy nominations to the company and to you specifically, Fred, 91, someone other kind of role there?
Thank you. That's definitely
a team effort. Beyond my own content team, the marketing and PR groups and everyone who kind of makes that happen, it's hard to forget that it is a race. So it is a big campaign that attaches to that stuff too. But 91 nominations is an all time record for us and we're thrilled.
I continue to add a little bit, David, to you. You note that our 3 key guidance assumes much of the 2 key momentum will continue. You said you're cognizant the lessons in the prior quarters where mobile forecasting was lumpiness in that app. So can we take this to mean that the 3rd quarter includes that, your average income or
I think back to your earlier question about what lessons in the last 90 days have held for us. And one of them is our business is a little bit tough to predict given the success of content and the popularity of content. We still think the major driver is adoption of Internet television. But on top of that, we're increasingly growing throughout the world. So we're getting more word-of-mouth in our newer territories.
And we're seeing great content states have an effect like they did in the Q2. So I think you can take that line to mean that our forward guidance assumes continued good trends and continued great trends. But we're a little bit cognizant of other quarters where we've either under or over forecasted because some of that demand was pulled forward by a great content slate. In this case, in the Q2, we had a really strong content slate.
And would you be able you had some kind of expectations that you're talking about margins being on track for a full year 7%. Does that suggest that with subs and therefore like the revenue coming more than expected, you are choosing to invest more and maintain that margin target?
Yes. So we had a 9% margin in the Q1 and we had a lot of content come on in this quarter. So we got it down to 5%. So on the 1st 6 months, we're running right on our target of 7% and our guide is right on 7%. So you can take from that that we're going to reinvest and plow back in the business sort of any over forecasted growth that we have on the top line.
And David, one more for you. You called out ungrandfathering impact in the Q4. I think you had some price increase sort of plus that was impacting TQ and ungrandfathering again in 4Q. Is there any
I think last year, what we found was because of the PR and the news around the price change in the Q2, which actually didn't happen around grandfather until the 3rd Q4, we had a real blended effect through the year. So it's hard to tease out exactly which quarter we saw effects on both acquisition and retention. We do know that the comping off of last year, we think we will have less noise this year. I think that's pretty clear. So I would say it was a medium in terms of size and impact on the business from last year.
Over the weekend, sure you tell me based on the results you just reported, you did well everywhere. But in particular, it looks like Europe is really hitting greater mass and every country in Europe is different. So I thought I'd sort of try to pin on Germany as an example, particularly I think Germany is kind of a tough market for U. S. Companies.
Consumers over there don't like to pay for TV. They don't watch as much TV. Obviously, English is not their local language. Amazon was at first as well, so it was a competitive dynamic. It looks based on eye tracking, we're actually surpassing Amazon, at least in terms of app downloads, if not, subs.
Is that the right are you at the point where you're taking leadership in domain? Can you talk a little bit about what you've done right and what you're doing right? Is that market really geosynthetic?
Doug, Amazon is super successful around the world. If you look at U. S. With Prime, incredibly successful. It just doesn't seem to take away from us.
So I wouldn't characterize it as us versus Amazon in Germany. I would really characterize it as can we have a service that's so great that Germans find it worthwhile paying for. And clearly, we're succeeding at that, making our service better and better. In particular, there's no advertisements on Netflix. And so it's great for kids.
It's great for teens. And then the great content is so significant in helping those the growth that you're picking up. But as you suggested, we're really seeing that around the world, whether it's Brazil or Argentina or Japan, Singapore or Germany, Internet TV is really catching on for us, for YouTube, for others.
And I guess what I'm trying to get to, Reed, is you launched 2.5 years ago. I think when you launched, you better off than that. It will take some time, but you figure the markets in Europe out and eventually you're going to have single levels of success. Does still hold and could you look forward to for the year or 4? There's decent starts in terms of progress, but you really hit the point where you reach the same velocity and you think those markets would be more strong markets going forward?
Well, I think all throughout the West, so Latin America, North America and Europe, we're doing very well. We just had to continue what we're doing, more local productions. We've got some amazing new shows we're producing in Europe and in Latin America. With Asia, we've got a lot more to learn. We're really expanding a lot in India, Japan.
We're figuring it out market by market. But Asia is very unique and very large. So we see a huge opportunity for us over the next couple of years, all of us spending more time there and investing more.
You know, we just continue along that line because Asia is so diverse and you think about Saudi Arabia and Thailand and India, they're all very different markets. How do you prioritize your investments in the Asia power, Asia power?
We look at market size. We look at growth of Internet, kind of all the factors that we've always looked at around the world. And so then we're able to prioritize in what we're doing. And we saw some great success, for example, this quarter with OCHA. And maybe, Ted, you want to describe a little bit of that.
Yes. I mean, Okja is directed by Bong Joon Ho, who is the most celebrated director in Korea and is a huge star and an attraction in and of himself, but also the movie itself is the one of the most ambitious productions in the history of Korea. His films tend to travel around the world pretty well, made a ton of noise at the Cannes Film Festival, is the most talked about film of the festival. So it helped in attract new subscribers also, but it also brings a brand here to Netflix that it's a place for great content we're paying for. And I think we saw some of that benefit throughout Europe and in pockets of Asia where we saw big sign ups in Korea.
But remember, for most people, they've learned about Netflix for the first time when Okja was coming out in Korea. So relative to the rest of the world, we've got a lot of work to do. But it was a great introduction to Netflix for a lot of the world.
Well, and so to carry my thought that we just mentioned more local content, particularly in
Yes. And even more so, Doug, it's think about local content for global audiences. So the idea that's a fantastic story that we'll make a Korean movie for Korea, but it's even a bigger story that the movie is getting watched by the millions all around the world.
So, Ken, can you talk a little bit about how you're expanding multi site policies? Is the size of the team? Is there a capacity growth? Is there growth? Is there a growth in percentage of budget
being out there? Yes. As we mentioned, matching the program into local taste is really the key. And we've seen it in our expansion through Latin America, our expansion to Europe. And as we look to Asia, we have to get better and better at matching those tastes.
And those tastes are not as easily aligned with Western tastes. So we'll invest more time and energy in Asia, putting some people on the ground in Asia that we haven't historically. But it's well within the how we've looked at the size of the TVs generally, but locating them more likely outside of the U. S. As we continue to grow for local audiences in Asia and throughout the rest of Europe.
And Doug, just to round out Ted's answer, all those things that you mentioned are involved in that. So it's growth of the acquisition and development teams. It's also budget. I mean, we already had in place growth in budget in many of these territories. So it's just trying to deploy that more efficiently.
And in some cases, it's adding on to the levels of investment. You asked about how we prioritize. Generally, when we see success, we try to add on to that until we reach a point where of diminishing returns. And so we're going to see success in some markets, we may up the content budget in those markets.
That makes sense. We read over the year, I think it's particularly on Asia. If you think about emerging markets broadly, they're certainly a lot from mobile. And curious if you can give us an update on the implications for strategy and assets that you have underway as you think about addressing mobile.
Absolutely, Doug. I mean, we've had great success on mobile in the developed markets like the U. S. And Europe and then throughout Latin America, now in Asia. And all of the Netflix service works extremely well on mobile.
We're continuing to get better and better at encoding efficiently our films and TV series so that it takes less and less network bandwidth and we're rising in popularity around the world. And that's paralleling the improvements that YouTube and others are doing to make video a natural part of mobile phones. And so that's just a continued evolution.
Is mobile message product, do you guys have different parts than what we see right now?
No. Multiples just 4 or 5 inches screen for us with a great touch interface. And it's very similar to what you see on an iPad to the television. So think of it as there's just many screens that you can enjoy Netflix on. I'm afraid that guy can't hear you anymore.
It seems to be some AV problem.
So the signal data? What? Dan, are you getting now?
Barely.
No, we'll see. We've been very successful getting to beginnings of a mass model product in Latin America, where you've got a lot of fairly developed economies. We'll see in Asia what we can do with that. But for the first couple of years, it's focused on more high end Western oriented elites. And then as we grow into that, we can think about expanding beyond that.
Ted, back over to you. In the beginning of the year, you talked about having a strong software content site. Is your feeling that the content site is settling out the way you thought and there is a strong second half? In any titles that you
There's a lot to be really excited about in the second half in terms of our content releases. Starting as early as next week, we have a great show called Ozark, starring Jason Bateman that we're really excited to launch. And then in August, we'll we have the release of Death Note, a great new film that we're going to panel at Comic Con this week. And also in August, The Defenders, which brings together all of the characters from Marvel's Defenders, Jessica Jones, Luke Cage, Daredevil and Iron Fist for an incredible season that people are really excited about. And of course, throughout the year, we have things that will lead up to Bright at the end of the year, which is a huge film with Will Smith that will be only available on Netflix that we're incredibly excited about.
Ted, what do you think Lee means when he says he wants you to be able
If you're not failing, maybe you're not trying hard enough. So when we have a good hit rate and even with the recent cancellations where 93% of our shows have been renewed. So you want to be introspective and look at that and say, are we being the adventurous enough, daredevil, we're trying new things. And I think when you think of things when you have a very high hit ratio, you definitely want to keep second guessing yourself even though you do.
David, when we think about potential for more and more regional shopping for Easter for likely more and more cancellations over time, is there any impact on the financials that we should think about? And secondly and importantly, is the meeting that you're expecting, whether it's license content or it's regional content, whether it's meetings that you're putting out consistent with the amortization schedule that you have in place?
Yes. And I think where you've raised a good point, which is the more shows we add, the more network television, about twothree of the about onethree of the content, on network television about 2 thirds of the about a third of the content gets cut in the 1st season versus our content, which is mostly renewed. And it's not because we're less careful about it, it's because we can more efficiently build it and not 100% of the time. So we want to launch shows, we love that there's a deep passion fan base for a show, we just need it to be big enough to support the economics of that show, so we don't create opportunity costs for future fans of new shows.
And Doug, just to take the sort of accounting oriented part of that question, I would say no, we don't anticipate right now. I mean, we look at this constantly. Every quarter we look at the trends. Many of these shows, even if they're not picked up for renewal, they may have a story arc that completes the narrative. And so it really is for us is about the sort of continuity of viewing over the life of the show.
So even if some of that viewing is concentrated as our amortization methodology reflects upfront in the sort of first release, the 1st month of release of that content on the site, it may have sort of steady viewing over the life. And if it does, then to be sort of reflective of those trends. If it's really concentrated, then yes, sure, we would have to reflect that. But many of the non renewals get wrapped up. Bloodline is an example, something that got wrapped up
in a narrative. We're going
to do a movie wrap up on Sense8. And so I think overall, you'll see us try to wrap the narratives on these.
And I have some questions on content. I want to set up lead with a question for you in the past, Steve, John, cohost between Netflix and HBO, and that implies Netflix and TV network. I think even the letter this quarter that talked about that, the TV network sort of plays out.
I think about it more like a super network. We're talking about addressing content desires and needs across the board, as you mentioned on scripted, but also kids and films. This year at the Emmy, just as an example, we have 5 different series nominated for best comedy or drama. We also have 2 documentary series nominated for Best Documentary Series, 2 documentary films, DocumentNet nominated for Best Documentary Film. We won 10 Daytime Emmys for our kids programming.
So we are doing across the board programming, not programming for 1 niche, which networks tend to do.
And then for me, is it a question on
Well, every piece of content that we do is important, and we try to have that content flourish around the world. But in terms of the overall investment levels, we're continuing to see increased median viewing compared to a year ago, 2 years ago, 3 years ago, as we're winning a few more of the moments of truth of what you do to relax. But still, we're such a small player in our viewing compared to linear TV, compared to YouTube. So we've got a long way to go to have more and more content to please more and more members and continue to grow. And what you see us doing as we grow is also improving our margins.
So we're getting some efficiency out of that as opposed to spending every dollar in the content. But we are growing the content budget significantly also because of the opportunity that we see.
Ted, sort of back to you in terms of strategy for how you're producing content. When you think about the fact that MethodStyle can self produce titles, you can license exclusive originals from higher studios. You can license 3rd party. You can license DRMs. Where do you see the growth return at this point in time?
And how do you see the stock? How are you responding to your strategy of self producing a few shows at this point?
The success we've had with our self produced shows has given us a lot more confidence to expand it. Because we're a global network, those rights are really important in terms of being able to control our destiny, when we can make shows available, in what formats to make them available. So and beyond that, there's an economic trade off, which is there's a big studio margin that we get we're able to put on the screen and make better shows when we produce it ourselves. So a show like Stranger Things, when it becomes a big cultural phenomenon, we'd like to be able to control the destiny of those brands as we continue to invest in them. But at the same time, we want to lean on putting the best programming possible on the air.
So not being dogmatic about which shows we pick depending on their business model, but being really careful about picking shows that are great regardless of their business model. But you'll see us do a lot more of self producing whatever we can.
And so last question, this series on contract fed. Without him asking us every quarter forever, but any issues on either cost of content or access to the best shows with fewer employers. Obviously, Apple hired to work for some of the executives. You have Facebook announced they're buying some original content. Others continue to expand.
And we certainly continue very well and the enemies are sort of proof of the quality of content. But on the margin, do you think could that cost wise more than you'd like to some projects go to others that
Look, I think Internet television is the enormous space. There's going to be lots of competition. And as they come in, they're going to bid up the cost of the best stuff, which is great. It's great for consumers, because more things get made. And it's great for creators, because there's more buyers at the table.
So we expect the content cost to go up on the top premium things. But I think I said, I think that's a good result for everybody.
And that, of course, brings in new capacity. Like you saw headlines today that Liberty Global and TPG were forming a new television studio to produce shows for all this new market. So as the prices go up, there's more capacity because there's a very large numbers of writers out there.
In the letter, it talks pretty explicitly about expanding distribution relationships, whether it's broadband providers or pay for new providers, the family and Netflix service. And I guess two questions there. We need to first, what about the reverse? Do you see Netflix as a platform that can bundle other video services and sell data on profit and make a margin? And second as part of that, any specifics behind the front made in the letter that you expect to significantly expand these efforts?
There are several companies who are selling networks on top of their platform. So Hulu is doing that. Amazon is doing that. We don't see that as a business direction for us. We're really focused on making our network as great as it possibly can be.
And then as you point out, we're now looking at proposals for including Netflix in some services and beginning to learn the bundling part of the business. We're doing a little bit of that in Europe already, and it's been quite successful. Thus, we're interested in expanding that.
And shifting over to David and ASPs. I think in the past you've talked about mid single digit being a sort of big aspirational point we consider. And when we look at the tiers that you have, it seems like the base tier is relatively tied in price to the middle tier and the upper tier. Number 2, are there other ways to differentiate those tiers to create more value and have that be an even bigger part of ASP growth in the future?
Well, Doug, I'm not sure I heard the first part of your question on ASP. So just repeat that first part.
So for our ASPs, I've seen in the past, you've said that mid single digit large longer term is the right way for investors to think about Netflix's pricing potential?
That's correct. So if you're just looking for clarity there, yes, that's an easy
answer. And when we think about the tiers that you're doing it out in price, the mid sized tier and the higher priced tier, I feel like they're relatively close in price to the base tier. Is there other ways that you're considering to add value to the higher priced tiers to have tiering up to be an increasing part of that ASP growth? Well,
I don't think so. I mean, right now, I would say we do see success people taking the upper tier with just the differentiation of concurrent streams and high definition. So I think we don't think necessarily that we need to add more value. We have the flexibility to add more value in terms of that tier differentiation. But honestly, we think there's progressive growth just from thinking about differentiating those tiers on price point a little more in terms of middle and upper.
And then in terms of an expectation of ASP growth, that's reasonable in terms of what you outlined. Now we are lapping the un grandfathering of last year.
So you are
seeing sort of revenue on a year over year basis or ASP on a year over year basis start to reflect that lapping of a large pool of un grandfathers coming off.
And Doug, we're super proud that we've been able to maintain this $8 access point in the U. S. Or €8 in Europe, which we've had in place since 2010. So all of this decade, Netflix has been available for $8 And when you think about the content increase over the last 7 years, it's phenomenal and it's still $8 a month at the base level. And we're getting the ASP growth as people optionally select to get HD and Ultra HD, which are amazing new formats that have come on.
But again, a key part of the successful strategy is that we're staying very, very affordable for people.
Yes. It's interesting because you mentioned sort of growth in content and the service lead and you mentioned that the median time spent has been increasing. Are newer customers that are coming out of the service this year behaving similar to new customers 3 years ago or 4 years ago or
Similar and better. I mean, they're watching more.
More engaged, yes.
Yes, more engaged. Again, that's a combination of the user interface, the algorithms with the personalization and of course the content itself. And so it's very exciting that we've been able to see even higher engagement with members now compared to last year and the prior years.
David, I want to circle back on churn. You talked about the un grandfathering churn. I'm just curious if you could sort of help investors understand how churn has evolved over time? And do you see new opportunities to improve Trunk and here? And what specifically those opportunities might be?
Well, we generally talk about net additions just because the fluidity of somebody coming back on the service, it's hard to parse the 2 pieces. I've made comments in the past that generally year over year churn has improved as we improve the service, as we add more content, as subscribers age up. But more and more as our word-of-mouth and as we penetrate close to 50% in the U. S. Today, those lines are fairly indistinct in terms of who's a rejoin or not and somebody may have been a member of the service 12, 14, 18 months ago.
So I would say in giving answering the spirit of the question, we continue to improve the quality of the service with more content, with a better interface, all the things that we just about in terms of driving value to the middle and upper tier to have people choose and electively choose a more robust service, I'd say that continues. And then outside the U. S. As we age, we usually the pattern there is to improve the quality of the library. We better match the taste and that includes both Western content for that local audience and a little bit of local content as well that Ted talked about earlier.
So we expect to improve churn outside the U. S. As we get better and better in these markets.
Speaking with you, David, on the mortgage side, you've in the last letter, in this letter, talked about a 7% margin target this year and modest expansion thereafter. Can't that help investors out at all in terms of understanding what that pace of margin expansion might be relative to investment opportunities that you have?
Well, we're focused on making the 7% this year. We know that we'll clarify that towards October. But we want to balance both growth of the business and reinvestment back in the business, given that we're seeing some great returns on that content, given the growth that we experienced this last quarter with sort of a disciplined growth of profit. We also know that you can't just hockey stick it in 3 to 5 years and expect the business to be in the right place. So I think it's a bit of a balance and right now that 7% with sort of consistent and deliberate growth after that is the right guidance for our investors.
And if you remember, last year, we were at 4%. So you might be able to apply something there.
Yes. Thank you, Reed. I appreciate that. What would be helpful as well sort of getting the details a little bit on it, David, is can you bring the margin progression in terms of where the leverage comes in the cost structure? Is it content side, the marketing side, G and A, tech and breadth?
Where should we see the most leverage in the cost structure every time?
Well, to date, it's really just been about as we expand globally and people watch a lot of the same content. Ted talked about cost pressures in terms of as more people pile in at the top end of the market on the unit cost of content costs, but we've been able to grow even faster than that. So we're able to expand both our content spending and our margin at the same time because we're growing faster than that content. And we expect that to continue forward for the foreseeable future. We are leveraging marketing.
We're spending more on an absolute basis on marketing as we become more and more
of a media company. But on
a percent of revenue basis, we're leveraging there. And G and A and Tech and Dev has kind of run a little bit in line with revenue as we expand internationally and as we become more of a full fledged studio and a bigger and at scale studio. So it's pressured there in terms of adding people. But I do anticipate the ability to leverage some of
that down the road.
The free cash flow burn is sort of an interesting comment. And you mentioned cost occurred in the letter, you mentioned it disciplined in the letter. I think similar to margins, investors are trying to read between the lines, understand how free cash flow burn might progress over the next few years. 1st, I think, actually, for me, now the comfort level with this level of negative free cash flow? And David, any sense you can give investors as to, do you carry forward at these elevated levels?
Does it get better? Does it take a while to get to or even any help in DC?
Look, when we produce an amazing show like Stranger Things, that's a lot of capital upfront, and then you get a payout over it over many years. And seeing the positive returns on that for the business as a whole is what makes us comfortable that we should continue to invest and integrate to basically self develop many more properties as they can find the appropriate ones. And then there's comfort with being able to finance it. And of course, our debt to market cap is incredibly low and conservative. So we got lots of room there.
And I think that combination that it's spent well and we can raise it is what makes us very excited. And the irony is the faster that we grow and the faster we grow the owned originals, the more drawn on free cash flow that will be. So in some senses, the negative free cash flow will be an indicator of enormous success.
And then to annotate your second part of your question, like Reed said, this is a success scenario in the sense of as we scale and if we're scaling reinvest part of that back into the content and that has implications on the cash side. So for us, as we've seen success with both the popularity of our owned originals, we've expanded into other content verticals. And as we scale faster, as we grow faster globally, that has implications. That said, we gave you an indication of around $2,000,000,000 this time we've updated that to be between 2% and 2.5%. Percent.
So you can think about that as a 10% to 15%. And you put that in line and compare that with our subscriber growth on the top line, you kind of get some indication that we're still being very disciplined about the efficiency of our content cohort investments. And we're looking at how those shows perform over time. But if we have a bigger prize and if we see a bigger prize with the growth of the globe, that's going to have some implication on the cash flow side.
A couple more for Paul and then I think we'll wrap up with you. Ted, one question I get a lot is the investments in movies. And I think all of it is for the TV series, it's a brand that goes forward, there's a year after year episodes, virtually there's one time for phone. It's going to be very expensive as well and we're taking a non traditional approach. And I think in the letter you talked about we believe Internet TV can reinvigorate the phone business.
So, 1, property settlement in your phone strategy at this point? And 2, any thoughts behind the statement in the letter would be helpful?
Well, look, I we're doing a lot in the film space for a lot of the same reasons we're doing it in the television space, which is access to great content when consumers want it around the world. So we think it's a good investment. We're trying a lot of different things. Some of them work out great. Some of them work out not so great.
We've learned from every single one of them. And so we're going to continue to invest in that space because we can bring films to our members when they want them, which is when the world is talking about them. And that's almost impossible to do with a studio partner. So that's why we're pushing down that road. I think that in success, our films will be able to attract subscribers and retain subscribers the way our series have, and that's why we're working so hard at it.
Another question I get, I think it's just noticeable, is the investment you made in comedy, and we talked a bit about that last quarter, Ted. But is there something behind that strategy in terms of forming personal relationships where comedians who also might be actors in TV shows movies? Or is it simply or so keep investing more?
Yes. The category is remarkably efficient even at the premiums that you have to get the superstar talent attached to them, because it gets a big audience. They get watched like movies. And just think about it that the main cost of them is the talent themselves versus the cost of production. And it's been also a great way to invest in content partners because as like Chris Rock by way of example is getting ready to shoot a special for Netflix.
He is right now starring in the next Adam Sandler movie that's being shot right now in New York. So we're really excited about being able to work with great talent like Aziz Ansari, like we did with Chelsea across the entire platform whenever we can.
And shifting over to me, as Melissa said, over 1,000,000,000 hours per week of view on the Netflix platform. Is that 1,100,000,000 or 1,200,000,000?
And climbing. And climbing. That's what we're working on.
No, I think I want to wrap up with a couple of questions. 1st, regulatory need, I think we've already expressed the opinion companies? I've seen a deal on Facebook. What's your approach to the military environment given these challenges?
Well, first on net neutrality, the recent effort that we participated in generated over 3,000,000 additional comments to the FCC demanding that the net neutrality rules stay in place, bringing the total to over 8,000,000 comments. So certainly, we, other companies, the public have weighed in heavily. We'll see where that goes. When you look at Europe, we're making big investments in local content, local productions, working well with local content companies. And so I think it will be a really different dynamic or we hope so with Netflix than maybe with other firms because just of the business structure.
We're able to take some great French and German and other content, Spanish this quarter and share it around the world and that creates big new markets. So think of us much more as trying to curate some of the world's best content and share it with the world versus the moniker of being a disruptive tech company.
And last question for me. You're talking a lot about the shift from media TV to on demand viewing. It's something that you talked a lot about, Reed. And you talked about how much media time and how many security services will be successful. And while that's going good, I imagine that Netflix not going to continue to be the leader in this category.
So this final question is, how does Netflix sustain and expand its leadership position? Because now the market opportunity might be good, I'm sure you're busy executing every day.
More watching, less sleep.
And what are you doing? And what is Netflix specifically doing to make sure that Netflix needs that no watch and less speed charge?
Well, again, I'm not sure we are leading it when you look how far ahead YouTube is. Now you might say, well, it's different content, but it's still very engaging for the audience that's choosing it. But we don't really focus on like who's ahead in certain things. What we focus on is doing our best work. And TED runs a lot of that with the content.
We're doing amazing work in product, making it easy to use, fast. And then finally, all these distribution agreements and marketing we're doing. So we're just improving around the whole company, growing what we have, and we're very excited about what we've accomplished. But what's ahead is also super exciting.
Thank you all very much. Thank you. Thanks, Doug. Thanks, sir.