Good afternoon, and welcome to Netflix Q1 2022 earnings interview. I'm Spencer Wang, VP of IR and Corporate Development. Joining me today are Co-CEO Reed Hastings, Co-CEO and Chief Content Officer Ted Sarandos, COO and Chief Product Officer Greg Peters, and CFO Spence Neumann. Our interviewer this quarter is Doug Anmuth from JP Morgan. As a reminder, we'll be making forward-looking statements and actual results may vary. With that, Doug, I'm gonna turn it over to you for the first question.
Great. Thanks, Spencer. Your tone in the letter today around competition, maturity, and macro factors is very different than it was three months ago. I was hoping that you could start out by just walking us through how your views have changed over the past few months.
Yeah, Doug, I mean, I think our views are a little different because our numbers are a little different. If we had made our 2.5 million guidance, I think that was consistent with our thesis, and the lower acquisition really forced us to kinda tease apart what's going on. As we put in the letter, you know, COVID created a lot of noise in how to read the situation, you know, boosted us a lot in 2020. In 2021, I think we, you know, thoughtfully said it was mostly pull forward, which was the logical conclusion. Now coming into 2022, that, you know, doesn't really hold. Pushing into it, we realized, you know, with all of the account sharing, which we've always had, that's not a new thing.
When you add that up together, we're getting pretty high market penetration, and that combined with the competition is really, you know, what we think is driving the lower acquisition and lower growth. On the two parts, we're working on how to monetize sharing. You know, we've been thinking about that for a couple years. You know, when we were growing fast, it wasn't the high priority to work on, and now we're working super hard on it. You know, remember these are over 100 million households that already are choosing to view Netflix. They love the service. We just gotta get paid, you know, to some degree for them. That's part of it. Then two, it's really, you know, we got great competition.
They've got some very good shows and films out, and what we gotta do is take it up a notch. I'll tell you that we're all pretty. I know it's disappointing for investors, and it is for sure. Internally, we're really geared up, and this is, like, our moment to shine. This is when it all matters, and we're super focused on achieving those objectives and getting back into our investors' good graces.
The only thing I might add, Reed, is just that we put a finer point on kind of elaborating on what we're seeing in terms of slowing growth and near-term slowing growth. The long-term addressable market we believe is unchanged in terms of all broadband households. It's just that we have a better sense that COVID clouded in terms of the near-term limiters to penetrate that growth and capture that market. That's one of the things that we put a finer point on this letter. I just wanna reinforce that the core addressable market is still there, and that's what we're still growing into, Doug.
Okay, thanks. Maybe just in terms of the recent trends, if we could talk about 1Q a little bit more. You lost 200,000 subscribers or gained 500,000 X the Russia removal. Hoping you could perhaps parse out a little bit around some of those factors that you mentioned. It sounds like acquisition might be at the top of the list and you've talked about that for a little while now. Hoping you could kinda isolate some of those factors and then talk to us about how that informs your 2Q guide for a loss of 2 million subscribers.
Sure. I'll take that and then others can fill in. As you said, Doug, we guided to 2.5 million paid net adds. We delivered 0.5 million if you exclude Russia. There's really a 2 million miss in our Q1 actuals versus guidance. What's really reflected there is acquisition growth was consistent with what we expected. We were seeing that slow down when we did the guide, and it played out as expected. The difference is really some slight elevated churn throughout Q1. This is pretty small, so retention was still very good, but we're talking about, like, 0.2-0.3 percentage point. On our big member base, that has a pretty big flow-through. It's a combination of factors there.
We talk about interrelated factors in the letter, but one very directly that Russia's invasion of Ukraine had some spillover effect in other parts of EMEA. We saw that in the Central and Eastern European countries where there was some elevated churn. We also saw probably some little bit more macro strain in some countries, some parts of the world, like Latin America, we mentioned that on the last call, but that was elevated. Just a little bit more seasonality in the business. We suspect some of that is those macro factors we mentioned and maybe a little bit of competition on the margin as well. That's really what we saw in Q2.
I'm sorry, in Q1, and that's really what's reflected in Q2, which is sort of the continued trends we're seeing in acquisition and this, you know, it's that slightly elevated churn to probably continue through the quarter. It's just a softer seasonal quarter for us typically, and that's what's reflected in the guide, a little bit of softer seasonality and essentially the same acquisition and retention trends.
Maybe I could pick it up and talk about the first two factors you want a little bit more detail on. You know, we have this addressable market that's expanding over time in every country that we're operating in. It's a bunch of enabling factors like, you know, broadband and smart TVs. Then in some countries that we're operating in, where we've been operating the longest, like the U.S. is a great example, we have really significant high penetration of viewers into that near-term market potential. That was really boosted by sort of this growth at the beginning period of COVID and the lockdown. Now, viewer penetration is made up of two groups.
One is a group that's paying us, which is great, and then there's a group of viewers that are not paying us, and they're sharing someone else's account credential. We really see that second group as a tremendous opportunity because they're clearly well-qualified. You know, they have everything they need to do to get to Netflix. They know what the service is. They found, you know, titles that they want to watch. Now our job is really to better translate that viewing and the value that those consumers are getting into revenue. The principal way we've got of going after that is asking our members to pay a bit more to share the service with folks outside their home.
If you've got a sister, let's say, that's living in a different city, you want to share Netflix with her, that's great. We're not trying to shut down that sharing, but we're gonna ask you to pay a bit more to be able to share with her, and so that she gets the benefit and the value of the service, but we also get the revenue associated with that viewing.
Maybe let's follow up on that a little bit more, Greg. We'll come back to some of the more recent trends in a moment. I guess when we think about account sharing and just you know curious about the early testing that you're doing when you think about Chile and Costa Rica and Peru. You know, I guess now it's pretty clear to see why it's the right time to do this in a bigger way, but how do you think about rolling that out in the U.S., and what will the implementation actually look like?
Yeah. I mean, first, it's important to note that we're trying to find a balanced approach here, and we're trying to basically come up with a model that supports, you know, a customer-centric approach that still puts members in charge, that supports member choice, that delivers great entertainment value and sort of all the options we've got. Also, very importantly, allows us to bring in revenue for everyone, who's viewing and who gets value from the entertainment that we're offering. Obviously we're doing that so that we can invest then in, you know, into more great content and a better service for everyone. There's a bunch of factors that we're working through. That's why we've deployed the tests that we have. You know, frankly, we've been working on this for, you know, about almost two years.
You know, about a year, a little bit over a year ago, we started doing some light test launches that we, you know, informed our thinking and helped us build the mechanisms that we're deploying now. We just did the first big country tests. It'll take a while to work this out and to get that balance right. Just to set your expectations, you know, my belief is that, you know, we're gonna go through a year or so of you know, iterating and then deploying all of that so that we get that, you know, sort of that solution globally launched, including markets like the United States.
Okay. That's helpful. Maybe Spence, just on that point, maybe if you could just walk through the accounting a little bit here. How do you think about the uplift, whether more of it would come from ARM or from subscribers, over time?
Yeah. That's great, Doug. You kinda nailed it, which is, as you heard from Greg, we're looking to monetize sharing and kinda meet our members where they are. You should expect that member numbers or subscriber numbers are sort of less relevant over time because it may and very likely show up in ARM. You should think about it as engagement and average revenue per member, probably increasingly important, and then obviously revenue growth, which we've always said we're trying to optimize both, yeah, near and long-term revenue growth to drive that, you know, positive flywheel of reinvestment in the business. It's not that there isn't going to be a P x Q. There's still a Q, but increasingly important is probably ARM and engagement and revenue overall.
Yep.
just to clarify there, sub-accounts will not count as subscribers. They'll just-
That's right. It's less distinctive of an individual household account.
Okay. In the process though, as some of those current sharers outside the household do not become sub-accounts, you'll pick up some of those subscribers separately in addition.
That's right. As Greg said, we're still working through the ultimate solution here, so we don't exactly know how that's gonna play out. You should assume that there's gonna have less importance on an individual household account number and therefore what's more important is revenue, viewing engagement, overall revenue growth, and ARM as a key metric.
Okay. Let's go back to acquisition for a minute. You noted it has not returned to pre-COVID levels. What are the ways that you can influence acquisition, you know, beyond account sharing, which we talked about, and then beyond, of course, just creating great content?
It shouldn't be more complicated than that. It shouldn't be any more complicated than that, Doug. Honestly, we've gotta compete, and we've got to continue to improve on the core service, which is making TV series and films and now games that people really love. That thing, that's what we're really focused on, and I think that that's a thing that I think we can continue to grow the business in. Now, we talked about being highly penetrated in some of those core markets with users, which means that it's harder to get them to join Netflix if they're already using Netflix, so we gotta figure out these different models that we're doing now to more effectively monetize that viewing. As Spence said earlier, the engagement is really key.
As you see in the Nielsen data that we published in the letter, our engagement has been super healthy. Even with this heightened levels of competition, our engagement, our viewing has been very, very steady, holding on to our market share in that space. On top of that, in the quarter, while we were not happy with the top-line subscriber growth, we definitely saw that the new season of Ozark, the Inventing Anna, this, The Adam Project, and certainly the biggest of them all, the new season of Bridgerton, delivered exactly as expected. Actually a little bit bigger than expected with our fans.
Now, of course, we think we've gotta do that, and we have to have The Adam Project and a Bridgerton every month, and to make sure that that's the expectation of the service constantly. We're definitely feeling you know, the higher levels of penetration in those markets of users, and we're definitely feeling a heightened level of competition for sure. We've just gotta continue to do what we're doing and improve each of those things. Now, how do you improve content? We've been doing this for a decade. Well, first of all, that's about 90 years less time than all of our competitors have been at it. I look at things like we've been doing over the last few years that we've been improving in. Big movies.
Just a few years ago, we were struggling to out-monetize the market on little art films. Today we're releasing some of the most popular and most watched movies in the world. Just over the last few months, things like Don't Look Up and Red Notice and The Adam Project as examples of that. That's just in a few years of improvement on one line of content. Another is unscripted. We made zero unscripted about three years ago, and today creating these big unscripted brands and growing original unscripted universes like Too Hot to Handle and Ultimatum, that's really popular right now around the world, Selling Sunset. These are kinda large, growing, original unscripted universes. We've come a long way from Ultimate Beastmaster, my point is. I think about things like our content in Korea.
Again, pretty new to the market. Everybody knows about Squid Game. It was probably the biggest show in the history of television. Just a few years ago, we were producing no original content in Korea. While we all know about Squid Game, there's D.P. and All of Us Are Dead and a slew of original content that are thrilling our members in South Korea and fans around the world. We're continuing to improve constantly and getting those moments that can lead to something like a Squid Game or a Bridgerton constantly.
Got it. Okay. I wanna go to pricing just for a moment. I mean, there's a lot of. You kinda have this confluence of trends basically that are taking place here. Greg, I was just hoping you could talk a little bit more about the recent price increases, primarily in the U.S. I know it's still early in the U.K., but I guess to what effect. You know, you did mention slightly elevated churn in 1 Q. I guess how much was that a factor? How is this price increase being received currently?
Top line is that the price changes, the last several price changes we've done are generally performing as we've seen the price changes over the last several years. There's no sort of fundamental difference in performance. First of all, these price changes are significantly revenue accretive, so that's an important top-level heuristic. We sometimes see a blip in churn. In some markets we also see a marginal impact on acquisition. Often these effects are transitory, so it's sort of a change effect and we, you know, move through it and win those folks back.
I would say the big takeaway is the vast majority of our members recognize that we're investing, you know, what they pay us and the incremental amount that we're asking them to pay us into more entertainment value back to them, back to our members, more great stories, bigger films, more variety of content, and higher quality of programming. We, you know, we generally plan to continue doing what we've been doing.
I would also say it's, you know, we're also working hard to ensure that we have a range of price points, you know, across a set of plans with different features that deliver on, you know, different consumer needs and consumer desires, while, you know, making sure and being very focused that we retain, you know, good accessibility to the service for a broad group of people in every country we serve at sort of that entry level. No major changes there, and we're keeping sort of the plan that we've got in place.
And one-
Related-
Oh, go ahead, Reed. Sorry.
Related to that, you know, Greg's done great work on the price spread, and one way to increase the price spread is advertising on low-end plans and to have lower prices with advertising. Those who have followed Netflix know that I've been against the complexity of advertising and a big fan of the simplicity of subscription. As much I'm a fan of that, I'm a bigger fan of consumer choice and allowing consumers who would like to have a lower price and are advertising tolerant get what they want makes a lot of sense. That's something we're looking at now. We're trying to figure out over the next year or two. Think of us as quite open to offering even lower prices with advertising as a consumer choice.
Spence, you wanna keep going?
My point was quite tactical. I'm sure Doug's gonna want to follow up perhaps on your point, but I just wanna be really clear on the point on Q1 performance and when I talked about slightly elevated churn relative to our expectations, that was not due to our price increases. The price increase played out as Greg said, consistent with our expectations. We just saw some slight uptick in seasonality for the other reasons I mentioned, some of the strain in Central and Eastern Europe, some of that macro strain we saw, and maybe a little bit of competition in on the margin.
Okay. Reed, you pulled me forward to advertising, so I do wanna get there. It was a little further down the list. One last point just on pricing. Given all these factors that you've talked about and written about in the letter, is there a change to your view on long-term pricing power?
I would say, you know, our general view is unchanged. Again, we don't have an a priori target, you know, in markets or whatever. We've been sort of finding our way through adding more value, you know, keeping that virtuous cycle going, that big spread that Reed mentioned. Again, we're seeking ways to actually, you know, take that spread even wider, and that's why I think ads is an exciting opportunity for us that we wanna explore more. No fundamental shift in our thinking about how that process works or the potential that we have in that.
Okay. Thanks. All right. Let's shift to ads-
Doug, I would just add that that's those directly related to, you know, creating the content that people find to be incredibly valuable. Our long-term view of our ability to continue to do that is unchanged.
There's a long history of that across entertainment for decades, right? Of, you know, people love film and TV and games content and, you know, if we can continue to deliver that value, deliver that engagement, then there's a long history of people being willing to pay for it. As Reed said, also advertisers trying to reach those audiences. We believe we can kinda derive that value over time and then monetize it, so long as we deliver on that entertainment value.
Okay. On advertising, I think certainly, Reed, preserving the simplicity of the product has been very important. I think you've also kind of talked a little bit about, at least in the past, perhaps not seeing the incremental profit potential as well in terms of a lower priced ad-supported tier. Has that view changed? I guess if you were to you know pursue an ad-based model on a lower tier, how long would it take you to get there and kind of roll that out, and what are the key things you'd need to do along the way?
Yeah, it's not a short-term fix because once you start offering a lower price plan with ads as an option, some consumers take it, and we've got a big installed base that probably, you know, are quite happy where they are. Think of it as it would phase in over a couple years in terms of being material volume. In terms of the profit potential, definitely the online ad market has advanced. Now you don't have to incorporate all the information about people that you used to. You know, we can be a straight publisher and have other people do all of the fancy ad matching and integrate, you know, all the data about people. We can stay out of that and really be focused on our members, creating, you know, that great experience.
You know, again, getting monetized in a first-class way by a range of different companies who offer that service.
Got it. Is it fair to think that it would be something you would test in a few small markets to start out and then kinda move along?
You know, we're probably not that advanced, but no, I think, you know, it's pretty clear, you know, that it's working for Hulu. Disney's doing it. HBO did it. I don't think we have a lot of doubt that it works, you know, that all those companies have figured it out. I'm sure we'll just get in and figure it out, as opposed to test it, you know, and maybe do it or not do it. You know, I think we'll really get in. But again, it's a, would be a plan layer, like it is at Hulu. So if you still want the ad-free option, you'll be able to have that as a consumer. And if you'd rather, you know, pay a lower price and you're ad tolerant, that's also. We're gonna cater to you also.
Okay. Let's shift gears to content. Ted, the 2Q slate includes a bunch of returning hit series, like Elite, Ozark, Stranger Things, Umbrella Academy. How are you thinking about that slate in 2Q? Maybe if you could also talk a little bit more about the back half as well.
Yeah. They're proven brands for us, of course, and I'll start with Stranger Things because the new season of Stranger Things is a super-sized season, that's why we cut it in half. Each episode of the new season feels like a big feature film. It's really phenomenal. We're super excited about how it's landing creatively and with how excited fans are for it. I think that's gonna be, you know, obviously the big story coming up later in the quarter. The finale of Ozark, which is, you know, one of our Emmy Award-winning fan favorite. Season 3 was a killer, and Season 4 brings it home in a really incredible way.
We're also wrapping up our longest-running show, Grace and Frankie, with an incredible final set of episodes coming up later this month that we're really excited about. We've always said we ran through the COVID delays that had us backstacked 2021. 2022 is not quite as backstacked, but it does build throughout the year. It builds up to some of our big event films in Q4 that we're really excited about, like Knives Out 2, The Gray Man coming up before that, from the Russo brothers, who we've had a lot of great success with.
A really fantastic action movie with Ryan Gosling. The upcoming slate in 2022, we're confident is better and more impactful than it was in 2021, and we think 2023 will be better and more impactful than 2022. The content flow has been fantastic, and we're really excited about it.
Just to follow up on. You mentioned.
I should say, you know, obviously not to forget our international content. Elite season 5, as you know, continues a really great run for us there. We have a Korean version of Money Heist coming up, called Money Heist: Korea. That's really fantastic. A new movie from Omar Sy, The Takedown from France. A great film from Germany, All Quiet on the Western Front, and a great slate of new content from Japan. Kubi, First Love, that we're really excited about the output from all of our international territories as well.
Ted, you mentioned splitting Stranger Things into different parts, and you've done that with a number of series-
Yeah
...you know, over the last few years. I guess as streaming proliferates, you know, it feels like there's this increasing debate around the value and stickiness of providing a full season of content all at once. Just curious about how your thinking has evolved here, you know, given that we are seeing more of these series kind of broken into two parts essentially.
Yeah. Splitting the seasons actually had a practical reason before, which was the COVID delays and all those projects that kinda led us to splitting some of the seasons. What we found is that fans kinda liked both. Being able to split it gives them a really satisfying binge experience for those people who want that really satisfying long binge experience. Then being able to deliver a follow-up season in a few months versus, you know, in some cases, the new season of Stranger Things is coming nearly three years after the last one, or more than two anyway. We're really being able to split the season when you can deliver both halves of it in a really high-quality way, like in the case of Ozark had additional episodes.
The both experiences were really satisfying for the binger or the one-at-a-time viewer as well.
Okay.
We've also had great success in these kinda mini batches of our unscripted shows. Doing one to three episodes a week every week has also been great and still true to the binger by giving them more than one episode to watch at a time.
You've talked about cash content spending of around $18 billion this year. In a period of slower sub growth, are you more likely to pull back to manage costs or to lean in to further differentiate the offering?
Look, I think we've got to continue to invest in the content, both in the quality and the variety of the content. We will continue to grow the content spend relative to prior years. I think in general, we look at what's most important though in there is the impact of the slate. We're very focused on making sure that impact of the slate continues to grow. We should be able to 10 years in now get more bang for our buck relative to what we've done ourselves and relative to the market.
Yeah. Doug, to that point, obviously the revenue growth has slowed. We're gonna be responsible in terms of how we manage the business. We talked about in the letter, during this period of slower revenue growth, we're gonna protect our operating margins, roughly in line with what we guided to for this year. We're holding to our guidance for the full year 2022. For the, you know, presumably for the next, you know, 18-24 months, call it the next two years, we're kind of operating to roughly that operating margin. Which does mean that we're pulling back on some of our spend growth across both content and non-content spend, but still growing our spend and still investing aggressively into that long-term opportunity.
We're trying to be smart about it and prudent in terms of pulling back on some of that spend growth to reflect the realities of the revenue growth of the business.
Just to clarify, only because you've been saying it for many years now, the 300 basis points, kind of per year over a multiyear period. Obviously, we were not going to see that this year, but it sounds like over the next couple of years, you're thinking more flattish, you know, until you get subscribers really growing in a bigger way.
Well, again, revenue growth, again.
Right.
Getting the revenue and engagement are gonna be primary. We'll also get subscribers going, so there will be subscriber growth. Primarily re-accelerating that revenue growth. We believe we have multiple levers to do that. We have high confidence in monetizing sharing, as we talked about. You know, Reed talked about things like, you know, perhaps adding in an advertising layer. Obviously continuing to improve the service, grow engagement, grow revenue. We have high confidence that we will accelerate revenue. When we do, we also have our commitment to continue to gradually grow our operating margins. Let's first get our revenue growth re-accelerated, and then let's talk about the pace of that margin acceleration.
Spence, what does all of that mean for free cash flow kind of near term and then over the next couple of years? I mean, 2022 is, you know, certainly looked at as like the first year of kinda sizable and sustainable free cash flow.
Yeah, that continues. We're, as I said, managing the business prudently. You know, for all of our stakeholders, we'll be positive free cash flow this year, consistent with our expectations going into the year, and we'll continue to build on that in years going forward. That's our expectation. That's what we're still planning towards. I don't know, Spencer, if you would add to that maybe.
No. I think you hit it right on the head, Spence.
Okay. I wanted to talk about India a little bit. You cut prices significantly in December across plans. You've certainly pointed out that cable in India is around $3 a month. Just curious what the response has been like. Do you still view those changes as revenue accretive? What are you seeing in terms of maybe early behavior from some of those incremental subscribers?
Yeah. I would say to your last point, the incremental subscribers are largely behaving similar to the subscribers we've added over the last 12 months. Not a fundamental difference. Really, this was a bet in terms of long-term revenue maximization, which is, you know, sort of how we think about the top level evaluatory, you know, model we have for these things. It was stimulated specifically by the fact that, you know, Ted's team is doing some incredible work on Indian content, and we saw the slate there. We're really excited about a bunch of titles that were coming down and thought there was an opportunity to, you know, broaden the audience that got to see those titles.
We've seen, you know, that effect definitely take hold, where we have a, you know, an additional bump in subscribers that will now get to, you know, see that content. The bet is that, you know, those folks will enjoy those titles and that they will talk enthusiastically about those titles to their friends, their family, their coworkers, and that'll lead to a, you know, another sort of positive momentum on the flywheel of signups.
Ted, can you elaborate a little bit more just on the content in India? I guess just how you're thinking about kinda overall product fit at this point in the market.
Yeah. The product fit incorporates subscription prices as well, and willingness and ability to pay. We have seen a nice uptick in engagement in India, so we're definitely taking in the right direction.
Okay. I wanna talk about gaming a little bit. I think, Reed, you've discussed it in the past as perhaps the next genre of content beyond TV and beyond film. Curious how you'd characterize your progress so far?
I'm really happy with what the team has built. You know, a big capacity to be able to provide our members with interactive and gaming experiences. We've had some nice successes, which I'll have Greg talk about. I think we're building capacity, frankly, faster than we did when we entered film. I'm excited, and you've seen, you know, we've been doing these small acquisitions to build up the know-how and the creative chops to be able to make some really great games.
Yeah. Just to pick it up. Sorry, Doug, do you wanna-
I'm sure it's where you're going. I was just gonna ask what the kinda puts and takes are around owning versus licensing IP and what the appetite is for further M&A going forward.
Sure. You know, we're open to both models. I would say we're very enthusiastic about building internal capacity, and we're doing this both from sort of assembling it organically as well as through acquisition, which is a key part of our strategy to be able to build the capacity to produce the games titles that we think are really gonna unlock value for our members. We're learning more and more every day from the licensed titles that we've got, which is helpful. You know, you can sort of. There's an early glimmer of where we're trying to head with this with the announcement we just recently did with a launch of both a game and an animated series around the Exploding Kittens IP.
I don't know if you're familiar with this card game, but it's a super fun physical card game that we're now gonna bring to form, in both an animated series and a game. You know, we'll have some interplay between these two different modes, for fans of that IP. That's sort of the, you know, an initial step on a long roadmap we have around thinking about how do we, you know, make the film and series side and then the interactive games experience, sort of the interplay between those you know magnify the value that our members are getting from both. It's like a 1 + 1 = 3, and then hopefully 4, and then 5 situations. That's sort of the multiyear vision that we've got behind it.
Really to deliver on that, you know, we think the internal development capacity is gonna be key because we can obviously have those folks be very specifically focused on the opportunities that we see there.
What are the benchmarks or milestones perhaps that you need to see around gaming to lean in even more here in terms of content budget? Are there any metrics or numbers that you can provide so far?
I can certainly provide the framework that we're thinking about it, and it's a, you know, top-level priority for us, and we're very focused on it. Bottom line, we think about games and delivering value to members and reflecting that back into the business through both acquisition, so, you know, we're aiming to have titles that land that, you know, create, you know, conversation and enthusiasm and buzz that drive more people to sign up for the service. Obviously in retention as well. You know, engagement is that primary leading indicator that we have for retention and sort of value delivered, so we're looking at both of those very carefully.
Similar to how we think about it on the film and series side, obviously, we wanna make sure that the investment that we're making in any given title is sorta calibrated to that business value that we're getting out of it. We're, you know, building our understanding of how those metrics work together so that we can have a good, you know, sort of fitness function around the work that we're doing and making sure that it's delivering value. That's really the, sort of the go signs for us that we've got it figured out, and we wanna ramp and scale the investment.
Okay. Ted, Netflix shares are back to, you know, of course back to pre-COVID levels, but they're also, you know, around the same level they were at, you know, nearly four years ago in 2018. If you could just talk about your ability to continue to hire great talent within the company.
Look, I think that when people that join Netflix, they join Netflix because they believe in this long-term vision of the move away from linear television and kind of transactional movie business into a business that could be much more satisfying for consumers and deliver on the culture and deliver big audiences and really move the market. One of the things I'd say is by way of example is what we can do around the world. Our teams are on the ground, our creative executives, our business executives are on the ground all over the world, are much more empowered. They're much more collaborative, and they're much more risk-tolerant than their counterparts all over the world, which enables...
It creates an ecosystem for something like Squid Game or for like a Lupin, or La Casa de Papel to exist. That is our ability to do that and to bring kind of global notoriety to local content players is unprecedented, and it's pretty unrivaled at this point. I think people look at that as something to be very exciting to be close to, and that the long-term story is the broadband household penetration. We're gonna get to those houses. There's a long term and a short term. In the short term, you've got the, you know, highly penetrated users, and we're working through that right now.
In the long term, you've got things like smart TV sales and a bunch of macro factors that slow that down, that we all see that as temporary, including everyone who works at Netflix. Everyone really does see the long play. I know I've been here for more than 20 years and have been through a couple of these and, yes, they don't feel great in the moment, but man, it feels great to come out on the other side of it. I think everyone is knowing that that's gonna come up and we'll come out on the other side of it.
Doug, we have time for two last questions, please.
Okay. I wanted to just back to content for a minute. You've driven a lot of attention to Formula 1, with Drive to Survive.
Yeah.
Given the success there, you know, sports is obviously a frequent topic. How are you thinking about sports? You know, there's certainly more rumblings.
Yeah
... around doing things related to NFL Media and NFL Films. How are your, you know, intentions shifting perhaps here at all?
We expand our content verticals constantly. For us, I look at the games as a great example of adding something brand new to the service, something new for our members to enjoy. We're going down the game path because I think it fits us really nicely. Our ability to tell stories and build worlds are very consistent with our you know existing skill set and culture. We think that we can build a big revenue and profit stream by adding games. Why we're not quite so sure that you can add the big profit stream by adding sports, other folks are trying it and we've gone down this other path.
In the meantime, we're incredibly excited about, as you mentioned, the Formula 1: Drive to Survive as an example of kind of sports-adjacent programming, that is, that our members really value. We've grown the sport tremendously. We're taking that bet in the world of tennis and golf and others coming up. We also have an incredible sports documentary business that keeps growing. I'm not saying we never would do sports, but we'd have to see a path to growing a big revenue stream and a big profit stream with it.
Okay. Then just to close out, Reed, you've created this very unique, very successful culture within the company over the past 20+ years. Has anything changed in your view, just from a cultural perspective, around either content acquisition or in some of the more operational functions?
Yeah, I mean, we've changed every year, you know, hopefully for the better. We don't look at culture as some fixed thing. You know, we look at it as what's gonna drive excellence. You know, the North Star is getting excellence, and so we've made a bunch of adjustments as we've expanded around the world. We've made adjustments as we've become more original content-centric. We're always improving. Again, the goal is excellence, and then the culture is a tactic in that journey.
Okay, great. Thank you all.
Reed
Great. Thank you.
Ted, did you wanna close us out?
Hey, can I say one thing before they close us out just as-
Yeah, please.
A tactical thing, one tactical thing that I should have mentioned earlier, Doug. I just wanna make sure there's not a read-through when we guide to negative 2 million paid net adds in Q2. We didn't talk about, you know, full year and how, what we expect, and we're not providing full year guidance, Doug, but I just wanna make sure there's not a read-through from negative 2 million paid net adds in Q2 that there's gonna be a steady trip down of negative adds. We're not expecting our growth to re-accelerate, our revenue growth to re-accelerate before the end of the year, but we will grow revenue, and there will be paid net add growth. You know, as we get to the back half of the year, Ted talked about the stronger slate. We get further away from some of the big price increases.
We get into a stronger seasonal period. I just wanna make sure that that's understood as you think about the full year, even though we're not providing full year guidance. Sorry, just we didn't get to it.
Thanks, guys.
It's always good to provide that non-guidance guidance.
Thanks, Reed.
You know, when we look at the last 20 years, like Ted mentioned, you know, we've gone through a lot of changes, and we've always figured them out one by one. It's super exciting. We're gonna figure this one out. We got a great team. We lead by a significant margin in streaming, and streaming is continuing to grow around the world. So you know, we have a bunch of opportunity to improve, but coming out the other side, I'm pretty sure we'll look at this as really foundational in our continued journey. Over to you, Ted.
Yeah, that's well said, Reed. I would only add that a reminder to folks is that as we keep talking about competition, to remind you that we've always had really tough competition, and all of the players who compete with us today have been competing with us since our first day of streaming, some head-to-head, and some through their legacy business models, and they're now migrating to be more head-to-head players while they're struggling to manage their legacy businesses. So I really like the competitive position that we're in. I love the competitive position that we are moving from relative to just a couple of years ago. In every metric that we measure success, engagement, revenue, subscribers, profit, all of those ways that we're measuring, I think I like the competitive position that we're coming at it from.
I want to just assure everybody that everyone at Netflix shares that excitement to come out the other side of this part of the business. With that, I just encourage you to enjoy the final episodes of our incredible show Ozark and our longest-running comedy show, Grace and Frankie, coming up at the end of the month, and an incredible slate of films and series coming up in 2022. Thanks.