Business
04 December 2023
Link copied to clipboardGood afternoon – it’s great to be here with you all today.
Greg Peters and I have been co-CEOs for nearly a year now, so I wanted to start with a few big picture observations about the industry, and about Netflix.
Entertainment has always been an industry of change — with new technology, competitors and consumer behavior all creating new business models.
Today choice and control are the price of entry in modern entertainment. And that is streaming.
It’s what consumers want, and how our industry stays relevant — and growing — in the face of intense competition from new forms of media.
And like TV, cable and Pay TV, and home video sales and rental — all of which significantly changed our industry — streaming has opened up tremendous new opportunities:
With more TV shows and films being made — creating more jobs and a greater choice of movies and TV for consumers.
With more chances for more creators to have their voices heard.
And with a vastly expanded audience for the stories created.
Take TV, which has always been highly local. Streaming made it possible for:
Wednesday — a very American story — to find success all over the world and in countries like Korea and Japan, which haven’t typically embraced US series
And for Squid Game — a quintessentially Korean story, rooted in Korean cinema — to become the most watched TV show ever — including in the US, where foreign language film and TV never typically generate a big audience
For Netflix, the transition from DVD to streaming, US to global and second run titles to originals was hard. These were big bets that took significant time, effort and investment. But we knew to succeed long term we had to get there.
And it’s paid off. Since our global launch in 2016...
We’ve invested heavily in our slate — with content amortization up ~3X from $5B to ~$14.5B a year.
While also steadily increasing our operating margins — up 5X, from 4% to 20%.
And growing our free cash flow — from negative $3.3B in 2019 to an estimated $6.5B this year alone.
So, as you can see, streaming is a good business.
With so much change in our industry, Greg and I spend a lot of time discussing where Netflix needs to adapt, and where we should stay consistent.
Our focus on constant improvement — a better slate, easier discovery and more fandom — has served us well over the years. So far this year alone we’ve had the #1 title in the US 42 out of 44 weeks, according to Nielsen.
Viewing on Netflix is many times greater than any of our nearest competitors.
And that matters because when people watch more, they’re happier and place a higher value on our service — which means they stick around longer and recommend us to their friends.
That engagement really packs a punch not just for our fans and business but for our creators and even our competitors.
It’s a virtuous cycle from which everyone can benefit.
Take Breaking Bad, Schitt’s Creek, Shameless and The Walking Dead. These shows existed with a small cult following on cable TV. We turned them into award winning, commercial hits for both Netflix and their originating networks — bringing new popularity and extra revenue to the creators and casts.
Netflix has also brought new life to old shows like Full House, Gilmore Girls, The Office and Friends. When Suits launched on Netflix this summer it broke US viewing records — despite having already been on the USA Network and two competitive streaming services for several years.
And we did all that while building a library of original and exclusive series and films that generates more engagement, revenue and profit than any of our streaming competitors to date.
But as we learned in 2022, balancing consistency with adaptability is important to maintain our long term growth. Looking ahead we see big opportunities to ….
Broaden our entertainment offering — and increase our value to members — with more variety in our non-English language slate, games, sports shoulder programing and live.
Deepen our connection with fans through marketing, consumer products and innovative, new live experiences like The Bridgerton Ball, The Squid Game Trials and Netflix House.
Diversify our revenue through advertising — while also offering low, highly competitive prices.
And if we can continue to execute well in our core, while establishing ourselves in these areas, we have so much more room to grow.
It’s a $600BN+ opportunity revenue market across pay TV, film, games and branded advertising — and today Netflix accounts for ….
Less than 10% of total TV time in our most popular countries
And just 5% of that revenue.
As I said at the start — it all begins with the consumer. Because when we delight our members, we can drive more engagement, revenue and profit than the competition — and create a wildly successful business and brand that will strengthen and grow over time.
Thank you.