Hey there,
This is the orginial video on Netflix Q1 Analysis
Here is the new Q1 followup & Q2 analysis
Check those out because I reference them here.
Into the Q1 interview that was posted to Netflix's youtube channel
First, the question is on net adds expectation for the quarter. David Wells the CFO answers the question by saying to not focus on quarter by quarter but focus on a yearly basis. What I take from this is that they seem to go for yearly goals, like a 7% operating income, which causes the quarters to vary greatly; 9.7% operating income Q1 and 4.4% in quarter two. It could also explain the general volatility in net additions, and shows that they have a yearly goal to reach rather than steady quarterly growth.
Heres the excerpt:
Q - Doug Mitchelson
Thanks so much. Actually, first question for you, David, and then one for Reed. David, could you just talk a little bit about the net add results in the quarter versus expectations, and any dynamics underline the second quarter guidance that you want investors to know about?
David Wells
Well, I think what’s written in the letter and what I’ll reiterate is that, we’re not spending too much time understanding any particular quarter. We were with under 100,000 in the U.S. under a couple of 100,000 in the international versus our expectation. We had a particularly back-weighted first quarter, which were - we don’t usually have, but that explains some of the sort of net adds guidance versus actuals as well, and we have a pretty strong guide for Q1.
So I think looking at our Q4, which is one of our strongest quarters ever and a pretty strong Q2 guide, we sort of look across that like we put in the letter and say, we’re still on a great growth path, and our content is working. And we’re pleased with the international growth and we’ve got a lot of growth left in the U.S. as well.
Second, we see Hastings avoiding to say certain metrics such as viewing hours per day. I don't like seeing this from Hastings, because view hours per day is an important metric to the investor.
Doug Mitchelson
The international arena is a pretty rich topic, but I want to move back to the U.S. But first, Reed, you mentioned consumption. I think investors would love to have an update on consumption both in the U.S. and overseas. What is the hours per day on average? Is it still growing for both cohorts year-to-year? Anything you’re willing to share at this point in time?
Reed Hastings
Yes, viewing is very large and growing, but nowhere near as big as YouTube. So we definitely got YouTube envy and we’ve got a lot a room to go. And some of the new shows like Ted was talking about, our movie out of Korea [indiscernible] has great global potential. So, we’re finding great talent around the world and that’s what drives up the viewing.
A good point from the interview which is what I was worried about is that eventually memberships are going to be harder to come as they grow. Hastings mentions it:
Reed Hastings
U.S. market is continuing to grow very nicely. I don’t see any fixed wall. I mean of course, every incremental 10 million is a little harder than the last 10 million, but our content keeps getting better, so those forces offset each other.
David Sarandos, Chief Content Officer, Mentions the Disney relationship. It looks strong. Good to see.
So it’s been a great relationship and continues to be a great relationship with Disney as a company producing our Marvel series as well as being their Pay 1 partner and hundred - several hundred hours of their catalog all the time. So it continues to be a great partnership and they’re great supplier of content that people love so we’ll see.
Hastings says the recent departure of several officers isn't a worry to investors, nice to hear.
Doug Mitchelson
And so no particular signal that investors should take from this. It just happened to line up this way?
Reed Hastings
That’s correct.
It looks like total aggregate viewing isn't in their metrics.
Reed Hastings
It’s really not the total aggregate viewing as opposed to the median viewing by country is not something internally that’s in our metrics pack.
The content Netflix produces has a goal of being high quality, which gives them a competitive edge. I agree with this.
So, we’re already delivering that and also growing the content. So I think, sure I’d love to have shows less expensive, but honestly we’re more competing with the quality of the show and trying to push and improve the cinematic quality of that show, which is driving - has more of an influence on the cost of that than the individual competition within the market.
All in all, it looks like 100m total subscribers is going to be reached this weekend which I am looking forward to see. I liked the replies from Sarandos and his overall positive attitude. Hastings didn't have the best replies, because they weren't very specific.
What do you think about the interview?
Submitted April 18, 2017 at 10:58AM by Noqt http://ift.tt/2ok5rLh
