Instant Reaction: Netflix Logs Record Profit, But Withholds User Data
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Okay, Netflix shares finally bouncing around a little bit, up about 2% in the after hours. The company did just report first quarter profit that exceeded estimates. It was boosted by a recent price increase, a strong slate of programming across the globe, like the UK hit series, Adolescence. I want to bring Lucas Shaw in right now. He's been all over this story and he's all over this company and has been for years. Lucas, this report is unique because it's the first time they haven't reported subscriber data. We knew this was coming. Everybody knew this was coming.

Is there a way to back into that number or are investors just ignoring that now?

Well, I think you can try to figure it out, at least in the first couple of quarters, by looking at revenue and modeling out how many people that they added and you factor in the price increases. But look, a lot of other companies get measured based on sales and profit. There's no reason Netflix can't. It's a little less fun for me. I think it's a little less fun for all of us. We'd appreciate the added transparency.

But for the, you know, they made sure that in the first quarter of not doing that, they met or beat on pretty much every metric. What for you, Lucas, also stands out? I mean, we were just talking about, too, you know, and that it has been an outperformer. We've seen some movements up certainly this week. But what for in this release? There's a lot there that really stood out for you. Is it some of the content that they're offering? We talked a little bit about live content and sports with our TV colleagues. But I'm just curious for you what's significant here.

I was a little confused. You know, they issue this letter to shareholders every quarter and they had this long section that was titled competition that didn't really talk about competition that much. They spent a lot of time talking about how much they're investing in production overseas. And then they had a chart from the UK

showing their growth there and how they're only behind BBC and ITV. And I think important to Netflix on television screens, they're ahead of YouTube because Netflix really doesn't like that in the US, YouTube can now say that more people watch it than Netflix. So I sort of read that as like a long effort to show ways in which it's both ahead of

of all of its traditional Hollywood competitors. And in some of these foreign markets on televisions, it's still ahead of YouTube. I think that's where Netflix feels the most competitive pressure at the moment. Does it still feel like it can-- I mean, Lucas, this is a company that years ago would say it's competing with anything that anyone is doing looking at a screen, whether that's gaming, whether that's watching traditional linear TV.

whether it's looking at TikTok, for example. I think there was a year they called out TikTok specifically, or a quarter they did that. Do they still think about all those, or do they still think about competition that way?

Yeah. The company still thinks of anything that is leisure time as competition. How much it talks about some of those other behaviors, I think depends on the quarter, right? Like right now they may be more focused on your traditional video entertainment programming. There's some quarters. I feel like they oftentimes do that when they have like a really killer quarter because they don't really need to spend any time on their immediate competition because everyone can see that it's going very well. And so then they talk

sort of loftily about like Fortnite or TikTok or sleep or any of these other topics. How does it feel to not get those subscriber numbers, subscription numbers? I mean, I don't like it. Who would? We all like using data to evaluate a company. It was always the easiest way to know if things were going well or not.

And it feels a little, even though they would push back on this, it does feel a little bit like they're trying to hide it because they know that their subscriber growth is going to be good, but not as good as it used to be. And so it allows them to, you know, they can only do so much to adjust the subscriber numbers, but...

increasing and decreasing subscribers is now just one of a few levers they have, right? Because they're going to raise prices, they're going to have advertising, they're going to do a lot of different things that allows them to kind of shift people from a metric that is maybe a little harder to control to one that's a little easier for them.

Lucas, as we were preparing for these results, we saw this narrative emerge that this is a tech company that could be at least a little shielded from the chaos that we're seeing when it comes to tariffs, when it comes to trade, because, well, look at what they're dealing in. But at the same time,

it is a discretionary expense for consumers. So I'm wondering how you view that and whether or not if we do see maybe some sort of downturn as a result of higher prices from tariffs, from trade, that could actually be a risk to the company.

Yeah, I think consensus is that they're, to your point, they're more insulated, both because, look, yeah, they don't deal in any hard goods. So the tariffs don't have a direct impact unless you start to see other countries impose price increases on services, which is possible, but not something that we've seen yet. You know, they're a little bit impacted in the cost of making things because of

just tariffs will impact factors that go into production. But in terms of discretionary income, look, they keep raising prices. Maybe some people will decide Netflix just isn't worth it. Netflix has the best churn, which is sort of the cancellation rate in the streaming business. It's way ahead of everyone else. And so you have to think that when people are looking at what they're going to cancel,

It will not be at the top of that list. It will probably be close to or at the bottom of that list. So again, I think they're in better position than most. But look, they're big enough that even a slight increase in churn is a headache for them. So they're not immune. I just think it depends on if we go from a trade war into a full-on recession or if we just have this period of uncertainty. I think just uncertainty is fine for Netflix. A recession is not good for anyone.

Hey, one last quick question for you, Lucas. On the analyst call, what is the question that must be asked? Good question. I mean, I expect they'll get a bunch of normal questions about

sports and advertising. I guess I'm probably most curious about advertising. They keep talking about how they're close to this being a material part of their business. They're teasing it out a little bit more in their shareholder letter. But we haven't really had any material numbers on that business other than these sort of vague monthly active user figures. So I'd love for them to go into more detail. I don't expect that they will.

will. All right. Great stuff. Hey, thank you so much. Have a great weekend. Bloomberg News entertainment reporter Lucas Shaw with a breakdown on Netflix. Just want to draw everybody's attention because I'm looking at it in the aftermarket and we're now seeing the stock up about 3.6 percent here. Let me just pull it up once again on my Bloomberg. Yep. Almost 3.8 percent as we speak.

Netflix reported first quarter profit that exceeded Wall Street forecasts, boosted by a recent price increase and a strong slate of programming across the globe like the hit UK series Adolescence. Keep in mind, this is the first time that the company has reported financial results without disclosing how many customers it added or lost, something we talked about with Lucas Shaw, which has been such a crucial yardstick.

excuse me, to gauge the company's performance. But again, the stock up about 3.9%. Hey, I want to bring in Mark Douglas right now. He's president and CEO of Mountain. It's the company that has software that helps companies target advertising when it comes to smart TVs. He joins us here in the Bloomberg Interactive Broker Studio. I want to pick up exactly where Lucas left off, and that's advertising. We don't know

a lot about how much revenue is actually coming from advertising. They don't have a specific place for it in the shareholder letter today.

How much do you think they're getting? I think it's still pretty small for them. But what's really important is half of all new subscribers they reported previously in previous quarters are buying the ad-supported tier. What does that tell you? So it tells me they have a growing backlog of revenue that's going to occur in the future. Because...

Essentially, every person that gets the ad-supported tier is currently under-monetized. But despite that, they have record-breaking earnings. So imagine what the earnings are going to be when they are fully monetized.

which would effectively double the revenue per customer for their new customer. You must have spent time with the advertising tier of Netflix, just given your business. Yeah, well, some. I know a lot of the key people. No, but I mean, like, the experience. Because I think a lot of people who have been using Netflix for years, we don't have the advertising plan. But if you're watching something on YouTube, for example,

and an ad is just thrown in there. It can be pretty disruptive. - Yeah. - What's the experience on Netflix? - It's like watching any other streaming service, ad supported streaming service. There are pods of ads, there's just a lot fewer ads right now. - How well is it targeted?

I don't think it's very targeted. I think that's probably an issue, right? It is. It's because Netflix is kind of starting from the big brand advertiser perspective and to really fully monetize that they're, you know, they have to take market share away from the entire rest of the industry because those big brand advertisers, they're not increasing their spend. So, so I think that's

part of the challenge they have in monetizing the ads, but they will get there. And when that kicks in, it's gonna be the same way cracking down on password sharing. - My experience with advertising was in one of these, I don't know, like a similar service was when Amazon decided to kind of get rid of the free Prime Video. And I'll tell you,

I was like watching something, Carol. It just cut out for an ad at a terrible time. Right. It was thrown in a really sloppy way. It's only, I think, three dollars more a month to pay for it. And I was like, I'm done. That's it. No more. Like, you know, I don't know what's wrong with me, but I'm like, I'm not even going to partake in this. I'm done with it. It's amazing how we as consumers of video and content. Right. Where we used to be. We didn't have a choice.

you know, in linear television where you had to stop, you know, or you had a commercial and you ran to the bathroom or something. And like, but now it's like, I don't want any interruptions.

Okay. I'm just before everybody throws the hate at me. We love you. All right. So then how much, I mean, we were talking about how Netflix has been a bit of an outperformer this year. It's up more than 9% here. So when do we start to see those numbers and that enthusiasm that you're talking about as a result kind of start to show up? Well, I think Netflix. And is the stock underpriced because of it? I think Netflix is somewhat immune because think of it this way. The first thing you get is the last thing you cancel.

And Netflix for streaming is definitely the first thing you get. It's the first thing. There's data that shows. You turn on the TV, the first thing you hit is, let me go see what's on Netflix. And remember, their highest price offering, their highest price subscription, costs 68% more than their lowest price. So you can just kind of go, you want to save some money, you just downgrade the subscription. You don't need to cancel it.

So I think for them to get to the point where people are canceling, like it's nearly impossible. Like you can't put food on the table. I'm only kidding. Hopefully nobody has to do that. Sorry. The squid game on the table. That's all you can put on the table. Exactly. Mark, when it comes to the landscape out there. Yeah.

Okay, I know first mover advantage is going to be part of your answer here. But Netflix stands apart from the competitors out there. And part of it is that some of them were legacy media companies that were trying to adapt to this new world that Netflix helped pioneer.

But why is Netflix so good at this and everybody else is struggling? Well, my friends at Disney would probably disagree. I mean, would they disagree that Netflix does it better? Well, I think Netflix... Do you think they would? It's the thing is... They might say we have Bluey and Netflix doesn't, but that's it. Yeah, well, they have a lot more sports. But I agree with what you're saying, which is when you turn on the TV, Netflix is generally the first thing you're going to check.

And that's just an insane advantage because it allows you to turn shows that maybe people wouldn't have watched, like WWE, and turn them into top ten hits on Netflix. Just because you sit down on the couch, turn on the TV, you're

WWE is on and it's live. Why? You know what? And it's there for you to watch. It gives them this incredible power to turn average content into really big hits and to turn great content into like NFL sport, NFL games in the nearly Super Bowl numbers on a regular weekend. You're more of a UFC person. Yeah, totally. Not. Absolutely.

So advertisers, where do they want to put their ads in terms of content? Is it the live sports stuff? Is it, what is it? Do they care? Are they picky? It depends on the advertiser, but generally people, you can sell live sports all day long. For Mountain, we're kind of not in that game. We're not dealing with brand advertisers. But I know when I talk to all the big agencies and things like that, it's all about live sports. They just...

it's an insatiable appetite. Linear, streaming, they don't care. Yeah, streaming, streaming live sport, ESPN is now rolling out streaming live sports and people are, I know from Disney, people are just lining up to buy it. And it's every streamer is in the process of doing that. And so it's always that. After that, I think the appetite changes a lot, but there's just something about,

About the engagement on live sports. That advertisers love. The November 2024 Taylor Serrano fight on Netflix. Became the most watched professional women's sports event. In history. They say that with the upcoming rematch. We're poised for another groundbreaking night. That will further elevate the profile of.

women athletes. In addition, Netflix has opted into a second game for Christmas 2025, where they'll be the home of the NFL for Christmas Day. My sister was watching that last year on Christmas Day. They say live efforts have primarily focused on the U.S. We expect to extend the strategy to other countries over time.

How big of an opportunity is that for Netflix, given what you told me about the ad demand for live sports? Huge for Netflix if they expand this outside the U.S.? Yeah, I mean, if I was a sports sleeper, if I was Formula One, I would literally just live in front of...

um, surrender tells like, let's do a deal. Why do you think they haven't done? Well, they already are doing that because F1 has become so popular with the drive to the drive to survive. Imagine if the gate, if it wasn't just last year, it was like, so why is it not there now? Do you think, is it like longterm cable deals that are in place already? Yeah, I think it's longterm deals. I wouldn't be surprised if formula one comes there. They go to Europe, of course, football in Europe. I mean, they, they,

it's just something there. But Netflix is smart. They're going to sports that are like female boxing that wouldn't necessarily be something that would attract a huge audience and get the highest rates. And they're turning it into the most watched

female sports event in history. And this is the superpower that they have. It's the advantage that they just have over every other streaming network by being the first thing you click when you turn on your TV. Just want to mention, we are talking with Mark Douglas, president and CEO of mountain, uh,

Shares of Netflix, they're up about 4.6%. This is the company logs record profit in the quarter. Revenue tracking above the midpoint of its 2025 forecast range. And it does see second quarter revenue. So the current quarter that we're in, $11.04 billion. The estimate is $10.88 billion. When it comes to advertisers, is it...

Does everybody else want to just be Netflix, especially when it comes to streaming? What do you hear from advertisers? Is their first choice always Netflix? I think people are very intrigued by advertising on Netflix, but at the end of the day, they want the consumer wherever they are. And so Netflix started their ad tier with very, very high pricing, and they've had to kind of come back down to reality and retool. So I don't think advertisers are like Netflix or nothing,

But Netflix has the most viewers, so they potentially have the most ad space over time. One last quick question. We know you're going to join our TV colleagues in just a moment, but a federal judge ruled that Google illegally monopolized online ad technology markets for advertising exchanges and tools used by websites to sell ad space. So...

They say they, you know, we're doing anti-competitive acts to acquire and maintain monopoly power in these markets. So what does that possibly mean if this stands? I don't think Google is losing any sleep over that ruling. If anything, it's their dream scenario. It's a small part of their business.

But the US federal government has been very focused on it from an antitrust. And in fact, it's like, yeah, focus on that. Don't focus on search and AI.

And so to me, it's almost a dream scenario. The best dream is they're left alone, but if they have to kind of focus on that and even potentially give up that, great scenario for them. I don't think any investor should be worried about Google losing that part of their ad business. - All right, kind of interesting, different perspective.

And we will say that Alphabet shows were down about 1.4% today. A little bit of a swing. Mark, thank you so much. Mark Douglas, he's president and CEO of Mountain. The company has software that helps companies target advertising on smart TV. So good to get his perspective. Mark, thank you.

You know when you're really stressed or not feeling so great about your life or about yourself? Talking to someone who understands can really help. But who is that person? How do you find them? Where do you even start? Talkspace. Talkspace makes it easy to get the support you need.

With Talkspace, you can go online, answer a few questions about your preferences, and be matched with a therapist. And because you'll meet your therapist online, you don't have to take time off work or arrange childcare. You'll meet on your schedule, wherever you feel most at ease. If you're depressed, stressed, struggling with a relationship, or if you want some counseling for you and your partner, or just need a little extra one-on-one support, Talkspace is here for you.

Plus, Talkspace works with most major insurers, and most insured members have a $0 copay. No insurance? No problem. Now get $80 off of your first month with promo code SPACE80 when you go to Talkspace.com. Match with a licensed therapist today at Talkspace.com. Save $80 with code SPACE80 at Talkspace.com.