Shulou(Shulou.com)11/24 Report--

Beijing time on the morning of October 29 news, the United States video streaming service provider Netflix today announced the company's fiscal year 2022 third quarter results. The company reported third-quarter revenue of $7.926 billion, up 5.9% from $7.483 billion in the same period last year, net profit of $1.398 billion, down 3.5% from $1.449 billion in the same period last year, and earnings per share of $3.10. compared with $3.19 in the same period last year.

After the announcement, senior executives such as Netflix Joint CEO Reed Hastings (Read Hastings), Joint CEO and Chief content Officer Ted Sarandos (Ted Sarandos), Chief operating Officer and Chief Product Officer Greg Peters (Greg Peters), CFO Spencer Newman (Spencer Neumann) and Vice President of Investor Relations Spencer Wang attended the subsequent earnings conference call to interpret the main points of the results. And answer questions from JPMorgan analyst Doug Anmuth.

The following is a transcript of the conference call:

Doug Anmuth: last week, the company announced the details of the launch of "basic service with advertising" in 12 countries, including the United States. How does the management set the price for the service? What are the characteristics of this product?

Greg Peters: in terms of pricing, we consider that the main thing is the value the product can provide to users, turning consumers' payments into wonderful programs. The company released a very large number of wonderful shows in the third quarter. The plan for the fourth quarter also looks pretty good. In terms of advertising content, we expect that the regions that enjoy the service will contribute to the growth of more paid subscribers to the company, as well as progress in commercial operations, and achieve a general balance or positive economic benefits per unit. Our pricing is not high, so it is expected to bring a large number of paying customers to the company and promote the company's long-term revenue and profit growth.

Doug Anmuth: with regard to the general balance or positivity of the unit economic benefits you mentioned, is it also against the company's basic paid subscription service?

Greg Peters: one thing to remind you is that there is no phenomenon that a large number of users stop their previous payment plans and subscribe to this new service. For example, users who chose 4K playback service before or continue to maintain the previous paid solution, the overall stickiness of corporate users is still very good. The economic benefits of the unit I am talking about are generally balanced or positive, compared with the company's basic paid subscription service without advertising.

Doug Anmuth: where does the company's confidence in advertising growth come from? How does the management view the current advertisers' demand for the service? Because last week the company mentioned that hundreds of customers had decided to advertise in the service, and that the advertising inventory had been sold out.

Greg Peters: according to the local situation, we have launched some advertising models in these markets and have attracted a lot of customers. our small and sophisticated sales team cooperates with Microsoft team. we have contacted brands and relevant advertising agencies. at present, we see a very large demand, and we very much agree with the concept of this service of the company. It is also believed that the content strength of Netflix can support the promotion of brands among global consumers, and the demand is very strong. Our confidence comes from the deep recognition of the business model and sales process, and the model and process are also in the process of continuous iteration. In the next few quarters, there will be more powerful features online to optimize the attractiveness of advertising services, so that customers are willing to check more service options. For example, we have released features such as "Certified partner", and there will be more excellent features in the future.

Doug Anmuth: the precision launch feature you mentioned is also very important, such as the launch of certain regional markets, theme types, best series of word-of-mouth, user age, gender and so on. I know that there is little feedback from customers on the precision launch feature. How will this feature be improved in the future?

Greg Peters: we still very much hope to bring this service to market as soon as possible, from the announcement of the plan to the launch of only six months, it can be said to be very fast, the whole team has made great efforts. At the same time, there is also the full cooperation of Microsoft, and the company itself also has a certain precision delivery ability, including in the show situation, theme type and so on. This is also consistent with the current transformation of the TV market, that is, the transformation from traditional TV to digital TV. Our viewers are all obtained through subscription, which can help the accurate delivery of advertising in terms of commercialization. Of course, we also attach great importance to privacy. Our use of customer information is entirely for the purpose of providing more relevant advertising content on the Netflix platform, rather than anything else.

Doug Anmuth: there is a lot of discussion about advertising price (CPM) in the media. Is it accurate to say that the price of Netflix is two or three times the price of Internet TV (CTV) advertising? What is the reason for the company's current advertising pricing level?

Greg Peters: we don't comment on a specific price, but the company's own products are very attractive, and of course, with the help of our many paying subscriber base, these advantages are not available in other channels, including traditional television, as well as the wonderful entertainment content we can provide, and advertisers value the company's advantages in these areas, which in turn promotes the growth of demand. And formed the company's pricing strategy.

Doug Anmuth: you have mentioned the issue of innovative advertising content models before, and there will be more different types of advertising products in the future, such as ads in four to five minutes per hour, which may not be as large at the moment, and for example, there will be a cap on the frequency of ads. Did the company have any other innovations in the early stages of the launch of the service? What progress will be made in the future?

Greg Peters: in the initial stage, we want this service to be acceptable to the audience, and the experience in terms of advertising volume and frequency is still user-centric. What makes me very happy is that in the process of communicating with brands and advertisers, they also agree with us very much, and they do not want to put it too frequently, and they also want to have a higher degree of originality and uniqueness. And setting limits on the number of ads can also make their ads more different. In the future, we will continue to make use of the ability and experience accumulated by the company over the past decade to enhance innovation ability and expand innovation practice. Personalized advertising will be a very good attempt, based on different viewing content. It is a dimensional consideration to display different types of advertisements for different users and viewers. In addition, we will also work with brands and advertisers to find the most suitable advertising format and experience for pay Internet TV viewers, which are areas that need to be ploughed in.

Spencer Newman: another part of the innovation is also reflected in the speed of product release, coordinating the operations of regional markets, as Greg said, in only six months from the announcement of the plan to its launch. These 12 countries contribute more than half of the company's revenue, and I want to emphasize this flexibility here, and I hope this flexibility will continue in the future.

Doug Anmuth: investors are also talking about the impact of this new service on the number of users of the company's existing services and paid subscribers. What does the company think?

Greg Peters: I would like to reiterate here that the new service has not caused a large number of changes in user payment plans. In addition, as I mentioned before, our goal (to provide new services) is not to transfer users from one payment plan to another in the future. We hope that by providing a greater variety of services and functions, let customers find and choose a payment plan that suits them, and we have achieved the desired results in advertising and cash out, and have developed a price strategy based on this. We look forward to bringing more advertisers, more paying users and better unit economic benefits and revenue streams to the company through this model that is acceptable to the audience, as well as relatively low pricing, so even if some users change their plans, we'd love to see it.

Doug Anmuth: what is the impact on reducing user turnover and market penetration in different regions?

Greg Peters: overall, the impact of price cuts on wastage should be positive, but the service is still in the early stages of release and there are still a lot of situations and factors to watch in the coming months.

Ted Sarandos: it's also about user engagement. The best way to reduce turnover is to entertain them from content.

Welcome to subscribe "Shulou Technology Information " to get latest news, interesting things and hot topics in the IT industry, and controls the hottest and latest Internet news, technology news and IT industry trends.