Instant Reaction: Netflix Beats on Earnings, Disappoints on Cautious Forecast
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What is the main topic discussed in this episode?
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Looking at Netflix shares, they're continuing to move lower. This after the company reported results for the most recent quarter. Concerns about the guidance and boosting spending. The company saying, even though they largely beat Wall Street estimates, they issued a cautious forecast for the months ahead, setting higher program spending. And then, of course, Carol, the cost of closing its deal with Warner Brothers Discovery.
Number of customers growing by almost 8% last year, topping 325 million subscribers. Let's get to our team who certainly follows it. And of course, our own Chris Palmieri, who's been following this company and the ins and outs of the pursuit of Warner Brothers Discovery. Chris, they're out there on the West Coast. Chris, you know, you know this company, you followed it. Investors not too impressed. They're worried about, I guess it seems like, the spend that's out there. But walk us through what really jumped out for you in their reporting.
Well, first of all, obviously, investors have been really concerned about the Warner Brothers bid. The stock has lost a lot of money since October when it first came out that Netflix was interested in bidding. And you still see concern here. I mean, they said they've spent $60 million already already. on pursuing Warner Brothers. They're anticipating another $275 million in cost for that. They paused their share buybacks, which were considerable. They had $8 billion left in their buyback program so they can conserve cash for the Warner Brothers bid. So if you're concerned about all this, there's certainly enough in there for that.
You know, I'm just looking at some of the headlines from here. And given, Chris, the reaction from investors over the last few months as Netflix emerged as a bidder, it hasn't exactly been a positive one. What's the case for why Netflix actually needs these assets? Because this is a lot of money to spend, especially when investors are getting increasingly concerned about how much money the company is spending on content.
Well, they do in their letter to shareholders sort of cite the broader case that they're no longer just competing against HBO or Paramount Plus or whoever, that they're competing against YouTube, TikTok, Instagram, and that they really only have a still small share of overall TV viewing, about 9%. And by acquiring this great library and these facilities, Warner Brothers, they could really increase their production of stuff all around the world and get into some new business, more consumer products, more video games. And so that's their argument. HBO Max would give them the opportunity to offer different pricing plans. So somebody just wanted HBO programming, they could get that instead of Netflix.
So those are the things they're talking about.
I'm going to play Netflix's accountant. I mean, how much, I mean, the content that they do get, they're going to get a lot of content, right? In one move.
If they get the deal.
If they get the deal.
Yeah, huge. I mean, it's a massive purchase in the 70, 80 billion range. There's numbers that came out today of Warner Brothers projections of what their studios and streaming business are going to do out five years. And, you know, it's a potentially huge boost.
Why did Netflix shares fall after beating Q4 estimates?
You know, Batman, Bugs Bunny, everything you could imagine for Netflix to own. But, you know, they've also been investing in their own licensing deals.
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Chapters
5 chapters
1
What is the main topic discussed in this episode?
0:00–4:08
2
Why did Netflix shares fall after beating Q4 estimates?
4:08–8:04
3
What are the projected costs and cash moves tied to the Warner Bros. Discovery bid?
8:04–8:09
4
How much will Netflix increase program spending and why does it matter?
8:09–11:15
5
How could acquiring Warner Bros. change Netflix’s content and business model?
11:15–22:37
Speakers
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