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Chapter 1: What does Ted Sarandos predict for the future of Hollywood?
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There we go.
So I usually start with a joke. I was trying to think of a streaming joke. Ed. True story. I broke up with my first girlfriend because she claimed that Netflix was the lowest-priced streaming media company, and I just couldn't have a relationship with someone who was a Hulu cost denier. Hulu cost? Holocaust? Yeah, yeah, they get it. All right, you want a dick joke?
Is that what we're looking for here? And I just have this... This sinking feeling, my girlfriend has a dick. It's just something I feel inside of me. Welcome to Prop G, Marcus, live from Los Angeles.
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Chapter 2: How is AI changing the film industry according to Ted Sarandos?
That's good. So I'm very excited to get into this. Ted just was seen leaving. Offstage. It's very good to be here, here in Los Angeles, known as the center of Hollywood. That's what a lot of people think of LA. But it's also the center of a very exciting new technology. And before we'd like to begin, I'd just like to share some numbers of my own. You know, I love data, Scott.
on that technology and this historic city's relationship to it. So before we start, I'm just gonna give you, share some data here. So this, today's number, the first number is 3,000. That is the percentage increase in California's GLP-1 prescriptions in less than five years. The next number is one in 10. That is the share of Californians who currently use GLP-1 drugs.
The final number is $1.6 billion. That is how much the state of California spent on Ozembic and Wegovy in one year, more than the entire state park budget. Very impressive numbers, Scott. You know, I think maybe half of these people have probably lost their jobs to AI, but the one thing that I can see looking at the audience is everyone is very hot and very thin.
So let's just give it up for the crowd one more time. The city of Los Angeles. And then we're going to start getting into the show. Before we do that, can I talk about GLP-1 sisters? Please. So seriously, I think GLP-1 is going to be bigger than AI. And AI is basically fear is the product. I'm so fucking awesome.
I've created this monster that's going to destroy the world after I've sold my shares and peace out to the co-deserve with a bunch of Russian whores. That's not helpful. Talk to anyone who's on a GLP-1 and uses AI every day and ask them what's had a bigger impact on their life.
And while the incumbents and the current seniors or incumbent industry or politicians want to create this illusion of complexity around how difficult it would be to solve our problems, whether it's inflation, weakness, a lack of optimism for the future for young people, it comes down to our deficit. The easiest way, absolutely the easiest way to solve the deficit problem would be the following.
In Japan, they spend $5,500 per consumer per capita on health care. We spend $13,500. We spend $8,000 more than Japan on health care. Times 350 million people, you're talking about $3 trillion a year in incremental health care costs. Why? 40% of America is obese. 72% are obese or overweight. In Japan, 4%. are obese.
If you wanted to solve the deficit, you would go after the health industrial complex, hospital systems, kidney dialysis, statins, pharmaceuticals. And just to piss off people on the left, the diabetes industrial complex has tried to convince us that people aren't obese, they're finding their truth. No, they're not, they're finding a fucking ventilator.
Obesity is the menace in this society and we have a way to solve it.
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Chapter 3: What challenges does Hollywood face in the current economic climate?
America should put out, the government should put out an RFP for a billion doses of GLP-1 and give it free to any household in any rural area making less than $60,000 a year. You would see slowly but surely our healthcare costs go down. And for the first time, we could really significantly address our deficit. But instead, the incumbents want to convince you that it's not a solvable problem.
GLP-1 is the technology that could revolutionize the West. Back to you, Ed. I think you're preaching to the choir here. So we're going to have on this screen a QR code, if it's going to come up in a moment. Yes, it is. And at the end of this show, we'll do a Q&A, and we'll hear from your questions. So if you want to submit a question, scan that QR code, and you can do that now.
And now that we've got all the phones coming out, good. We're going to have lots of questions. This is going to be fun. And now that we've done that, I'm going to move us on to our first story of the evening. So, we are live in the entertainment capital of the world. Here in Los Angeles, movies and TV generate more than $115 billion every year and support nearly 700,000 jobs.
Hollywood doesn't just drive culture here, it drives the economy itself. However, the industry is at a turning point. AI is rapidly changing how films are made, and at the same time, the traditional media model continues to erode. Last year, the combined viewership of broadcast and cable was surpassed by streaming for the first time in history.
Meanwhile, short-form video continues to surge as well. So the big question that is hanging over this city is simple. What will the future of Hollywood actually look like? Here to answer that question, we're speaking with the man at the center of the industry. Ladies and gentlemen, please welcome Ted Sarandos, the co-CEO of Netflix. Thank you for being with us, Ted. Thank you for having me.
I hope you weren't offended by Scott's jokes.
I'm glad the joke portion is out of the way.
He was covering his ears.
I was just hearing all about GLP-3s now, which is very L.A. that we want the next thing.
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Chapter 4: How does Netflix view its competition with YouTube?
Just to jog everyone's memory, back in December, Netflix had agreed to buy Warner Brothers Discovery, or at least the studios, and the streaming assets for $83 billion. And at that point, it started something of a bidding war with David Ellison of Paramount. There was kind of a lot of auctioning happening, and then eventually David Ellison bought the company for $110 billion.
Netflix decided to walk away. So, first question to you. What was the thinking behind going after these assets? And then what was the thinking in ultimately deciding to walk away from the deal?
We looked at Warner Brothers as an asset, kind of a once-in-a-generation asset, a pretty big section of every movie ever made in that library, a really great production company that does television production. We're one of their biggest buyers in that space, and a wealth of IP that we could develop into.
I'm very proud of the team, and I'm very proud of what Netflix does, but we've been doing it for about a decade, and they've been doing it for 100 years. So for us, it was being able to accelerate our existing business model, our success story with or without it. And we figured out what the price point was.
And one of the things that I've been doing at Netflix since the beginning is valuing content and figuring out what is it worth to us? What is it worth in the market?
We did all the work, we came up with the price point you talked about, and we thought if we can buy it for that, that would be good for the business, good for our shareholders, good for our members, but a price significantly higher than that, it wouldn't be.
And I think typically when people get into these deals, there's a lot of emotion, there's a lot of ego, and you don't want to lose, you put in a lot of work. And when they came back with this significantly higher price point, it was more than we were willing to pay, and we just said no.
A lot of ego sounds right.
And like I said, we have built to where we are today organically, and we have tons of headroom to continue to do that. And this would have just been a little quicker.
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Chapter 5: What role does short-form content play in the future of media?
And it makes them a better writer. They believe it makes them a better writer. It doesn't replace a writer's room because a writer's room will come up with a couple of good ideas. a couple of interesting ideas, a couple of original ideas. AI is not built to do that ever.
I mean, the tool itself is built to give you the most predictable outcome possible, the antithesis of what we're trying to do when we make a TV show or a film. So will AI help things? I look at things right now of how we're using it in production today, things like previs.
So even just think about the technically working out a very complicated stunt shot before you do it, which increases the safety on set. I mean, people forget that people die on these productions all the time. And so these kind of things are making the business a lot more efficient. And again, I don't think it's meant to replace any creativity. I don't think it's designed for that.
On its best day, it won't do that. And somebody says, well, what about if you need a script? You don't need a script that's surprising. You've seen these Hallmark movies and these kind of things. They want them to be predictable. Well, the cost of the script for those movies is about 1% of the budget. So it's not a gigantic savings for anyone to do that or pursue that.
So I'm actually much more excited about the upside and the potential of the technology than I'm worried about it's going to displace creatives. So we always make a prediction at the end of the show. In fact, I'm very long on human creation. I'm building a billion-dollar studio in New Jersey right now. So I'm very long on human creation.
So at the end of the show, we always make a prediction. And two years ago, I made a prediction that Netflix would merge with a large entertainment company and become the biggest media subscription company in the world. Except I predicted it was going to be Disney. I look at Disney, its stock is below where it was 10 years ago.
And I see a combination between Netflix and Disney where you would take your unbelievable IP, you know, K-pop demon hunters, Wednesdays, Stranger Things rides verticalized in what is a singular parks business. And then you would own family and adult. You'd be the largest. And quite frankly, I would want to break up.
I don't think that merger should ever happen because I think- You don't like these mergers. I know you don't, yeah. We're going to talk about inflation later, but corporations have been able to consolidate and charge everyone higher rents, but that's a longer talk show. But you could get it done in this administration. Thank you. But you could get it done in this administration.
Would you ever consider, or let me put it a different way. Academically, do you see the industrial logic behind creating this unbelievable vertical juggernaut with your IP, their distribution with parks, and owning subscription across family and adult? To me, that just makes all sorts of industrial logic.
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Chapter 6: How is inflation affecting consumer behavior and the entertainment industry?
So we were a kid's brand. We were a...
art house brand we're a documentary brand and because of personalization it we really were all those things to all those different people so we didn't really pigeon our pigeonhole ourselves so we when we say what's a netflix show it's your favorite show it's really not like you know disney is going to have a very hard time getting broader than a family brand they're very very good at it they're really great at it but it's very difficult for them when they try to get too broad and and we are a general entertainment brand
just because it's in our DNA. And we got very good at serving all of those individual audiences and personalizing the experience in a way that they didn't really have to. And most entertainment companies don't. HBO has got a very specific brand. People think, oh, it's an HBO show. It's a prestige television. That's all.
But it's pretty narrow, and they've never been able to get into the family business for that reason. And I think our advantage is that we are a broad We're a broad brand and not just casual, but we're actually, I would argue, best in class in all those categories. So I think that's helped us not need to do the things you're talking about. Now, do I want to someday be in the parks business?
I'm not sure. But we're doing right now, we're looking at, you know, we're opening, we opened one in Dallas and one in Philadelphia, Netflix House, which is a hundred thousand square foot entertainment experience that does all those kinds of things. But it's a night out. It's not where you go on vacation.
And that's where we're kind of toe-dipping on some of this stuff, some of the consumer experiences. We have a live tour coming up of K-pop demon hunters, that kind of thing. So it would accelerate that for sure. But that's a very big transaction you're talking about. And we're really not like... We're not seeking to go out and buy things. We built everything.
We're much better builders than buyers, I think. And I think, like I said, the Warner Brothers aside, because it was a very unique product, it didn't have all the things you don't want in that deal. And it did have great IP. And if at a price point, we'd have closed on it. But I can't think of any other thing like it.
Netflix is one of the largest streamers in the world. It's certainly more popular than Disney+, Paramount, Hulu. There is one other, some would call it a streaming service though, which is very popular, and that is YouTube, which is actually dominating in terms of television viewing time. How do you think about YouTube? Do you think of YouTube as a competitor?
And if so, what is your approach to competing with them?
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Chapter 7: What are the implications of corporate consolidation in media?
And then there's cable channels. And then there's cable originals. And then there's premium paid channels. And there's premium originals. And they keep kind of ratcheting up on each other. By the time we got into it, the likeliness that a streamer was going to produce an HBO-caliber show like House of Cards was pretty unthought of. But I think this is kind of the same thing. Will people...
uh, step into YouTube because it's a very easy entry point, uh, to develop their storytelling skills, and will they find that the monetization there is not quite what they want it to be if they've got bigger ambitions, and will they go out and look for other things? Netflix, perhaps, or another streamer, another network.
All those things will happen, and it's all just part of the landscape of how people are watching. And it's not... I'm frankly fascinated by watching... Like, for me, if I watch Saturday Night Live on Sunday morning on YouTube, Am I watching NBC? Am I watching YouTube? Or am I watching Saturday Night Live? So are we competing with them? If I was watching NBC, of course we're competing.
So I think we're trying to constantly win those moments of truth. When you sit down on the couch and pick up the TV, press the button to choose what you're going to watch, I've got to entertain you.
One thing you didn't mention on that point, you're competing with YouTube when you pick up the remote and you turn on the TV. increasingly people aren't even doing that. They're taking their phones out and they're scrolling on their phones. And for young people, for Gen Z, we're spending around eight hours a day on our phones. To me, that's eating into content time. That's eating into watch time.
And something we've been talking a lot about on the show is the idea that clips seem to be taking over, short-form content.
Yeah.
Seems to be kind of king at the moment. Those are obviously dominated by basically Instagram, you could argue YouTube Shorts kind of, and TikTok. Do you think of Meta and TikTok as competitors as well?
If they're doing it on the TV, I do. And I would tell you this, I think that people, what's really remarkable, if you look at the consumption of professional content, TV series, films, on phones, that consumption's been remarkably flat for about seven years now. So you are seeing a lot more video on mobile, but the professional content on mobile is about 2%, and it's been steady.
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Chapter 8: What advice does Ted Sarandos offer to the next generation of media creators?
So I think on a split of justice basis, it's now at $700. The bad news is I sold it three months later at $10 a share for a tax loss. I literally want to find a time machine so I can go back, track my ass down, kill me, and then kill myself. Anyways, just think of that. Your stock is up, I think, 850% in the last 20 years.
The last five years, it's kept pace with the S&P, but it hasn't outperformed. And the last year has been not a tough year, but you're a CEO of a public company. And it's very much what have you done for me lately? And I think the general sense is, and you tell me if this is not correct, is the clip economy that that Ed is talking about is just eating.
I mean, the fear is that people our age is we don't know what we don't know. And what I see with my kids, and I think unfortunately right now, the most powerful force in media, I would argue is probably Instagram reels. And that is our brain. We have a generation of people being wired to consume content in 60 and 90 second format.
You now have, including debt, the acquisition you passed up, you technically After I heard you were passing, I texted him. I'm like, you got $112 billion to go plan traffic now. It feels like you do need to inspire some more growth. You're still growing, but I doubt you think of yourself as a mature company. And your growth is still solid, but not the growth it once was.
With that $112 billion, where are you going to find growth? Is it continuing to do what you do? Or do you have... Do you have other ideas about new businesses you're currently not in?
Well, look, we're about 9% of total TV watching right now in the U.S. in our most mature market. We're about 45% penetrated in our addressable markets. And growing that penetration and growing share in what we're doing is a big business. You know, this first quarter of this year, we grew our revenue by 18%. We grew our gross margin by 18%.
We've got a guide for this year to be 12% to 14% of growth and 31.5% margin. We also have a doubling of our ad business to $3 billion this year. So we've got a lot of growth on the horizon for what we're doing because we've just barely scratched the surface in what we're doing.
You know, it's remarkable to me in some of these TV markets around the world that we're, you know, we're still in our infancy in a way. So we go out and see, and if I worried a little bit about what you're saying, I obviously, we follow consumer trends, we see what young people are doing, and then having tried to distinguish what will they do when they have
more money and less time, which is generally how these things evolve. And being part of their media landscape is really important. And they may use the phone to get excited about something. You saw that we just redid our TV UI, but we also redid our mobile UI and added vertical video, not to compete with TikTok, but to be more discoverable in a format that's more native to younger people.
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