$NFLX Netflix Q3 2025 Earnings Conference Call

Good afternoon and welcome to the Netflix Q3 2025 earnings interview. I'm

Spencer Wong, VP of finance, IR, and corporate development. Joining me today

corporate development. Joining me today are co-CEOs Ted Sandos and Greg Peters and CFO Spence Newman. As a reminder, we will be making forward-looking statements and actual results may vary.

We'll now take questions submitted by the analyst community and we will start uh with our results and outlook. Our

first question uh comes from Ben Swinburn of Morgan Stanley who asks, "As you begin to wrap up 2025 and look to 2026, can you talk broadly about the

health of the business and and how you would frame the opportunity ahead?"

>> Yeah, we think the business is very healthy. Uh we feel good about our

healthy. Uh we feel good about our progress on our key initiatives. We've

got also a lot of opportunity ahead of us, but we got a lot of work we need to do to accomplish uh and fully realize those opportunities. So what's working?

those opportunities. So what's working?

We had a good Q3. We had revenue in line with expectations. Our operating income

with expectations. Our operating income would have exceeded our forecast absent the Brazilian tax matter. We're also

seeing good progress against our key priorities. So engagement remains

priorities. So engagement remains healthy. We achieved record share of TV

healthy. We achieved record share of TV time in Q3 in both the US and the UK. Uh

we recorded our best ad sales quarter ever. Uh we are now on track to more

ever. Uh we are now on track to more than double ad revenue this year. We're

continuing to build out both uh live offerings and games is the emerging capabilities. On the live side, we saw

capabilities. On the live side, we saw Canelo Crawford that was the most viewed men's championship fight this century.

Uh we recently announced the ability to play Netflix games on TV with friends and family playing together at home using just that TV and the phone as the game controller. So, this progress in

game controller. So, this progress in these areas is indicative of how we think we can best compete and grow the business over the long term. We focus on a few key areas that we think matter the most. And then we work hard to deliver

most. And then we work hard to deliver continuous improvement in those areas.

It sounds super simple, but uh building a real atscale global streaming business is hard because you got to combine great tech product and great content from all around the world. And we believe we can

continue to improve in both those areas.

But Ted, maybe you want to comment on Yeah, I would just say, you know, looking ahead, we continue to have a massive opportunity since we're only about 7% of the addressable market in terms of consumer spending and only

about 10% of time spent on TV in our biggest market. So, enormous room for

biggest market. So, enormous room for profitable growth in the core business.

And um this is a very exciting time in terms of a lot of innovation, a lot of competition. Uh but that's been true for

competition. Uh but that's been true for the last 25 years. Uh and one thing as a company, we've always embraced change.

We thrive on competition. you know, it pushes us to improve the service even faster for our members. Um, you know, back at the beginning in the early DVD days even and now in streaming and global streaming of original content, we

compete with the biggest players in the world, tech and media. Uh, and as you see, we keep growing engagement, revenue, and profit. So, you know, today we're an entertainment company. We

program for the an audience that's approaching a billion people around the world. Um, we're producing series and

world. Um, we're producing series and films for local audiences in multiple markets. Many of those films and series

markets. Many of those films and series resonate around the world. Uh, and a really great example of that, I think, is this summer's uh, K-pop Demon Hunters. Obviously, a smash hit. Uh, but

Hunters. Obviously, a smash hit. Uh, but

it's also emblematic of exactly what we're trying to do every day. In fact,

feature animation is an example of that, continuously improving the core. Um,

we've been grinding away at original feature animation for for a few years now, and K-pop Demon Hunters is our most popular film ever. Um, and it again it proves our ability to create

breakthrough hits and move the culture.

Uh, today we announced Mattel and Hasbro have been named the global co-master toy licences for K-pop Demon Hunter. Uh,

this is a rare, maybe unprecedented partnership for them. Uh, and we're going to need them both to help meet the massive demand for uh, for the for fans to get closer to their characters

offscreen every day. Um, we're here to entertain the world and we're delivering tremendous value to our members every day. When you have a hit the size of

day. When you have a hit the size of K-pop Demon Hunters, it stirs the imagination of how big we could take this. And if as long as we keep

this. And if as long as we keep improving on the core business every day. So, we feel great about the

day. So, we feel great about the business and as Greg said, we are as energized as ever.

>> Thank you, Ted and Greg. Uh, our next question comes from Steve Cahol of Wells Fargo. Uh, can you please provide more

Fargo. Uh, can you please provide more color on the nature of the tax expense and why it fell above the operating line?

Uh, sure, Spencer. I'll I'll take that one. Greg and Ted were on a roll, but I

one. Greg and Ted were on a roll, but I think I will take the short straw for this one. Um, and I'll spend a minute on

this one. Um, and I'll spend a minute on it because the uh this Brazilian tax matter, it's it's a bit complicated and I want to be sure we're being really clear about what it is and what it isn't. Um, it's not an income tax. It's

isn't. Um, it's not an income tax. It's

a cost of doing business in Brazil. It's

a gross tax on outbound payments and it's called the contribution for intervention in economic domain. So,

it's a bit of a mouthful. Um, it

involves a 10% tax on certain payments made by Brazilian entities to companies outside of Brazil. Um, it's not a tax that's specific to Netflix. It's not

even specific to streaming. So, we

assume other companies will be impacted by this. In our case, uh, Netflix Brazil

by this. In our case, uh, Netflix Brazil pays Netflix US for services that enable Netflix Brazil to offer subscriptions to our Brazilian customers. And we actually

received a favorable ruling from a lower court back in 2022 that concluded we were not subject to this tax which is why we believe we couldn't acrue this previously. Uh the legal issue in

previously. Uh the legal issue in question relates to the scope of the transactions covered by the tax and in particular whether the tax applies to service payments that don't involve a

transfer of technology. Um, we flagged this as a potential exposure in our prior 10Ks and 10 Q's dating back to our 2023 10K. Um, and then in August of this

2023 10K. Um, and then in August of this year, the Brazil Supreme Court reached a 74 decision against an unrelated company ruling that uh the tax applies to a

wider range of transactions than we thought was legally permissible. In

particular, that it applies even to service payments that that don't involve a transfer of technology. So given that court's ruling, that's caused us to re-evaluate the likelihood of prevailing. And we now deem the loss to

prevailing. And we now deem the loss to be probable. Uh and that's why we

be probable. Uh and that's why we recorded the expense in Q3. And again,

it's it's not an income tax. And that's

why we recorded the expense as a as a a component of our cost of revenues. And

as we said in the letter, um the expense we booked in this quarter, it covers the periods from 2022 uh through Q3 of 2025. of the amount we

booked in cost of revenues this quarter.

Uh just about 20% of it is for the year 2025 with the remainder related to those 2022 to 2024 periods. So look, I know that was a lot. There's just two really important takeaways that I want to leave

you with. The first is that the

you with. The first is that the contribution for inter the contribution for intervention in economic domain it's it's a unique tax. It is a mouthful. No

other tax looks or behaves like this in in any other major country in which we operate. And secondly, absent this

operate. And secondly, absent this expense, we would have exceeded our Q325 operating income and operating margin forecast. And we don't expect this

forecast. And we don't expect this matter to have a have a material impact on on our results going forward.

>> Great. Thanks, Spence. Uh, I'll move on to the next question, uh, which comes from Tom Champion of Piper Sandler. Do

you have any early views on revenue and operating income growth, uh, for 2026?

I'll I'll take this one as well.

>> Yeah.

>> Um Yeah. Okay. So, look, we we'll issue a full year 2026 guidance on our next call in January, but our financial objectives are unchanged. We look to sustain healthy revenue growth, look to expand margins, and increase your cash

flow. Uh now, we did last year on our Q3

flow. Uh now, we did last year on our Q3 call, we did issue fullear guidance, but that was in advance of sunsetting membership reporting. So, it was a

membership reporting. So, it was a pretty unique timing giving that upcoming change in reporting for 26.

Again, we'll we'll issue the the full year 26 guide as we more typically would uh on our next call in January.

>> Thanks, Spence. I'll move us along to a few questions we've received on the topic of advertising. Uh the first one comes from Jason Hstein of Oenheimer.

Uh given your comment of doubling upfront commitments in the earnings letter, should we interpret this to mean that a full year 2026 advertising could also double?

Well, I'll start by just saying it's exciting to see our progress in 2025, more than doubling our ads revenue there. Uh, while of course it stole off

there. Uh, while of course it stole off a small base relative to the size of our subscription revenue, but we feel like we've established the fundamentals of the business now. We've proven we know

how to scale, we see plenty of room for growth ahead. And what's making up that

growth ahead. And what's making up that growth right now? As you mentioned, we more than doubled our US upfront commitments. That lands partly in 25 and

commitments. That lands partly in 25 and partly in 26, which I think you're alluding to here. Um, perhaps even more importantly though, we're seeing even higher rates of growth in programmatic and that's more important because we

believe that's going to be an increasing part of that incremental revenue contribution going forward. What are

driving those results? Advertisers are

excited about our growing scale. Uh, we

got a highly attentive and engaged audience. The roll out of our adte stack

audience. The roll out of our adte stack means we got more formats, we got more measurement, we got more ways to buy.

And of course, our slate is a critical and important source of competitive differentiation. So, while I'll refrain

differentiation. So, while I'll refrain from offering any 20 26 guidance, uh I would say we are feeling good about our growth trajectory.

>> Thanks, Greg. Um a followup on that one from Vicram Kesabotla of Baird. Um your

offering um to advertisers has evolved significantly in 2025, including the launch of the ad suite and the integrations with additional demand sources. As we look into next year, what

sources. As we look into next year, what are some of the key priorities uh for the advertising business?

Yeah, consistent with the last uh comment and answer, we made considerable progress in building out our general capabilities in the ad space. So, if you use our beloved crawl, walk run model,

we're now squarely in that walking phase. The roll out of the ads suite,

phase. The roll out of the ads suite, our own ad suite has been great because it means we're just continuing to learn and improve the stack based on client feedback. So, we've got a really fast

feedback. So, we've got a really fast iteration loop going there that we're excited about. key priorities and focus

excited about. key priorities and focus for us um is making it easier for advertisers to buy on our service. We

want to increase the diversity of advertisers we have. That's a key direction of growth for us that enables that revenue growth. We're adding more demand sources like Amazon DSP, AJA, and

Japan. We're improving our own ad sales

Japan. We're improving our own ad sales and go to market capabilities. Uh we're

also iterating on ad formats. Later this

quarter, we'll be introducing ad interactivity and taking that into 2026.

You're going to see us continue to develop along some of those lines. So,

more ways to buy, more data for targeting and media planning capabilities globally, more modular interactive ad formats with enhanced AI capabilities, and more measurement

functionality in all of our markets. And

then in 2027, we get to pivot to make more uh focused investments in data capabilities such as MLbased optimization, advanced measurement, advanced targeting. So, I would say, you know, uh

targeting. So, I would say, you know, uh we're getting we've got our legs underneath us. We, you know, we're

underneath us. We, you know, we're making a good pace, but we've got uh a lot ahead of us to go do. And quite

frankly, we expect we're going to be able to move more quickly than other streamers as we leverage pre-existing tech and data science assets and expertise.

>> Thanks, Greg. And to round out our last question on advertising, uh this one comes from Dan Samman of New Street Research. Are fill rates improving in

Research. Are fill rates improving in line with your expectations as the Netflix ad suite and new demand partnerships scale up?

>> Yeah, we focus on overall revenue is the most important metric we're seeking to optimize. But having said that, fill

optimize. But having said that, fill rates have improved and we believe they're going to continue to improve as we continue to develop our go to market capabilities, more measurement, more targeting.

>> Thanks, Greg. I'll now uh move us along to the topic of content and engagement.

Uh a lot of questions there. Uh we'll

begin first with Steve Kahhal of Wells Fargo. Are you seeing a pickup in

Fargo. Are you seeing a pickup in engagement like you've expected?

>> Yes, total view hours grew a bit faster in Q325 than in the first half of 25. In

fact, in Q3, we achieved our highest quarterly view share ever in the United States at 8.6%. And then the UK at 9.4% according to Neielson and Barb respectively. These are just, you know,

respectively. These are just, you know, two countries that we've got really good measurement on that share. We also

believe we're going to continue to see steady growth in view hours over time.

We grow engagement by expanding our programming and the range of our offering. This is a critical and very

offering. This is a critical and very proven dimension of growth for us. But

we're also seeing that um certain engagement delivers outsized and different value. And we saw pretty good

different value. And we saw pretty good examples of this in Q3. You got the Canelo Crawford fight, most viewed men's championship boxing match this century.

You got K-pop Demon Hunters, our biggest film ever. huge impact on the cultural

film ever. huge impact on the cultural zeitgeist. Both are great examples and

zeitgeist. Both are great examples and they're also from really different parts of our programming spectrum of this punctuated value. Now, we believe we've

punctuated value. Now, we believe we've got a better understanding of the streaming business than any of our competitors, but we're also continuing to learn and we're in the process of

really building a better understanding of how these particular moments deliver differential value to our members and the business.

Yeah, let me just add here, Steve. Um,

we're going to continue to benefit long term from the trend just of folks moving from linear from linear viewing to streaming that has a kind of a natural adoption curve. Um, but I also look

adoption curve. Um, but I also look forward and we have an incredible slate in Q4 and we're really excited to follow that up in 2026.

But it's not about any one single title in Q4 or next year. You know, as you know, even our largest titles and the biggest success generally drives less than 1% of our total viewing. Um, so

it's really about having a steady drum beat of shows and films that our members love. Uh, that's what drives continued

love. Uh, that's what drives continued steady growth and engagement over time.

Um, and we gave a lot of detail about our Q4 coming up in the letter, uh, including that incredible slate of film and the wild ride finale of Stranger Things. Uh, but I want to give you a

Things. Uh, but I want to give you a little bit of color in 26. Maybe this is a longer answer than you were bargaining for, Steve, but we're really particularly excited about a few things

coming up next year. Um, like the return of some of our biggest and most loved shows like Bridgetgerton, Beef, Emily and Paris, uh, One Piece, Outer Banks,

Virgin River, The Gentleman, Avatar, the Last Airbender, Running Point, Jinny and Georgia, Lupan, all coming back for new seasons in 26. We've this amazing slate

of films with, you know, a big event film from Greta Gerwick with Narnia. Uh,

Here Comes the Flood starring Denzel Washington. Uh, Ben Affleck is direct is

Washington. Uh, Ben Affleck is direct is directing this great movie for us called Animals. Uh, Apex from Charlie Stron, an

Animals. Uh, Apex from Charlie Stron, an incredible action movie. Um, Matt Damon and and Ben Affleck are on screen together and starring in The Rip. Uh, a

couple of great romcoms, Office Romance with Jennifer Lopez. Uh, people we meet on Vacation. Our French team has got an

on Vacation. Our French team has got an incredible epic film Quasimoto coming up and Piquey Blinders fans are going to freak out for the Pey Blinders movie, The Immortal Man, uh with Killian

Murphy. It's really great and and lots

Murphy. It's really great and and lots and lots of brand new series work coming going on this year and coming out in 26.

Uh Golf with Will Frell, Little House on the Prairie, Man on Fire. We have new series from the Duffer brothers, amazing slate of Kdramas. That's just to name a few. But, uh, in other words, we've got

few. But, uh, in other words, we've got a pretty great 26 coming up after this pretty phenomenal Q4.

>> Thanks, Ted. Um, Dan Kernos, uh, from Benchmark uh, company uh, has a question about, uh, our Spotify um, partnership.

How should we think about the recent deal with Spotify? How aggressively will you build out uh, this podcast category?

So, this deal is a video co-exclusive partnership with Spotify that secures a curated selection of their top podcasts uh to help us provide even more entertainment options for our members

when they're looking for pop culture or lifestyle or sports or true crime. And

we get to deliver to them wherever and however they want to watch. And we're

going to build into this category like we do with our other categories based on demand signals that we get from our members. And we see this as really, you

members. And we see this as really, you know, the opportunity to integrate highquality video podcasts that broadens the Netflix offering beyond all the incredible films and series that Ted

just mentioned, beyond the live events that we are building, standup specials and games. And we hope that, you know,

and games. And we hope that, you know, that ultimately reinforces our value as the most important service for your entertainment needs.

>> Thanks, Greg. Um, our next question comes from Robert Fishman of Moffet Nathansson. Uh, following the strong

Nathansson. Uh, following the strong theatrical performance of K-pop Demon Hunters, can you share your updated perspective on monetizing some of your

content in the theatrical window on a on an exclusive or non-exclusive basis?

>> Well, first of all, um, thanks, Robert.

It there's no change in the strategy.

Our strategy is to give our members exclusive firstr run movies on Netflix.

Um, we occasionally release certain films in theaters for our fans like like we did with K-pop Demon Hunters or as part of our launch strategy, publicity, marketing, qualification, all those things. And we'll continue to do that.

things. And we'll continue to do that.

Um, uh, we believe that this film K-pop Demon Demon Hunters actually worked because it was released on Netflix first. Um, look, we had a film that

first. Um, look, we had a film that people fell in love with. That's first

and foremost. Um, but not in a huge way on the first day or even the first weekend. In fact, it was the super fans

weekend. In fact, it was the super fans who watched the, you know, watched the movie and repeat watch the movie that drove the recommendation engine that got it in front of more super fans who also

fell in love with the movie. So, that

ease and value uh that allowed folks to repeat view it uh the ubiquity of distribution uh which took all the guesswork out of how to watch it when you did finally see it show up in your

social media feed. Um all of this contributed to K-pop demon hunters blowing up all over the world. And uh I would argue in a way that it couldn't happen anywhere else. Um if anything,

this actually reinforces our strategy because being on Netflix gave the film a chance to build momentum and it allowed fans to learn the songs and to watch it over and over again and uh to to make

their own post and their own dances around K-pop Demon Hunter. Now, for some films, seeing it together and singing out loud is super fun and it's a differentiated experience. And we were

differentiated experience. And we were able to do that with the K-pop Demon Hunter singalongs eight weeks after the film premiered on Netflix and we did have a good weekend. Uh but we, you know, we created a great night out and

we're going to do it again on Halloween weekend. Uh and this time every major

weekend. Uh and this time every major theater chain is on for the ride. We're

also adding a few international markets.

So it's been really fun to see this film and to see our ability to break through pop culture on par with some of the biggest theatrical films ever. Um, and

it's even better that it's with an original animated feature because it's so hard to do.

>> Great. Uh, we now have a question on our live events from Vicram Kesabota Baird.

Um, what were your observations uh from the Canelo versus Crawford fight in September? How are these types of live

September? How are these types of live events impacting engagement, acquisition, and retention on the platform?

>> Yeah. Well, like Greg said earlier that the Caneler Crawford fight, uh, it was the most viewed men's championship fight of the century. Uh, had over 41 million live plus one viewers. Um, it was in the

top 10 in 91 countries and it was a great fight. So, um, so we believe these

great fight. So, um, so we believe these big events that attract mass audiences are kind of differentially valuable for our members. It's a kind of urgent

our members. It's a kind of urgent viewing that our members love and value.

Um so these events typically have outsized um positives for conversation and for acquisition and we strongly suspect retention. Um however you know

suspect retention. Um however you know we've said earlier live is only a small portion of our content spend and it's a very small portion of our 200 billion hours viewed. So it's a you know it's

hours viewed. So it's a you know it's relatively small still but hugely outsized impact. Uh and we you know we

outsized impact. Uh and we you know we like we've seen with other titles this has had that kind of positive impact on acquisition. It's a little too early to

acquisition. It's a little too early to say for sure and retention, but so far it looks a lot like the Jake Paul Mike Tyson performance. Uh, and we remain

Tyson performance. Uh, and we remain incredibly excited about the opportunity in live. So, you know, upcoming we've

in live. So, you know, upcoming we've got Jake Paul versus Tank Davis from Miami November 14th. Uh, and we we really are trying to grow our capabilities outside of the US as well.

Uh, which you'll see next year with the World Baseball Classic from Japan.

>> Thanks, Ted. And that's a good segue to our next question, which is the quarterly question about sports uh for us. Um this is from Robert Fishman of

us. Um this is from Robert Fishman of Moffett Nathansson. Um since last

Moffett Nathansson. Um since last earnings, uh we've seen several sports rights deals including Apple F1, uh Paramount UFC, etc., etc., while we

still await an official MLB update, can you help us think about the importance of global sports rights versus local rights to Netflix? and do the sports rights you look to acquire need to

materially accelerate your advertising growth?

>> So, um, as for local versus global, it's just a scale question. Local cost versus the size of the local audience. So, uh,

and no real change in the approach. You

know, we're focused on big live events, uh, which sports are a subcomponent of the live strategy. Um, we said before we're not currently focused on the big season packages. Um, in terms of global

season packages. Um, in terms of global versus local, also we think about it just like series. It it varies. Um some

like the Canadella Crawford fight had big global appeal. Uh we think World Baseball Classic in Japan was actually built and designed and budgeted for a specific geography. Um on the far as

specific geography. Um on the far as advertising is concerned, the number one important thing we have to do is thrill our audiences. Um we the the revenue

our audiences. Um we the the revenue from advertising or subscription is the reward for thrilling the audience. So we

have to stay disciplined on that approach. Um, but for upcoming live

approach. Um, but for upcoming live events that we're excited about, I mentioned Jake Paul versus Tank. Uh,

that's November 14th. We have, uh, our double header NFL Christmas Day games with Dallas versus Washington, Detroit versus Minnesota. Skyscraper Live is

versus Minnesota. Skyscraper Live is going to be wild. Uh, the SAG Awards, we got WWE every week. Uh, I mentioned the World Baseball Classic in Japan in 2026.

And in 2027 and 31, we've got FIFA's uh, world uh, women's World Cup as well. So,

we're pretty excited about the slate and there's going to be a lot more that'll come in between.

>> Thanks, Ted. Uh, we'll take our next question from Rich Greenfield of uh Lightshed Partners. Uh, are you testing

Lightshed Partners. Uh, are you testing premium uh tier free trials? We

recently, we meaning uh Rich recently opened Netflix and were prompted with a 4K upgrade screen. Is this a typical promotion or are you selectively testing

free trials?

Yes, we test and productize a variety of offers that we think help members understand and sometimes try a feature or benefit that we think they might enjoy. So, if you got a 4K TV as as Rich

enjoy. So, if you got a 4K TV as as Rich does, you might uh get a notice from us and say, "Do you want to try watching, let's say, Skyscraper Live that Ted mentioned, somebody free climbing Taipei

101 in 4K and decide if that's a good option for you." But ultimately, we want a range of plans. We want a range of features, different price points, and then we want to help members choose the right plan for themselves. We think that

yields a better member satisfaction and yields better engagement and retention and a better long-term business.

>> Thanks, Greg. Uh we've gotten a series of questions on M&A on that topic today.

Uh not surprising given the announcement from our uh friends at Warner Brothers Discovery. Um, so we'll take this next

Discovery. Um, so we'll take this next question from Jessica Reef Erlic of uh, Bank of America. Uh, do you see potential industry consolidation

reshaping the competitive landscape? Do

you see that as an opportunity or threat? Uh, what implications might that

threat? Uh, what implications might that have for Netflix's content strategy and differentiation?

>> Thanks, Jessica. I look, we'll take it in two parts. Uh, first, the opportunity. Um, it's true that

opportunity. Um, it's true that historically we've been more builders than buyers. uh and we think we have

than buyers. uh and we think we have plenty of runway for growth without fundamentally changing that playbook. Um

nothing is a must have for us to meet our the goals that we have for the business. But as we wrote in the letter,

business. But as we wrote in the letter, we focus on profitable growth and reinvesting in our business uh both organically and through selective M&A.

And when it comes to M&A opportunities, we look at them and we we look at all of them and we apply the same framework and lens that we look at when we look to invest in a build. Um, is it a big

opportunity? First question. Second, if

opportunity? First question. Second, if

it's IP, does it strengthen our entertainment offering? Is there

entertainment offering? Is there additional value in ownership? Uh, does

it strengthen our existing capabilities somehow? Um, does the uh does it

somehow? Um, does the uh does it accelerate our existing strategy? Uh,

and by the way, and you look at all these things relative to the price, relative to the opportunity cost, and relative to other alternatives, uh, we've been very clear in the past that we have no interest in owning legacy

media networks. So there is no change

media networks. So there is no change there. Uh but in general we believe that

there. Uh but in general we believe that we can be and we will be choosy. Um we

we have a great business. We're

predominantly focused on growing organically investing aggressively and responsibly into the growth and returning access cash flow to shareholders through our shop through our share of repurchase. Greg, you want

to add there on >> Yeah, maybe I'll try and uh speak to that second part of this. The threat

part of the question.

>> You know, we've always faced significant competition. We still face it today.

competition. We still face it today.

This is, you know, an incredibly competitive uh entertainment environment. We've also seen a lot of

environment. We've also seen a lot of industry consolidation over the years.

Think about uh Disney Fox and Amazon picking up MGM, of course, Time Warner and AT&T and then Discovery and Warner.

But, you know, none of those mergers were a fundamental shift in the competitive landscape. And we have seen

competitive landscape. And we have seen also a wide range of outcomes from such mergers. So watching some of our

mergers. So watching some of our competitors potentially get bigger via M&A does not change in and of itself at least our view on the competitive landscape and we don't think it changes

the substance of the challenge that our competitors face. Specifically the range

competitors face. Specifically the range of activities that we and our competitors have to get great at has never been assembled in a single company before. think about, you know, producing

before. think about, you know, producing film and TV shows across multiple genres in multiple languages in dozens of countries around the world. Trying to

figure out how to incorporate the latest technology, including, you know, AI and Gen AI. We're trying to figure out how

Gen AI. We're trying to figure out how we build, you know, better product experiences that's conserve consumers better around the world. How about

customer acquisition and retention? How

do we optimize global payments? How do

we optimize global partnerships? There

is so much. And we want to get better at all those things. Our competitors are seeking to get better at all those things of course as well but you have to do that by the hard work of developing

those capabilities in the trenches dayto day you don't get there simply by buying another company that is also still developing those same capabilities so maybe I'll just end by reiterating what

Ted said which is it's our responsibility to look at every significant opportunity we do that we got a clear framework to evaluate those opportunities and we'll do whatever we think is best to grow the business

Great. Thank you. Um, David Joyce from

Great. Thank you. Um, David Joyce from um, Seport Research Partners has a slightly different angle uh, on the M&A question. Uh, should potential industry

question. Uh, should potential industry consolidation with embedded studio and streaming assets, could that lead to less third-party content accessibility

for Netflix?

>> Uh, thanks David. Look, original titles are the big business driver for us.

That's why we got into this, you know, more than 10 years ago. It's why we continue to grow and expand the original content investment across new genres, new content forms, and multiple geographies. Um, so we're happy to

geographies. Um, so we're happy to license titles from industry suppliers to complement our offering. Uh, but it's worth noting that we've always seen these kind of es and flows from third

party content um, uh, in terms of access to it. Uh, our competitors are also our

to it. Uh, our competitors are also our suppliers, so they change their mind sometimes about selling to competitors.

So, we've been dealing with that since the beginning of streaming. But as we sit here today, we're not dependent on any single supplier. Uh no single supplier represents more than a small minority of our total view hours. And I

and more importantly, I think is that we've proven time and time again that licensing to Netflix is the best way to build audience, build revenue, and create value for your IP. Whether it's

Suits or Piquey Blinders or Breaking Bad, you know, we played a played a very positive role in the life cycle of other folks IP, and we suspect that dynamic will continue.

Great. Um, we now have a question from Justin Patterson of, uh, Key Bank. Uh,

Netflix recently launched party games that are playable on the TV. How do you think gaming could change the time members spend with Netflix each day?

>> Well, games are clearly a form of entertainment consumers care about. And

in terms of the time they spend, which you noted, uh, as well as, uh, the money they spend, it's, you know, approximately $140 billion opportunity consumer spend, exhaustion. That doesn't

even include the ad revenue which of course is linked to the the time and engagement. We've mostly talked so far

engagement. We've mostly talked so far about our work in this space as games um because that's an easy shortorthhand but we see this initiative as more about interactivity broadly and how does

interactivity become complimentary to linear storytelling. How does it uh able

linear storytelling. How does it uh able to unlock whole new entertainment experiences? For example, uh real time

experiences? For example, uh real time voting will be our first live interactive feature. We're currently

interactive feature. We're currently testing it on dinner time with uh dinnertime live with David Chang. It's

going to roll out more broadly starting with Star Search in January and we expect to provide other interactive features to deepen engagement with live events as we go in the future. And then

when it comes to actual games, we've been building a ton of foundations for the last few years. Things like the ability just to develop games to get those games onto service, connect games with players, give them a high quality experience. And going forward, we're

experience. And going forward, we're building on top of that foundation, but focusing on offering more highquality games in a few key genres and targeting the right cohort of users. So this is a

less is more strategy on a few identified verticals. Those verticals

identified verticals. Those verticals include immersive narrative games based on our own IP. You can think about Squid Game Unleashed or Thronglets from the Black Mirror universe or Golf with Happy

Gilmore. Got games for kids. Uh, this is

Gilmore. Got games for kids. Uh, this is Peppa Pig, you know, no ads, no inapp payments, safe within your subscription, mainstream established titles. Think

about what we did with Grand Theft Auto, as well as socially engaging party games, which you noted, uh, we're rolling out this holiday season, a slate of party games on TV. It's great for the whole family when you're in front of

that TV. All you need is the TV and your

that TV. All you need is the TV and your phone as a controller. It's like Boggle Party, Pictionary Game Night, Lego Party, Tetris. Uh, we've got Party

Party, Tetris. Uh, we've got Party Crashers, which is a social deception game. And the part that I like most

game. And the part that I like most about this is these games are super easy to access. It's just like our series and

to access. It's just like our series and films. You scroll to the games tab, you pick whatever you want, click it, and you're in. You don't need a special

you're in. You don't need a special controller. That's key to this access.

controller. That's key to this access.

And in the years ahead, actually speaking of controllers, we expect creators will really find interesting and novel ways to unlock all of the power that is in this incredibly advanced controller that we all happen

to have in our pockets, which of course is our phones. So, we're just starting to scratch the surface today. Uh we

think there's much more we can ultimately do in this space. Um, yet we already see how this approach not only extends the audience's engagement with the story, but it creates a synergy that

reinforces both mediums, the interactive and the non-interactive side. It drives

engagement, it drives retention, and therefore supports the business. So,

looking ahead, we're going to ramp our investment in this area uh judiciously based on demonstrating that we're ramping returns to the business, but we're extremely excited about, you know, the progress we've got ahead of us.

>> I would say do not play boggle with Greg. He's very very good.

Greg. He's very very good.

>> He's our head of the games unit, but he's good.

>> He he he has a leg up on us. He's very

good.

>> He does. I think he gets a play quite often.

>> All right, we have uh one another question from Steve Cahol of Wells Fargo. Um last quarter you talked about

Fargo. Um last quarter you talked about Netflix being a great place for some creators on YouTube. Uh since then you've announced one new creator deal with Mark Robber. Uh, should we expect

more on this front and what kinds of content are you looking for?

>> Yeah, thanks Steve. I I said before, but we want to be in business with the best creators on the planet wherever they are and some of them are in Hollywood, some of them in Korea, some of them are in Paris, and some of them are sitting on

social media platforms and have yet to be discovered. So, um, not everything on

be discovered. So, um, not everything on YouTube is a fit for us, but there are some creators like Mark Robber, like Miss Rachel that are great fits for us.

Uh, and remember working with content creators from other platforms isn't a recent thing for us. Uh, in the over folks remember over the years we made Hype House. Uh, we partnered with

Hype House. Uh, we partnered with Miranda Sings. She had a stand-up comedy

Miranda Sings. She had a stand-up comedy special and a series called Haters Back Off. Uh, King Bach who's a a big star on

Off. Uh, King Bach who's a a big star on social media. You can see him in a lot

social media. You can see him in a lot of our films. Babysitter, Killer Queen, uh, When We First Met, just to name a few. uh but you know now we've we also

few. uh but you know now we've we also have created a curated section of uh video podcasts as well. So some of this stuff is just a very natural expansion

and there's plenty of room for the world's best creators wherever they are.

>> Great. Um we'll now wrap up uh with our uh last topic uh which is Genai and uh two sort of uh questions or maybe a two-part question. And uh the first part

two-part question. And uh the first part comes from Doug Anmouth of JP Morgan who's asking how has your thinking uh evolved over the past couple years about

Netflix's ability to leverage uh AI and related uh John Hudlick at UBS asks what are your thoughts on the impact from Sora 2 and other new AI content creation

apps in terms of increased competition from short form video. Do you think it creates new competition from an engagement standpoint?

>> Uh perhaps I'll kick it off on the first part of that question. And our thinking about AI hasn't really changed over decade and a half more. Um we've had a

long history of developing ML and AI solutions. We've got, you know, a deep

solutions. We've got, you know, a deep DNA, uh technology DNA, got significant data assets. We've got scaled consumer

data assets. We've got scaled consumer products, scaled business processes. All

of that we think um enables us to have the opportunity to leverage new technical capabilities as they come online. Uh and that's our job. We're

online. Uh and that's our job. We're

engaging proactively to do so. As we

said in the letter, uh specifically with Gen AI, we see a huge number of places in the business where we can bring these technologies in. They provide more

technologies in. They provide more capable tools. They improve

capable tools. They improve productivity. They improve velocity of

productivity. They improve velocity of innovation. They deliver better results

innovation. They deliver better results for members, for creators, for partners.

The vast majority of those cases involve us going to market for solutions and just integrating them into our existing tools and products. But there are a few

spaces where we think that making targeted investments uh is important. We

think we can develop often using building blocks from others. So think

about this as foundational models that we get open source or commercially to make cutting edge tools and cutting edge experiences. And those targeted areas of

experiences. And those targeted areas of investment are better product experiences, content production, and advertising. And maybe Ted, you want to

advertising. And maybe Ted, you want to pick it up on the content creation apps part of the question?

>> Yeah, look, what we've seen so far from these content creation apps is that it's likely to have a lot more impact on UGC creators uh the most in the near term.

Uh in other words, AI content replacing viewing of existing userenerated content. That starts to make sense. Uh

content. That starts to make sense. Uh

but for what we do, it takes a great artist to make something great. uh

writing and making shows and films well is a rare commodity and it's only done successfully by very few people. So AI

can give creatives better tools to enhance their overall TV movie experience for our members. Uh but it doesn't automatically make you a great storyteller if you're not. So if music is a leading indicator of all this, AI

generated music has been around for a long time and there's a lot of it and it's a pretty small part of total listening and established artists like Taylor Swift continue to be more popular than ever. So even in a world filled

than ever. So even in a world filled with AI music, AI seems to be mostly a tool for musicians to take to make to take their sound in new directions. And

you know, so we're confident that AI is going to help us and help our creative partners tell stories better, faster, and in new ways. Uh we're all in on that. Uh but we're not chasing novelty

that. Uh but we're not chasing novelty for novelty sake here. Uh and we're investing in what we believe delivers value for creators and members alike. So

we're not worried about AI replacing creativity. Uh but we're very excited

creativity. Uh but we're very excited about AI creating tools to help creativity.

>> Great. Thank you um uh all for your questions. Uh so we're now out of time.

questions. Uh so we're now out of time.

So we thank you for joining us for our Q3 call and we look forward to speaking with you all next quarter. Thank you.