Netflix Inc (NFLX) — Q3 2019 Earnings Call Transcript

Good afternoon, and welcome to the Netflix Q3 2019 Earnings Interview. I’m Spencer Wang, VP of IR and Corporate Development. Joining me today are CEO, Reed Hastings; CFO, Spence Neumann; Chief Content Officer, Ted Sarandos; and Chief Product Officer, Greg Peters. Our interviewer this quarter is Mike Morris from Guggenheim. As a reminder, we'll be making forward-looking statements, and actual results may vary. With that, let me turn it over to Mike for his first question.

Thank you, Spencer. Good afternoon. Let's start by talking about both member trends and the outlook that you just provided for members in the fourth quarter. Starting with the third quarter, can you speak a bit about some of the key drivers that - your results came in relatively in line with your guidance. Talk about the gross add dynamic and the churn dynamic there relative to what you are expecting coming into the quarter, please.

Relatively in line. It was the most accurate member forecast we had in years. Spencer, over to you.

I'll take that. We have quite a few Spencers on the call. First, I want to highlight that it was a very strong quarter for us. We achieved record revenues for Q3, record operating profit of nearly $1 billion, and record net additions of paid subscribers for the quarter. We performed slightly better than expected in subscriber growth outside of the U.S., although we fell a bit short domestically. Regarding your question on the factors affecting this, we're looking at very minor changes. We did experience a slight increase in churn this quarter, which followed our price hikes in the U.S. This elevated churn persisted throughout the quarter longer than before, but we're talking about an increase of just 0.1 percentage point. Despite this, the price increases have been significantly positive for our revenue, as evidenced in this quarter. We are reinvesting most of that revenue back into our service, enhancing our content and product experience for our members to maintain our value proposition and support our growth.

Okay. I want to come back to the topic of churn. But before we do, I just want to ask about the fourth quarter outlook. On the last call, we spoke about potentially seeing a record year of net subscriber or net member additions in 2019. The guide does not imply that at this point. So can you talk a bit about perhaps what changed? And I think the big question in investors' minds is will 2018 represent a peak year for member adds or can you get back to growing on top of that level again.

Sure. I'll take that one again, too. So in terms of our guide for the year, yes, it is down a bit from our previous forecast. And really, what we're just trying to do there is to be prudent about the - there's a number of moving parts in Q4 and variables that are just difficult to forecast. And whether it's, first, just the ability to be precise about a forecast around our content slate that has so much new IP in Q4 and big film - a big film IP that we - we've never had a quarter with so many big films launching in a quarter. Combine that with some of that elevated churn that we saw in Q3 and the potential for that to continue into Q4. And then lastly, there is obviously a few new competitors launching in the near term, and we try to factor that in as well. Inevitably, there's probably going to be some curiosity and some trial of those competitive service offerings. So when we put all that together, again, we adjusted our forecast slightly. It's still nearly 27 million paid net adds for the year, a tremendously strong year. And furthermore, our long-term outlook is unchanged in terms of the long-term opportunity for the business. We're just trying to be prudent about our Q4 forecast.

In the previous year, we added 5 million new subscribers in the U.S., and if our projections hold true, this year we expect to add about 2.6 million. The difference is primarily in the U.S., largely due to the price increase. We are noticing some sensitivity in response to this change. Our focus must be on improving service quality and making our offering essential. We remain significantly more affordable than cable and are seeing an increase in viewership. We believe there is considerable opportunity for growth in that area. However, this has impacted us this year. We will continue to concentrate on delivering exceptional value to our U.S. members, which we believe will support long-term growth in net additions annually. We will approach our guidance with caution and carefully evaluate our progress.

Yes. And on that elevated churn, just to kind of wrap on this, what type of subscribers are you seeing churn more often? Does it tend to be really that hit-driven nature around a particular programming? Does it happen to be sort of the last subscriber in is less sticky? What are you seeing there?

Mike, at 0.1%, it's 1 in 1,000 people, so you really can't tell the margin. Think of it much more big picture, which is it's always a question of how much value do we have, how do the consumers feel it. In moving up ASP in the U.S. from about $12 to about $13, we see a little bit of it. And then what we have to do is just give it a pause and really focus on the value. If you think about it, we haven't had many big movies in the past, and movies are very valuable, people are used to paying for a lot of that. And the slate that Ted and his team have this quarter and for next year is way better than any movie slate we've ever had. There's some great room for optimism there, too. So we just have to focus on the members, and I think it will shake out very well.

Okay. Thank you. And so let's talk about competition. Spence brought the topic up, so I'm not introducing it. I know it's been a hot topic. But Reed, you spoke in the U.K. a couple of weeks ago. You made a comment saying it would be a whole new world starting in November. I think a lot of people - a lot of investors just read the quote, they didn't necessarily see the interview for context. And so I'd love it if you could provide some context given that, that is a bit different from your comments from a couple of quarters ago where you felt that perhaps these new services wouldn't necessarily be material to the outlook.

From when we began in streaming, Hulu and YouTube and Amazon Prime back in 2007, 2008, we're all in the market. All four of us have been competing heavily, including with linear TV for the last 12 years. So fundamentally, there's not a big change here. It is interesting that we see both Apple and Disney launching basically in the same week after 12 years of not being in the market. And I was being a little playful with a whole new world in the sense of the drama of it coming. But fundamentally, it's more of the same, and Disney is going to be a great competitor. Apple is just beginning, but they'll probably have some great shows, too. But again, all of us are competing with linear TV. We're all relatively small to linear TV. So just like in the letter we put about the multiple cable networks over the last 30 years not really competing with each other fundamentally but competing with broadcast, I think it's the same kind of dynamic here.

I think I got the subtlety of the brave - the whole new world Aladdin reference. Everyone else took it pretty literal.

And Ted, why don't you talk a little about the movie slate and how it's different? If there's a whole new world, it's really about our movie slate more than anything else.

100%. I think we've got - just in the fourth quarter alone, we're talking about films that are - that range from a massive scale action film from Michael Bay with 6 Underground to Oscar hopefuls like The Irishman, Marriage Story and The Two Popes, Eddie Murphy's return in Dolemite. So these are big, theatrically ambitious-type films that you'll be able to watch on Netflix, included in your subscription. It really is a fundamental change in the economics of how people enjoy films. So we're really excited about it. And it's our first time we've seen the scale and this volume of films in one quarter, so we're really excited about it.

Before we delve deeper into the content questions, could we discuss pricing and pricing power in the U.S. market? Specifically, for Greg or Spence, do you believe that the lower price point for some of these new services will hinder your ability to increase prices in the future? Additionally, can you provide insights on the equilibrium price for this service? We would appreciate a specific price point, even though that might be difficult. As you consider it, you could offer great value at various price points, but how do you view where this might ultimately settle?

We don't consider our competitors' pricing to be a significant factor in how we adjust our service. Our offerings and content are highly distinctive, which means customers won't choose us solely based on price. Our focus is on using the revenue from our subscribers wisely to enhance the variety and quality of our content, aiming to excel in every genre. If we successfully make smart investments, we can continue to provide greater value to our members. This, in turn, will allow us to occasionally seek higher revenues to maintain this beneficial cycle.

And so I don't know if you can speak any more about it, but is there a place where whether it's relative to a pay-TV subscription in a certain market or relative to other streaming services that you think set some sort of bound around where pricing could ultimately go to?

I think you can look at a couple of external ones in terms of pay-TV packages that might be relevant, but we don't really look at it that way. We're looking at it more sort of incrementally and let our subscribers sort of tell us, as we add more value along, where that right price should be. It's a - we're really more focused on listening to subscribers and sort of walking that path with them.

Okay. I have another question for you, Greg, regarding pricing. There are different dynamics, especially outside the U.S. with varying price points. You tested a mobile-only plan at a lower price in India. Can you discuss the range of tests and pricing strategies you currently have in the market and how they differ between more established markets with stable pricing tests? This would help us understand your direction moving forward.

Sure. Just to talk a little bit about where we are in India, I mean again, we think about revenue as a guiding principle for us. We do these different tests and try to figure out what is the right set of plans that have the right benefits, the right features that are delivered at the right price for the subscribers in any given market. And I think what we're exploring is, as we are operating in markets that have very, very different conditions, very different levels of affluence and other forms of entertainment competition, et cetera, what is the right structure for us. And so we've been very, very happy with the mobile plan. It's actually performing better than we tested. We'll look at testing that in other markets, too, because we think there are other markets which have similar conditions that make it likely that, that's going to be successful for us there as well. But I also think we're going to look at other plan structures, other feature value benefits where we might see different market conditions that will work there. And I won't get into sort of leaning into those, we'll see them as we roll out, and we'll respond to them based on what our consumers in those markets, our members to be in those markets are telling us is working or not.

Okay. I want to come back to competition but this time talk about competition for content. Ted, you teed up a bit some of the things you're enthusiastic about going forward. Reed, you did make the comment again in the U.K. that someday The Crown would look like a bargain. Perhaps another sound-bite that was picked up but perhaps you can provide some context around that. Maybe generally, how do you think about the investment that you want to make in programming from a very high level? Is it an overall budget? Is it a cost per subscriber to a certain level? How do you think about that?

The exciting aspect of this moment in entertainment history is that the scope, scale, and ambition of television are starting to match that of feature films, which is a significant advantage for consumers. When Reed mentioned The Crown, he highlighted that in terms of enjoyment and viewing hours, The Crown will seem like a great deal. We are well positioned with a $15 billion content budget to deliver on that scale for both film and television simultaneously. The impressive roster I just mentioned is occurring alongside the return of popular shows like End of the World, The Crown, Lost in Space, and You, as well as shows from other countries like Casa de las Flores from Mexico and Baby from Italy. We’re also launching new series such as The Witcher and Daybreak, all while offering what we believe is an exceptional value proposition for our viewers. When talking about pricing, it really comes down to price relative to value. As consumers spend more time watching TV shows and films on Netflix, they recognize the tremendous value we're providing, which is the essence of their experience.

Ted, as much as you can ballpark it, a show five years ago producing that same show today, sort of 50% more expensive, 30%?

It's a really hard one because the range is huge, and sometimes the big breakthrough is not the one that turned out to be that came into it that competitively. But on a very competitive show, there's probably been 30% price escalation from this time last year.

In one year.

No, that's a lot. But definitely, content pricing is rising. However, we are fortunate to have the largest membership, one of the biggest revenues, and the biggest content budgets, which is significant. We're still able to remain very competitive in terms of shows. And as you pointed out, it's an elite few shows that are that competitive that would see that kind of escalation. Just in any environment where you've injected a few new buyers, you're going to catch that dynamic on a highly competitive show.

I want to emphasize that we evaluate many factors and do not pursue everything, which means we inevitably miss some opportunities. We maintain discipline with every title, assessing each one on its own merits. As Ted mentioned, given our substantial content budget, we can take significant risks and afford to make mistakes since we do not concentrate solely on a single title. Thanks to this disciplined approach, we are consistently progressing towards higher profit margins and improving our cash flow over time while actively pursuing these larger opportunities.

And Mike, at the risk of hitting too hard the diversification point, just sort of mathematically, investors can do the math on what $100 million sort of project relative to a $15 billion cash content budget or $10 billion P&L budget means. It's incredibly diverse, right, so we don't have any sort of concentration risk. So I'd point that out.

Yes. Considering our math, Spencer, but the idea that the rumored $100 million that House of Cards invest going into the way, that would seem earth-shattering less than 7 years ago. Today, it represents about 1% of our content budget.

And today, that would be a bargain.

So if I look at this dynamic then, continue to increase the investment in content, at the same time, growing your subscribers. Where are we in terms of achieving scale on that investment if we look at that content spend per subscriber? Do you expect the competition to continue to drive that up? Or are we getting to a point of equilibrium where you're starting to see the benefit of that global penetration that you have?

I wouldn't attempt to predict whether we're at a point of balance given the current market volatility. However, what is evident is that there is a clear limit to what can be spent, and competition for projects will intensify significantly. We are focused on investing in order to create enjoyable experiences for our members, which is our primary motivation.

And Mike, there's about 2 billion active users of Facebook, 2 billion active users of YouTube. We're obviously a fraction of that. And those numbers are continuing to grow. There are 6 billion active mobile phones in the world, and that's got to equilibrium. So equilibrium is so far away from where we are today. It's not something that we think a lot about, we think about how do we grow.

Yes. Definitely in terms of member growth. I thought you were talking about content spend.

Sure. So let's talk about creating franchises. I have a question about that. I think there is a lot of enthusiasm, as you know, for the Disney+ product coming out. And I think it rides a little bit on the success of the streaming marketplace but also this concept that they have this tremendous content library and IP library that they've built over many years. So Reed and Ted, as you think about that, I know you've made an investment in children's content over the course of the last quarter. Talk a little bit about franchises, the importance of franchises and whether building franchises is something that is your ambition.

I believe established intellectual property has an advantage with consumers. They have an understanding of what to expect, which creates excitement and simplifies marketing. However, one should not overlook the importance of creating a brand. The essence of a franchise lies in brand creation and whether it can be scaled. Recently, we released a movie titled Tall Girl, featuring a largely unknown cast that managed to amass millions of social media followers within a week on Netflix and attracted over 40 million viewers. This demonstrates the capability of generating a brand almost from nothing, which is equally as valuable as relying on existing franchises that may eventually fade. We are enthusiastic about the opportunity to develop our own brands while also recognizing the value in established franchises like Stranger Things and Black Mirror. We continue to focus on this as we move forward. Ultimately, it's not that franchises are superior to non-franchises; it's the quality of the stories that truly matters, as well as how these stories connect with consumers.

You had a couple of original programs, original pieces of content in markets outside the U.S., global pieces but focused in markets, Sacred Games in India, Casa De Papel in Spain, I'm thinking about it in particular. We saw Google search activity, let's say, multiples or at least doubling what their prior levels were. So I'm curious, your thought about how that piece of content does drive that enthusiasm on local market. I think what that ties to really is, I think, the way we try to think about what the growth opportunity is. So I'd love to hear why you think you get that big step-up. And maybe in terms of Ted and Greg together, how you work together to try to make that happen.

Our investment in local language original series and films continues to grow significantly, with over 100 new seasons of local language original shows that make a substantial impact in the market. Casa de las Flores, returning for its second season in Mexico, has been a great success. Many of these titles, which resonate strongly in their home countries, often gain popularity across the region and even globally. For example, the success of Casa De Papel reached almost every non-English-speaking territory. We're anticipating a similar outcome with a new German show called The Wave, which has stories that can resonate across regions. The appeal of these shows lies in their authentic local storytelling that provides satisfaction to viewers first in their home countries and then expands internationally. As we enter our fourth year of producing local language originals at scale, we're excited about further expansion. Audiences appreciate both global films and series that reflect their own experiences, and we're committed to delivering both for our members worldwide.

Just to add to that, I think it's super fun and exciting to be able to take one of these really authentic local stories and connect it effectively with a broad regional or global audience. In many cases, we feel like we'd have never actually watched a show in that language or from that country before. And the key to doing that, first of all, is obviously being available in all those countries in an easy-to-access way, but then it's connecting that show, having it be localized, in language with subtitles or dubbing, whatever is appropriate for that market, and then also explaining to users, to members why they're going to want to watch this amazing heist series from Spain and why that's going to be a totally compelling watch for them based on the other kind of content that they're enjoying.

And I think it's important to understand how broad your production is outside the U.S. So can you share any statistics on how many countries you're actually producing first-party production of content and what that sort of investment looks like in terms of building a moat there? And in addition, you just struck a partnership with Mediaset during the quarter, one specific partnership you could perhaps detail and how that can benefit you.

We have entered most of those markets through joint ventures or coproduction arrangements initially, and then we take over many productions in those countries as we scale up. We also maintain strong coproduction relationships, like with Mediaset, while our own studio produces local Italian content as well. To date, we have released original local language content in 17 countries, and we plan to expand that to 30, with further growth expected globally.

You made a significant commitment to the rights for Seinfeld, which is somewhat different from your strategy of gradually allocating resources to original content. Can you explain how substantial this commitment is, at least relative to your other investments? And why do you believe this is the right choice?

Well, we've seen - in the past, we've had a lot of questions about the value of volumes of catalog programming, meaning just having hours and hours of content that people don't watch. But we have seen there's a few titles in the history of television, Seinfeld being one of them, that continue to be incredibly relevant 30 years after it came out on television and get watched every night. It's kind of a comfort view comedy that travels around the world. And Seinfeld is one of these very elite shows that came available in that time frame. So we have Friends till the end of the year, then we'll have Office for another year after that, and then Seinfeld will roll out to the world in 2021 on Netflix. And we're incredibly enthusiastic about those shows. But they're very, very unique in the vast catalog of television ever created that people are still watching 30 years after it was produced.

I want to ask you some questions about windowing and fostering community among your viewers. One question we often receive concerns the decision to release an entire season at once versus rolling it out weekly. You've discussed this previously, but I would like to know your current thoughts. The inquiry goes beyond just the weekly release; it also encompasses why one might choose to drop an entire season simultaneously or consider dividing it into parts or the timing of a series. For instance, we were inquiring why Stranger Things couldn't have been released before the end of the second quarter instead of just after the beginning of the third quarter.

I'll share a quick personal story. I'm a big fan of Succession on HBO and I watch it every Sunday night when it premieres like everyone else. If I enjoyed the show a bit less, I might burn out because I get frustrated each week waiting for the next episode. That's how much I enjoy it. We're working to fine-tune the offering for customers, focusing on great storytelling and how and when they want to watch it. We've noticed that in markets where we release about 35 shows weekly in alignment with local broadcast schedules, we achieve greater viewing and more social media engagement with the all-at-once model compared to weekly releases. This suggests that viewers are engaging at different times and finding more enjoyment in a concentrated experience. Additionally, we're producing shows like The Ranch with 10-episode seasons and shorter gaps between seasons, releasing them six months apart instead of a year. We're also experimenting with a different release pattern for Rhythm + Flow, a music competition show. Essentially, we aim to align not just with the program you want to watch but also with how you prefer to watch it. For many viewers, it may not be all at once, but it's rarely just one episode per week.

Right. Do you see more opportunities for that? Whether it's unscripted or the type of program, it's not live per se but it does lend itself to a little more pent-up excitement, do you see more opportunities to put resources behind that or is it opportunistic?

It's opportunistic. We're trying a lot of different things. We're trying - basically, what we're trying to do is make your favorite show, whatever that is. And for some people, it's going to be a music competition show. For other people, it will be Green Eggs and Ham. So we really are trying to make your favorite show, whatever it is, and be best-in-class at all of those things. And there might be something unique about the release rhythms of competition shows and more topical talk shows that lend themselves better to frequency release.

You spoke two quarters ago, you updated it a little bit last quarter, the topic of providing some more data or information both for producers, talent as well as for individuals. My first question is, can we have an update on where we are in that, what you have provided especially from a consumer perspective as well? I think the goal was to help create some more of that buzz, create more conversations, how is that playing out at this point?

One of the things you saw, we've launched in the U.K. and we're looking to expand the presentation of the top 10, so that people can come to Netflix and see the top 10 most popular things in different categories. Once again, I think that one way that people choose content is by popularity. It's not the only way, and it's not the only way we want people to. But if they want to use that as a tool to guide their decision-making, we want to help them do that. So publishing that top 10 that refreshes every 24 hours is one way that we're helping out on the consumer side. Our producers, we share viewing data with every week on the lead of the launch week and the end of the month. So they are - we're incredibly transparent with our producers around the world, and we're going to be increasingly doing things like we did in our earnings letter and give you viewer stats on a lot of our projects as we go. Greg, would you add anything about the top 10?

No, I think it's - you covered it well. And just to make it clear, I mean that top 10, that's a list that's available in the product. So to Ted's point, those members who really think that popularity is an important signal for them on what to watch, we'll have that available to them.

Great. Greg, I'd like to ask you a couple of questions on the technology, the product side. First, maybe an update on partnerships. We talked about it a bit on the last call. I'd love to expand, in the U.S., the pay-TV partnerships seem to be a big part of the focus. Can you talk about whether that's become a bigger part of the subscriber acquisition product? Is it steady state? Help us understand where we are in that process.

Yes. It's important, I think, to ground it in the partner-based acquisition component when you think about all the devices that we operate on and just being able to find and sign up new license, that's a healthy chunk of our acquisition. But then when you get to the bundles, which I think often people think about partners equals bundles, that's relatively small, but it's a nice incremental acquisition channel for us. And so we'll seek to grow that. We think there's a bunch of opportunities both in the United States with existing partners and expanding the number of bundles and sort of the bundle availability. We'll also seek to expand that globally because we think there's a tremendous number of opportunities globally to add those kind of partners and make it easier for members to sign up. We did a couple this quarter, whether it's Canal+ and Sky Italia with sort of new partners for our bundles, but we've also done things like take KDDI, a mobile operator in Japan, and be able just to expand our presence across their offering, which makes again an easier place more attractive for more members to sign up. So it's still small, a relatively small fraction of our acquisition, but it's a nice, good, incremental way to access a member base, member to be based. It's less technology for less early adopter, and we can just make it super simple for them to sign up.

Okay. Another topic that we haven't talked about in a little while is that of password sharing or stealing or whatever you want to call it. As we get to a more mature growth trajectory in the U.S., does that come back into being something that's important for you to address? And how do you address it without alienating a certain portion of your user base? How do you strike a balance there?

I think we continue to monitor it, so we're looking at the situation. We'll see, again, those consumer-friendly ways to push on the edges of that. But I think we've got no big plans to announce at this point in time in terms of doing something differently there.

Okay. And so Spence, I'd like to ask a couple of questions on the financial side, the first around the margins and contribution margin. In the past, you've spoken to a 40% domestic contribution margin target. Is that something that you still view as achievable? And maybe within that context when we talk about competition, do we need to spend more, say, on the marketing side than you previously anticipated as you achieve what you want to achieve on the subscriber side?

Well, first regarding margins, the good news is we delivered over 40% contribution margin in the U.S. this quarter. This will be the last quarter we report the business in this manner, as we mentioned in our communication about changing our reporting approach going forward. We will begin reporting revenues and subscribers on a regional basis as well as global operating margin. This is because, as we move towards a model where we are both licensing and producing more original programming globally, segment margin is not how we view the business. We increasingly focus on managing to a global margin. We are breaking out regional reporting at the revenue and subscriber level since that is how we directly drive our business. As we noted this quarter, 90% of our growth is outside the U.S., so we consider it in a broader context rather than just U.S. versus international. Regarding our efforts to continue growing our margins, we are looking at it on a global scale. We believe we are driving scale, efficiencies, and margin growth across all areas. Although our content investment is rising, it is increasing at a slower pace than our revenue growth. We will market as suitable to grow our business. We significantly raised our marketing spend last year, so this year, our expenditure is at levels similar to last year because we have learned a lot along the way. We will keep testing and learning to discover new ways to reach our members. We will remain mindful of driving up our operating margins on a global scale, seeing a 300 basis point increase this year to 13%, and we have committed to reaching 16% next year. We plan to achieve this by driving efficiencies in our business while also engaging in necessary marketing to connect with our members.

Let's discuss free cash flow in light of those fundamental trends you mentioned. There is a different dynamic regarding cash investments, but you mentioned progress toward achieving positive free cash flow. Can you provide some insight into the factors involved, specifically in relation to the upcoming year? Additionally, what are your expectations for restoring to 2020 levels?

Yes, we are focused on improving our negative free cash flow starting in 2020. This year, we expect to see about negative $3.5 billion in free cash flow, which is largely due to our investments in future content for our service. We are becoming increasingly profitable, and as we enhance our profit margins and scale our business—evidenced by nearly 30% revenue growth and improving margins—this will lead to more cash flow that can be funneled back into content investment. Additionally, we have been moving from licensed second-run content to original programming, which has created some working capital challenges, but we are now predominantly investing in original programming, indicating significant progress. Our scale and the transition in our business model are well underway, and we anticipate seeing improvements in free cash flow next year. Beyond that, we are not providing specific projections but will continue to gradually work towards self-funding while pursuing our strategic priorities.

Mike, we have time for one or two last questions, please.

Sure. Well, I'll take the opportunity to finish with a question for each of you, so maybe get a little bit of a 5 answer bonus here. But I'm curious what each of you, if you wouldn't mind sharing, are most looking forward to as we get through the next quarter and you come to your next earnings interview, what's the one thing that you're most excited about being able to talk about as we look out there. Maybe I'll start with you, Spencer, and we'll - for convenience, we'll work backward alphabetically by last name, so you guys can figure that out. Spencer, go ahead.

Great. I guess for me, maybe fewer questions from investors on competition, but I think that's pretty unlikely. So I'll say, what I'm, I guess, really excited about in the coming quarter is actually 6 Underground, a new original film from Ted's team. I'm a big action film junkie, so super excited about that.

I guess I come next. So I'm super excited about The Irishman actually, can't wait to see that film. And also, frankly, it will be nice to have some of these competitive launches in the rearview mirror so that we can continue to look forward and all the things that we're excited about in terms of this huge global opportunity.

What I'm most excited about is that we need to keep doing what we're currently doing, which is to continue making your favorite shows and deliver them seamlessly. This will not change moving forward. Looking ahead, we've already talked about Irishman and 6 Underground, but there are also some incredible projects like Marriage Story, The Two Popes from Fernando Meirelles, and Laundromat from Steven Soderbergh. These directors are among the most iconic of our time, creating their next films on Netflix. Our team of animators, who have produced the best animation over the past decade, are also working on their next projects at Netflix. I'm really excited to update you on these developments over the next quarters.

And I'm pretty consistent with that. I think the opportunity to be able to expose our members to the kind of films that we are producing right now that are being released on Netflix in such a compelling way is going to be super exciting, and it's super fun to sort of look back on that and see how that goes.

I look forward to exceeding our expectations. We have good accuracy when it's attainable, but it’s really enjoyable to surpass the numbers. So, fingers crossed, we’ll see this happen every quarter. The forecast is essentially a 50-50 estimate, as you can see for this year, and we’ll see what unfolds.