Netflix Shares Detailed Viewing Figures for the First Time Transcript

Good morning. My name is Rob and I’ll be your conference operator today. At this time, I would like to welcome everyone to the call. As a reminder, please use the webcast link to watch and listen to the presentation. If you would like to ask a question, use the dial-in number provided. The conference call line will also be playing audio from the presentation, so please mute the audio from the webcast to avoid a double feed. This call is being recorded. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question and answer session. We will only be accepting one question per outlet. If you would like to ask a question during this time, simply press star, followed by the number one on your telephone keypad. If you would like to withdraw your question again, press star one. Thank you. Ted Sarandos, co-CEO of Netflix, you may begin.

Thanks a lot, Rob. And good morning and good evening, wherever you are in the world. Over the last 16 years of streaming, the one constant has been that people are asking for more viewing information. And today, I’m tremendously excited to share our first ever engagement report. It is a comprehensive deep dive into what people are watching on Netflix around the world and it is an important milestone for our industry.

(01:15)
Now, what is engagement really? It’s about getting people to press play and stay. People are happier and get more value from Netflix when they’re watching our shows, and films. This means that they stick around longer, which is good for retention, and they’re more likely to recommend Netflix to friends, which drives acquisition. So, engagement is how we delight our members and build a great business, which is why it is key in streaming.

(01:42)
Now, the most effective way to measure engagement is view hours. Why hours viewed? It’s easy to understand. It mirrors third parties, like Nielsen, in the US. It makes Netflix very easy to compare to other streaming services. Over time, we’ve been getting increasingly more and more transparent about what people are watching on Netflix. When we started in streaming 16 years ago, it was a pretty exotic proposition. There were no other streamers to compare to us, and comparing live TV or Live+7 to Netflix On Demand was like comparing apples to oranges. But as we’ve grown, and streaming has become more mainstream, in the US, it makes up more TV time than cable or broadcast, so we’ve become much more open.

(02:26)
Two years ago in November of 2021, we started publishing our Top 10 list of our most watched titles across film and television as well as our most popular list. We also privately share much more detailed information, title-specific information with our creators. But we wanted to go even further, and that’s what we’re here for today. So, I’m going to pass this over to Lauren Smith, who is our Vice President of Strategy and Analysis, and she’s going to share with you a lot of details.

Thanks, Ted. We’ll be publishing this report twice a year, covering hours viewed for all titles, original, and licensed that were watched for more than 50,000 hours between January and June, 2023. That’s over 18,000 titles, and nearly 100 billion hours capturing more than 99% of all viewing on Netflix. There are a couple of important points I want to highlight upfront.

(03:20)
First, this report closely mirrors our Top 10 list, so while it is broader in scope, you’ll find familiar trends. And second, while at the slate level, our goal is to maximize hours viewed, so that Netflix continues to win more share of TV time, at the title level, it’s a bit more nuanced. It’s all about whether a movie or TV show thrilled its audience, and the size of that audience relative to the economics of the title. So, we have amazingly successful titles that delight members with both higher and lower hours viewed. The Night Agent at the top is a clear global success, and so are On Plus and Rhythm + Flow that both thrilled our French members, and appear on this list below the 1,000 mark.

(04:01)
And that’s the beauty of Netflix. Success can come in all shapes and sizes. Because our member base is so big, and diverse, our recommendations are so great at matching titles to taste, and our fandom is so intense it drives excitement for many different stories. As you look through this report, there are a few things to keep in mind. First, it’s a snapshot in time. It covers view hours for titles between January and June, 2023 only, not total cumulative hours viewed. For example, in this report, Wednesday looks smaller than The Night Agent, The Glory, or Ginny & Georgia, when it’s in fact much bigger. It’s our number one most popular English series ever. That’s because these titles premiered during this report period, whereas Wednesday premiered two months before.

(04:48)
Second, all the shows and films listed have different runtimes, which is important to keep in mind when comparing titles. Films have shorter runtime than TV series, and so movies generate lower total hours viewed. It’s the reason we separate our weekly film and TV lists. Series runtimes also vary quite a bit. The average length of a US scripted series on Netflix is nine hours, by comparison to 17 hours for Korean shows, and more than 50 hours for telenovelas in Latin America. Longer runtimes don’t make for more successful shows. It’s all about a story’s ability to delight, and hold its audience. Third, as I briefly mentioned, there’s a significant overlap between this report, and our Top 10 lists. In fact, around 60% of Netflix titles released between January and June, 2023 have appeared at one point on our Top 10 list.

(05:41)
With all that in mind, here’s some interesting trends from the report. Let’s start with the variety, and diversity of the titles audiences watched. As we’ve said before, on average, our members watch six different genres a month. In this report, our most watched titles are from over 12 different genres. The report demonstrates our ability to break out new stories and stars with titles like The Night Agent, Beef, The Glory, Alpha Males, FUBAR, and Fake Profile, generating huge audiences, and fandoms. And it shows how we’ve been able to develop and grow our own IP with returning favorites like Ginny & Georgia, Alice In Borderland, The Marked Hart, Outer Banks, You, Queen Charlotte, XO, Kitty, and Black Mirror, and film sequels like Murder Mystery II, and Extraction II.

(06:31)
The release of each of these titles also generated big new viewing for previous films, and seasons. Season one and two of The Marked Hart generated more than a quarter of a billion hours viewed between January and June. Extraction I and II, a combined 288 million. And three seasons of Outer Banks had 740 million. The report also gives you a great sense of the size of the audience of our films. Movies is varied as The Mother, Luther: The Fallen Sun, Murder Mystery II, You People, ¡Que viva México!, AKA, and Hunger, all drove high hours viewed. One of my personal favorites, All Quiet on the Western Front, which premiered in October, 2022 still generated 80 million hours viewed between January and June.

(07:18)
And you can see the popularity of our non-English language titles, which account for 30% of our viewing in the first half of the year. Titles as varied as Physical 100, from Korea, The Law According to Lidia Poët, from Italy, Fauda, from Israel, The Snow Girl, from Spain, and The Empress, from Germany, which premiered back in September, 2022. And viewing in other languages is even higher when you look at subtitles and dubbing, which accounts for 45% of the viewing of English language series and films. Netflix’s catalog has always had a wide range of licensed titles, which delivered tremendous value for our members.

(07:56)
From January to June, 2023, 55% of our viewing came from Netflix films and series, with 45% from licensed titles. In addition to delighting our members, showing licensed titles also helps other studios and networks grow their IP, as we did in our earliest days for Breaking Bad, Walking Dead, Grey’s Anatomy, and more recently with Suits. Each of these shows generated over 500 million hours of viewing in just six months. It’s a win for everyone, our members, Netflix, and our partners.

(08:28)
For comparisons between titles, you should continue to use our Most Popular Lists. These are grounded in viewing of a title in its first 91 days on Netflix, and ranked by views, that’s hours viewed divided by runtime. Our Most Popular Lists enabled apples to apples comparisons by accounting for both longer runtimes, and length of time on the service. So, I’ll finish up by saying that we believe the viewing information in this report combined with our Top 10 and Most Popular Lists, gives creators and our industry deeper insights into our audiences, and what resonates with them. So, we’re very excited to share it with you today. And with that, I will hand it back to our moderator for Q&A.

At this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. Start with your name and news organization followed by your question. In the interest of time, we’ll be taking one question per outlet, and about our engagement report only. We’ll pause for just a moment to compile the Q&A roster. And your first question comes from the line. I do apologize. Let’s pause for one more moment. And your first question comes from a line of Jessica Toonkel from Wall Street Journal. Your line is open.

Thanks for taking my question. I guess I was wondering, what was the biggest surprise that you found in looking at the genres that people like or what did you see here that was different from what the Top 10 lists were telling you?

I think it really is just about the variety of shows, and films, and the genres that they come from. It really speaks to Netflix being that place that fits every mood, and what you want to watch, and making sure that when you come into Netflix you want to hit play and stay.

Thanks.

Your next question comes from a line of Stephen Leon from Les Echos. Your line is open.

Hello, thank you for taking the question. Is this report a way to give more transparency on viewing figures to advertisers especially?

Hi, thanks for the question. When it comes to the advertisers, we use third-party reporting because that is the traditional way advertisers verify viewing for payment, but this is not for that. This is basically … Think about, our existence in streaming goes back about 16 years, our original production goes back about 10. And along those ways, we’ve become more and more transparent about the viewing data. In the earliest days, it really wasn’t really in our interest to be that transparent, because we were building a new business, and we needed room to learn, but we also didn’t want to provide roadmaps to future competitors. And by not doing public data, there was something the creators liked a lot about it too, which is it took a lot of pressure off of the overnight ratings model or the weekend box office model, and gave people room to create, not focus so much on the numbers.

(11:59)
And back then too, our business was pretty exotic. We were the only streamer in the game really, so there was no one to compare to. And comparing Netflix streaming to Live+7 watching or live television when we have this always-on, all-episodes-at-once viewing. So, it was really hard to make those two comparisons. The unintended consequence of not having more transparent data about our engagement was it created an atmosphere of mistrust over time with producers, and creators, and the press about what was happening on Netflix. So, we’ve been on this continuum of opening things up, first with the Top 10 list. And keep in mind, we do share this data in even deeper detail with all of our creators. So, I would say that this is on the continuum of transparency as streaming has become more and more mainstream, that it’s more on par with other forms of media that have quite accessible information about how things are performing.

Thank you.

Your next question comes from the line of Joe Adalian from New York Magazine. Your line is open.

Hey Mr. Sarandos, thank you so much for the call, and Lauren, I appreciate it. I want to ask you about what your skill … Not to seem ungrateful for … You’re finally ripping the band-aid off, and allowing a peek into your numbers at all levels, right? So, you can see now what titles may not get a lot of consumption, et cetera. But you are still sort of not allowing numbers to be seen in ways that could be useful for people who are trying to figure out how shows are performing in the pop culture, and how they are relative to each other. You could, for example, release data monthly. You could release titles by territories or major regions, you can … et cetera. Are we going to get there, and if so, how soon? Now that you’ve taken this first step, don’t you believe that there needs to be more, so that people can actually gauge how shows are doing month by month or every 90 days for example, which might be a good way of looking at it, since that’s a big area for you guys?

Yeah, thanks for that. Keep in mind that the Top 10, and like we said at the beginning of the presentation is quite a good reflection of these performances, and it’s in real time. And the other piece is, we run the business as a global company, and we have a consolidated P&L, and global content investment. So, the kind of global engagement is really what matters. And I think in terms of how things are doing in the culture, and all those things, this is a great gauge of that. Because if the show is actually really resonating or the film is actually really resonated with audiences, it drives a lot of engagement, and that engagement has driven conversation around the world. People doing the Wednesday dance on TikTok, that wouldn’t have happened if you didn’t have that enormous amount of watching of Wednesday.

(14:51)
So, I do think that it is a good reflection of the success of our shows, not just in raw numbers of watching, but also that kind of raw numbers of watching drives a ton of passion. So, these things really are inextractable from one another, and we really do run the business trying to please our members. And we think the best way to judge that is that the movies and shows that we produce or license thrill those members in such a way that they stay engaged. Hardly anybody turns off things that they love, and hardly anyone watches things that they hate, when it’s so easy to switch to something else. So, we think this is the most accurate reflection of that.

Okay, thank you.

Your next question comes from a line of John Elna from Broadcast. Your line is open.

Hello, thank you for the call, and for extra data. I just want to say, with these new engagement reports, what does this mean for you at Netflix? How are you going to use this data in terms of commissioning shows, or is it going to be used for commissioning shows in territories around the world? How are you going to use this data objectively for the program, the content on the platform?

It doesn’t reflect any change. We’ve always had this data, we’re just sharing it with you now. So, it’s always the same. We continue to do the same mix of art and science in terms of how we program Netflix for our members around the world.

Your next question comes from a line of Rick Porter from the Hollywood Reporter. Your line is open.

Hi, thanks for the time today. I’m curious if you think that doing things like this can maybe help open up the rest of the streaming industry, which doesn’t seem to share your zeal for public figures yet?

Look, that’ll just be up to them. They’re all running their businesses as they see fit, and they also are at different places in their existence, like we were different. We thought very different about this 10 years ago, too.

Sure. Next question comes from the line of Nathan Jolly from Umbrella. Your line is open.

Hi, I was just wondering why you chose to share the data in such a way, basically all of it as a big data dump, as opposed to breaking it up, or making it a bit more … Is it to be put into existing systems to be … or is that just the way you decided to put it out?

Simply, we’re just trying to be very transparent, and share with you all the titles that we have that comprises ninety-nine percent of our viewing, so nothing more than that.

Can I just remind you, too, this is the data that we use to run the business. This is the exact same pool of data that we’re sharing with you.

Great, well, thank you so much.

Your next question comes from a line of Jennifer Moss from Variety. Your line is open.

Hi Ted and Lauren, thank you for this. So, I just want to ask you if you have plans to get this report audited, and if there’s a path for this to become an industry standard, and if you might bring this process to the media rating sample.

Yeah, look, I’m the co-CEO of a public company, so sharing bad information has consequences. So, like I said, this is the actual data that we use to run the business. And in terms of the requirements for things like for advertising, Nielsen does require third-party validation, all those things. But this is our data, and it is our accurate data. It’s the data that we use to run the business that we’re sharing with you. Us compiling the data to provide to a third party, to provide it to you seems like a lot of steps of something that’s already a pretty heavy lift.

Your next question comes from the line of Natalie Jarvey from Vanity Fair. Your line is open.

Hi, thanks so much for sharing this with us. I’m curious, given the acknowledgement that there is some overlap with the Top 10, and also some of the caveats around not using this as comparative data, if you’re going to compare the performance of shows that the other data you’ve shared is better for that. I guess I’m curious just if there’s a specific kind of utility or use case that you think is unique to this dataset or a way in which you’re hoping that the general public will be able to use this now that we’ve got a bit more information from you?

I think it’s probably more industry-facing in terms of what kind of things are pleasing people around the world, not relative to each other, but just generally pleasing folks around the world. So, I think it kind of helps creators get a better sense of that, perhaps people who cover us in the industry press to get a better sense of that as well.

Your next question comes from a line of Tony Maglio from IndieWire. Your line is open.

Cool. Thanks Ted and Lauren, I appreciate it. And I would agree that Netflix has been in ways more transparent than most streamers for a few years now, and I know you acknowledged creator frustrations earlier in the call as being one of these catalysts, but how much is this, and specifically this timing directly an attempt to satisfy the transparency issue that was key among the sticking points within the strikes?

Look, like I said, this has been on a continuum for several years, so this is not driven by anything differently than that. I think it’s really important that … What I did say earlier was that that lack of data, that lack of transparency, the unintended consequence was this environment and mistrust around the data. So, this is probably more information than you need, but I think it creates a better environment for the guilds, for us, for the producers, for creators, and for the press.

Thanks, Ted.

Again, if you would like to ask a question, press star, then the number one on your telephone keypad. Your next question comes from a line of Alexandra Canal from Yahoo Finance. Your line is open.

Hi. Thanks, guys. Ted, you’ve spoken several times about the benefits of licensed content. I see Suits showing up several times in this report. As this becomes more of an industry norm, are you open to licensing Netflix originals to competitors, and how do you balance that risk-reward as you’re evaluating those decisions with licensing picking up some steam?

Well, what’s interesting is a show like Suits, which has been played on USA for a long time, had been available on Peacock, and had been available on Amazon for a couple of years before it hit Netflix. And yet, we were able to unlock this enormous global audience for it. That’s the combination of our large subscriber base, and our recommendation system that knew to put Suits in front of people who are going to love it the most. So, that’s a reflection of what we do best. I do not think that that necessarily would happen in reverse, that other outlets would have a better chance finding more viewing for the programming that we have on Netflix, which is why we don’t do it. And we also have never built any sales machines or ecosystems to sell our content to the world. It’s not part of our business plan. I do think that we can add tremendous value when we license content. I’m not positive that that’s reciprocal.

Thank you.

Our next question comes from the line of David Friend from the Canadian Press. Your line is open.

Hi, Ted. In the Canadian markets, Netflix has spent a good amount of energy in recent years talking about focusing on local investments to serve local viewers. I’m just wondering if you could explain, when you’re talking about global performance for global viewers with this data today, how you see the divide between those two perspectives, and if you see a value in providing Canadian data in the future.

Yeah, so like Lauren said in the opening setup, the French shows that are a number 1,000 and below on the list were hugely successful in France, and they’re designed to thrill local audiences. All of our local original programming is designed to thrill local audiences first and foremost. So, if they did good viewing but failed locally, we would look at that as a failure. But in trying to encompass what everyone’s watching, this list captures all of it. It is tidy to do it in descending order, but you shouldn’t look at that as the way to compare them. And we don’t intend to do country-level lists, because it’s an enormous amount of intelligence for competition purposes for sure. And also the local markets, and the local creators have enormous insights into that data.

Your next question comes from a line of Jay Peters from the Verge. Your line is open.

Hey, thanks for taking my call or my questions. I saw that this is a six month report, so I’m guessing we’ll get the next one in June, 2024. And would you consider speeding up the process in sharing this data? Thanks.

Yeah, it takes a bit of time to compile the report. And so this is a little bit of anomaly, I think, of us being this late, but we’re working on it.

Your next question comes from the line of Julia Alexander from Puck News. Your line is open.

Hey, guys. Thank you for taking my question. Just looking at the global scope of it, if we look at the Top 100 titles, about 31% came from Korean and Spanish speaking, which seems to correlate to what you’re seeing overall, the top 30% of it coming from international programming. And if we look at just Spanish and Korean language programming, we do see that while paid memberships have increased in the APAC and Latin regions between Q1 and Q3, and net additions have been more in flux. So, two-parter, I was wondering if you guys were going to ever share where these series were really performing, so our Korean language programs doing really well in other territories, and if we’re ever going to get an idea of how this engagement might look like on a consumption basis versus the acquisition and retention value that comes with some of these titles? Thank you.

Yeah, look, we don’t plan on doing it at a country level. Like I said before, that’s the enormous amount of competitive intelligence that we’d be putting out there. There’s some general things, which as content from Korea plays very well in Korea, clearly, also throughout APAC, and occasionally, completely globally, and similarly with Spanish content playing throughout the region, and occasionally quite globally. And so for us, I think it’s really important that we really focus on thrilling the local member. One of the drivers that drives a lot of engagement on Korean/Spanish content is the presence of novellas, and K-dramas, which can be very long seasons, 40, 50 episodes. So, that does drive a lot of engagement for sure. But they’re quite popular, and have fan bases around the world.

Our last question comes from a line of Lisa Richwine from Reuters. Your line is open.

Hi, thanks for taking my question. I believe the percentage of viewing for license content was something around 45%, which was higher than I might’ve thought, and I wonder if you think that the strikes impacted that. Did you have a gap in Netflix content that you were filling there, and do you think that percentage will stay about the same going forward?

So, we don’t really have a formula for how much it should or shouldn’t be. We’re trying to entertain our members around the world. There’s a lot of licensed content, so it makes up a lot of titles. We’ve only been making original programming for 10 years, and that’s been a slow ramp for the first couple versus licensing from the history of television, and the history of cinema. So, it does make up a lot. And our goal, like I said, is not to have a specific formula for licensed content versus original content. It is to thrill our audiences. I do think our original programming that that also distinguishes our brand, helps people to understand the value proposition of us versus competitors, and know that it drives our ability to drive culture in Zeitgeist helps drive love for the brand, which drives retention, and this sense of community that our fans enjoy around the world.

This concludes today’s conference call. Thank you for joining. You may now disconnect.