We want to have a lot of movies. We want them to thrill our audiences and they all have different tastes and we want them all to be great. And so, we take a very audience-centric view of what quality is. And Dan knows that from having produced for us as the CEO, Ride Back, he produced the Oscar-nominated film, the Two Popes. For us, he did Avatar, The Last Airbender for us recently. So he understands Netflix and the audience really, really well and his success in live action and animation is very hard to define in the business. So we’re thrilled he’s doing it here.
Spencer Wang: Great. Thank you, Ted. The next question comes from Kannan Venkateshwar from Barclays. Could you please provide an update on engagement trends now that paid sharing is mostly behind you. So I’ll kick it over to Ted first and Greg, you can feel free to add-on.
Ted Sarandos: Well, it’s important to note that we compete for every hour of viewing all the time, every day, everywhere we operate. And we think that engagement report is very important and that metric is important because again, it’s the best indicator of customer satisfaction. I know I just said this 10 minutes ago, but I’m going to repeat it. Eight of the first 11 weeks of this year, we’ve had the number one movie and nine of the last 11 weeks of this year, we’ve had the number one series. And that’s according to the Nielsen streaming data. And for us, that is what we’re personally focused on. And we’ve actually seen in that Nielsen data, our share tick up a little bit even in this incredibly competitive space, where you’ve got a lot of folks competing for attention, for time and for money.
Greg Peters: Yes, Ted, I think you can repeat that eight, 11, 9/11 as many times as you want as far as I’m concerned.
Ted Sarandos: I’m going to close with that two.
Greg Peters: So as we have said, due to the work that we’re doing on password sharing, we’re essentially cutting off some viewers who are not payers and therefore, we’re going to lose some viewing associated with that. So when you see our next engagement report, you are going to see some impact to our overall absolute view hours as a result of that. But despite that impact and despite the general pressure from strong competition that Ted noted, we think our engagement remains healthy. You can see it in the stat that Ted indicated in terms of the Nielsen ratings and our modest growth in TV time in the United States, but we also wanted to do an apples-to-apples view of engagement. So we looked at the population not impacted by paid sharing, it will be called owner households.
And in Q1 of ’24, the hours viewed per account were steady with the year-ago quarter. So that’s a pretty good sign that our engagement is holding up and it sort of cuts through the noise around paid sharing. And again, I just want to reiterate, we think we have plenty of room to grow engagement, right? We’re still less than 10% of TV hours, even in our most mature matrix markets. So there’s tons of room of growth ahead of us.
Spencer Wang: Thank you, Ted and Greg. I’m going to move us along now to a series of questions around plans and pricing and pricing strategy. So from Steve Cahall from Wells Fargo. Greg, as you continue to expand, do you think there is a ceiling for pricing? If so, how close are we to that ceiling in mature markets? And do you envision Netflix having content here, so that you can continue to expand your content genres and further segment your customer base?
Greg Peters: Yes. We don’t have a set position on a ceiling. I mean, I’m sure, you can look at pay TV as a potential markers for where people have spent before, but we really actually don’t think of it so much as defined by that. We see it as an opportunity to continue the process that we’ve been working on, which is let’s continue to try and invest wisely, add more entertainment value. And as we add more entertainment value, then of course, we can go back to our subscribers and ask them to pay a little bit more to keep that virtuous cycle moving. And really the markers for us in terms of the upside potential, more around the hours on TV that we are winning, how many moments of truth we call it that we are winning. Again, less than 10% in our even most mature markets, there’s tons of room there.
You can use total consumer spend on entertainment in the markets and categories that we compete in. That’s between 5% and 6%. So there’s just a lot of runway still ahead of us to go do a good job at making that investment happen, deliver more value and then ask folks to pay a little bit more.
Spencer Wang: Great. Next question on pricing comes from [Mark Shmulik] of Bernstein. Can you please share progress on how the retirement of the basic plan is going in the U.K. and Canada? And is there any color you can share on if when we could expect a similar rollout in the U.S.? Greg, why don’t you take that one?
Greg Peters: Yes. As we shared in the Q4 ’23 letter, we were planning on retiring our basic plan in some of our ads countries. We’ve now started that process in Canada and the U.K. and very similar to what you saw us do with paid sharing, we’re going to work hard to make this a smooth transition. Part of that is listening to our members before we make any further moves. So we’ve got nothing more to announce and we really want to see how this goes. Yes. We know that this is a change for our basic members, but we think we’ve got a strong offering for them. They’re going to get more for less, two streams versus one, we’ve got higher definition, we’ve got downloads, all at a lower price. And of course, it goes without saying hopefully that members can always choose our ads free plans as well if they prefer.
