Spencer Wang: Great. Thank you, Greg. A couple of questions on overall capital allocation. So these would be for Spence, primarily from John Blackledge of TD Cowen. Excuse me, you mentioned evolving capital allocation strategy in your investor letter with the – with your new investment-grade status. Can you please talk about changes in how investors will see that change?
Spence Neumann: Yes, sure. Thanks for the question. It’s really quite a modest evolution of our capital allocation strategy to better reflect our investment-grade status. And that’s really what it is. We’re still going to have the same financial policies and principles in terms of prioritizing profitable growth by reinvesting in our core business, maintaining a healthy balance sheet with ample liquidity and returning excess cash beyond several billion dollars on the balance sheet of minimum cash and anything that we use for selective M&A to return to shareholders through share repurchase. So really the only change is that now that we’re solidly investment grade, we’re going to – while we will hold still several billion dollars in cash on the balance sheet, we won’t have the same marker of two months of revenue – the equivalent of two months of revenue on the balance sheet.
So it allows us to be a bit more efficient there. We also upsized our revolver, which was announced today, up to $3 billion from $1 billion, which also gives us more access to capital and better cash efficiency. And then again, any cash beyond that, we’ll return to shareholders. We’ve historically been mostly a build versus buy company with select strategic kind of acceleration through M&A. And that there’s nothing right now planned, but that still is kind of our philosophy is to build predominantly. And we’re also going to kind of refinance our existing kind of debt as those maturities approach, but we don’t plan to kind of lever up through stock buyback. We want to – we really do value that balance sheet flexibility.
Spencer Wang: Great. Thank you, Spence. Last question on capital allocation for you. This comes from Vikram of Baird. What are your latest thoughts on the appropriate level of content spend for the business beyond 2024. Specifically, in the past, you have referenced a 1.1 cash content spend to amortization ratio. Is that still the case? And what would you need to see in an opportunity to meaningfully exceed that framework?
Spence Neumann: Yes. It still holds. It still holds. So still basically the short of it is we’re really kind of managing to that. So as we said, we’ve been like – we’ve been focused on driving that acceleration of our revenue growth, continuing to grow our business, grow our profitability. As we do that, we would expect to continue to grow our content investment as we have historically into the highest impact areas, but also be quite disciplined there. So we want to grow our free cash flow. So we believe we can manage to that roughly 1.1 times of cash content spend relative to expense on the P&L and that leads to overall revenue growth, increased profit, profit margins, growing free cash flow. And that still gives us a lot of opportunity to spend into the all those kind of content and entertainment categories that Greg and Ted have been talking about.
Spencer Wang: Thanks, Spence. We have a few more minutes left. So we’ll wrap-up with a few higher-level questions. The next one comes from Eric Sheridan of Goldman Sachs. And I think both Ted and Greg can tackle this one. The question is, what are your thoughts on the competitive impact from short form video consumption?
Ted Sarandos: So I look at how – what people watch and when they watch it, have a lot to do with one another. What are the choices and how much time do they have. So our version of short-form is more like giving our members the ability to watch 10 minutes of an episode of a series that they’re binging right now if they only have 10 minutes. But some and those when I look at the short-form viewing on YouTube and TikTok, some of it is adjacent and quite complementary to our viewing. So our trailers or creators expressing their fandom for our shows like doing posting a Wednesday Dance or Ugly Crying, Watching One Day, all those kind of things that become viral sensations and actually increase the fandom of our shows. Now that being said, some of that viewing is directly competitive with us, the same as it is with other media companies who provide content to YouTube by way of example.
The art of this has always been finding the right balance of both. So and also would point out that these platforms have been a way to have new voices emerge, and we’ve got our eye on them as well to try to develop them into the next-generation of great storytellers on Netflix.
Spencer Wang: Great. And I think for our final question, we’ll take that from Dan Salmon of New Street Research. What is the opportunity for Netflix to leverage generative AI technology in the near and long-term. What do you think great storytellers should be focused on as this technology continues to emerge quickly. I’ll turn that over to Greg, please.
