Greg Peters: Well, I think as Spence talked about it, it will be an iterative process. To your point, it does signal that we have big aspirations here, and we think there is a big potential opportunity, and so we’re committed to incrementally execute against that opportunity. But just back to Spence’s point, we are starting from a zero base essentially. And also, we’re also starting from a history as a non-ads platform, we had a lot of folks to basically join Netflix fully as non-ad subscribers, and so I think that we will be working through that over a period of time. But again, our goal and aspiration is that this is a very meaningful and significant source of revenue and profit for us over many years to come.
Jessica Reif Erlich: So I mean when you think about the pool of money that you’re targeting, linear, let’s call it, $50 billion, $60 billion business, seems like the easy money, you’ve mentioned already. These are shifting from streaming to streaming from linear, so we’ve seen all of the kind of eyeballs move. And so now you have basically more scale or reach, but the digital pool is much larger. But in the past, you’ve said you’ve made comments, the companies may comment that you can’t compete with Google and Meta or it would be incredibly difficult to compete with them. Has this changed? Has your view changed?
Greg Peters: Not really. I would say that initially, we’re competing mostly with that sort of traditional TV advertising pool. Now I think we can layer into that over time, components of what has made digital advertising so effective. So if you think about the targeting capability, the fact that we signed in fully addressable. If you think about the growing relevance of first-party data and how we do that, those are real big advantages that we can bring relative certainly to the traditional TV world. But again, the form that we have at least for the next couple of years will still be in that sort of lean back €“ primarily in that lean back experience. And so that lends itself to certain kinds of advertising and certain kind of advertising goal. And a lot of the demand collection component that a Google or a Facebook is really good at. We won’t be well suited to compete with that for at least some time to come.
Spencer Wang: And Jessica, just to add to that, the good news, as you saw in the letter, is that, that branded video ad market that Greg talked about us focusing on is about $180 billion, globally ex China and Russia. So we have plenty to do and a lot of opportunity ahead just in that area alone.
Jessica Reif Erlich: Yes. No, it’s an enormous opportunity, but there is also, besides advertising, there is enormous opportunity in incremental subscribers, as you have mentioned. You are the lowest priced service, at least now you are the lowest price, but can you frame the opportunity in terms of sub growth and how you’re thinking about it?
Greg Peters: Sure. And just to comment on lowest price. I mean, again, we don’t really think about the pricing question from a competitive perspective. Again, we’re €“ think of ourselves as a non-substitute good when you think about Wednesday or you think about Glass Onion, these are titles you can only see on Netflix that’s extremely powerful. Scott and Bella are delivering more incredible titles that are non-substitutable in that regard. So really, when you think about the pricing question is how do we offer a wide range of options for a wide range of consumer needs? We want to make that spectrum even wider as we seek to serve more members around the world and trying to deliver appropriate value at those different price points, and we’re doing a good job expanding that range.
And so then you think about so there is sort of two pools then of incremental subscribers. There is a bunch of people around the world in countries where we’re not deeply penetrated, and we have more opportunities to go attract them. A component of that is we’ve got folks that are watching Netflix who aren’t paying us as part of basically borrowing somebody else’s credentials. And our goal is over this year to basically work through that situation and convert many of those folks to be paid accounts or to have the account owner to pay for them to get enough subscription. But either way, we’re seeking to sort of monetize the viewing value that we’re delivering. And then beyond that, it’s back to Spence’s comment, even our most penetrated market 8% of total TV time, which is potentially a relatively narrow length to think about the broad competitive entertainment offering.
So we have huge opportunity to grow the engagement component that several X. We feel like we can get to if we do a great job of executing across all fronts and that represents a tremendous opportunity for more entertainment value delivered and we believe that the revenue flows from that in time.
Jessica Reif Erlich: Before we get to password sharing, just one last advertising question. You now have roughly a decade of producing your own IP. Any thoughts on offering a fast service over time, free advertising supported television?
Greg Peters: Ted, do you want to take this one?
Ted Sarandos: Yes. Look, we’re open to all these different models that are out there right now, but we’ve got a lot on our plate this year, both with the paid sharing and with our launch of advertising and continuing to this slate of content that we’re trying to drive to our members. So we are keeping an eye on that segment for sure.
Jessica Reif Erlich: So on the password sharing, what will drive consumers to pay $3 or $4 per sharing versus becoming a sub with their own profile? Is it affordability? Is there something else? What do you expect?
Greg Peters: Yes. I think there is a range of motivations for different borrowers. So some of it is economically driven and to a part of what we’re trying to do is that we are being responsive to that and finding the right price points, whether in terms of an individual account or an extra member of forte. And obviously, the ad-supported plans give us the opportunity present a lower consumer face pricing in those countries where we have advertising. Part of it is just what we call casual sharing, which is people could pay, but they don’t need to, and so they are borrowing somebody’s account. And so our job is to give them a little bit of a nudge and to create features that make transitioning to their own account easy and simple.
So we have this basically a profile export feature, which allows you to take your viewing history and all the great recommendations with you. So to your point, there is a range of motivations and I think a range of solutions that we will be able to offer to land people in different places.
Jessica Reif Erlich: Can you provide any details, including the time frame for converting borrowers to paying accounts?
Greg Peters: Yes. So we’ve been working hard at this and trying to do some sort of thoughtful experimentation to let our members speak to us in terms of what set of solutions work for them. So that’s the testing that you’ve seen us do over the last couple of quarters. We feel like we have gotten to a good set of features. It’s the profile export that I mentioned, but there is also a bunch of account management features that we think are important to making this experience work for folks. And so we’re ready to roll those out later this quarter. We will staggered that a bit as we sort of work sets of countries, but we will really see that happen over the next couple of quarters. And I think it’s worth noting that this will not be a universally popular move, so there will current members that are unhappy with this move.
We will see a bit of a cancel reaction to that. We think of this as similar to what we see when we raise prices. So we get some increased churn associated with that for a period of time. But then generally, what happens is both from the specific changes that we make, we will see folks come on as new subscribers, essentially borrowers creating their accounts or incremental monetization through the extra member that will happen shortly thereafter. And then clearly, our job is to continue to grow value, right, to have more amazing titles that people cannot wait to see and whether that’s satisfying those members to make those transitions or winning back essentially folks who have turned off the service and bringing them back on service over the months and years to come.
Spence Neumann: Jessica, sorry, I just €“ maybe just because we touched on it a little bit in the letter, but just to kind of reinforce a little bit of what that looks like in terms of timing and guidance. So those dynamics that Greg just walked through, because of that as we kind of start to roll this out later in Q1, based on the timing, what we talked about is that we will have modest growth we expect in paid net adds in Q1, but kind of atypical seasonality, where typically Q2 would be a softer pay-at-ad quarter. It will probably be a larger paid net add quarter. And most importantly, what we’re most focused on is obviously revenue. That is our primary metric. And what you see is in the guide, these revenue initiatives between paid sharing rolling out and then scaling ads, you don’t see much of that in Q1, which is why we are forecasting 8% growth FX neutral in Q1 revenue.
But throughout the course of the year, we would expect to see accelerating revenue growth as we roll out page sharing broadly across our business and then obviously, scale adds throughout the year, which is a more gradual build. So I just want to kind of highlight that, and that’s kind of what you’re seeing in the guidance.
