Greg Peters: Yes. And just to clarify, we are already in partnership with Microsoft developing part of the technology that supports our ads experience. So they’ve got a large team working on some of those features that I just mentioned, but we’ve got a smaller, but growing team, working on the areas where we can differentially contribute to. And then similarly on the ad sales and the go-to-market side of things, we’re building out our own teams that cover a portion of the sales and operations activities. So I think you asked in terms of what’s the size of investment, we have plans to continue to grow those teams. So those are both growing at a pretty strong clip and growing that investment. But we’ve modeled out where what we think we need. And even with those investment levels and the growth that we expect that we see, we expect the margins on the ad business to remain very high.
Spencer Wang: Great. Thanks Greg. A question from Rich Greenfield on advertising. Later this week, T-Mobile’s subscriber benefit called Netflix on Us, will convert to Netflix’s ad tier unless subscribers upgrade to an ad-free tier? Is it reasonable to assume that your U.S. ad-supported subscriber base will roughly double as a result of this change? And assuming it is, how quickly will you be able to fill that inventory?
Greg Peters: Yes. I won’t get into the specifics of a particular deal or provide a forecast for a particular deal, but I’ll just say that just as we’ve done for many, many years, leveraging partner channels is an important part of our subscriber growth strategy. We’re applying the same techniques and approaches to scaling our ads membership. And we love having this additional tool. It’s very effective, very useful for us because that lower consumer-facing price means that we got room now to bundle the ads plan into a set of lower-priced partner offerings where it was hard to make the economics work for everyone previously. So it opens up a whole new range of opportunities. It’s great for new members as well who are leveraging those bundles.
They get a better plan than basic, more streams, higher resolution with downloads. And of course, the real benefit is they get access to all these amazing stories at a lower effective price through the bundle. So we really think of this as a win-win-win and we’re going to continue to leverage these bundles going forward. And I think Rich asked how we think about – how could we fill the supply. I mean when you’re building – growing as fast as we’re growing right now, it creates a lot of challenges you might expect to then fill behind that. But I’d much rather be in that position where we’re growing that inventory and then racing behind to fill it and improve our monetization than the reverse. So I’m happy to have that challenge.
Spencer Wang: Super. I’ll now move us along to a series of questions related to content. So Ted, from Jason Helfstein of Oppenheimer. Are you shifting the mix of your content spend to more licensed second-run content? And if so, how should we think about this mix impacting Netflix’s operating margins?
Ted Sarandos: So we’ve always had a healthy appetite for licensing content from others for our members. I don’t see any meaningful change in that mix. And the current margin outlook contemplates a healthy mix between originals and licensed titles. It might be that we can deliver more on our programming spend with some licensed titles, but we also believe that we deliver an incredible amount of value, excitement and differentiation with our original series. Remember, our original series made up the number – we’re the number 1 most watched original 48 of 52 weeks last year. So we really don’t have any plans to move away from those investments.
Spencer Wang: Great. And another question for you, Ted, from Rich on content. While Netflix data clearly shows that new original movies outperformed licensed titles in terms of viewers and viewed hours, it doesn’t appear that new movie – those new movies are having the same cultural impact the TV series have. Do the recent management departures or the willingness of Hollywood Studios to license post theatrical movies on Netflix, signaling sort of meaningful shift in our film strategy towards licensing away from original production?
Ted Sarandos: Yes. No, look, our original movies are attracting some of the biggest audiences in the world. Look at Leave the World Behind in Q4. Look at all those crazy names about the creepy deers they were all over the place when the movie came out or look at Society of the Snow from Spain right now this morning was nominated for two Oscars or even look back last year, Jennifer Lopez’s great movie, The Mother. By some accounts, it was the most watched movie in the world last year. So I think about it that fans really don’t care much about budgets and windows. They just want a movie that they love. They want a movie to make a cry or make them laugh or giving something great to talk about over dinner. As you point out, our original films do outperform those license films, and they do uniquely distinguish us from the competition.
Just this morning, our original films got 18 Oscar nominations across 10 different films. So we do not plan to change our strategy or the mix. It’s always going to be that kind of blend of first window, second window and deep catalog. We think that formula works best to entertain the world.
Spencer Wang: Great. And as a follow-up to that question around licensing, Ted, your competitors have largely abandoned their opposition to licensing catalog content in Netflix. We’ve seen, for example, NBC Suits, HBOs, Six Feet Under and more recently, a series of Disney TV titles on Netflix. Do you think your competitors should begin licensing you their new original series as well versus keeping them exclusively to their own streaming services?
Ted Sarandos: Yes. I mean I guess I’d call you back to that history again and just say we’ve got a rich history of helping break some of the TV’s biggest hits like Breaking Bad and Walking Dead or even more recently with Schitt’s Creek. Because of our recommendation and our reach, we can resurrect a show like Suits and turn it into a big pop culture moment but also generate billions of hours of joy for our members. So I think you got to remember the studios have always been in the business of selling their content to others, including direct competitors for years. I believe because, again, of our distribution heft and our recommendation system that sometimes we can uniquely add more value to Studios’ IP than they can. Not all the time, but sometimes it does, and we’re the best buyer for it. So I am thrilled that the studios are more open to licensing again, and I’m thrilled to tell them that we are open for business.
Spencer Wang: Great. And a question on animation and animated features from Rich Greenfield as well for Ted is, Leo, Netflix’s most successful animated film to date. It’s been heavily watched based on our top 10 data. Is there any color you can provide on repeat viewing the film? And why has this animated feature film resonated versus other Netflix animated feature films?
