Richard Greenfield, BTIG
Somewhere in the Midwest last month. I am just curious, are there any kind of key takeaways that we should be thinking about that you learned or that were discussed that would be meaningful to investors?
Reed Hastings, CEO, Netflix, Inc. (NASDAQ:NFLX)
Yeah, I think the key thing is that everyone sees that internet TV is really becoming substantial, so we saw this with CBS All Access, 15 years of shows, any episode. I really lean forward move. You see this with ESPN, both heavily investing in WatchESPN. And if you think about in from an ESPN perspective, as long as people are subscribing, whether a third of the time they are on WatchESPN and two-thirds of the time on a linear channel, or the reverse. It’s all the same to them. So they’re being forward leaning and investing in WatchESPN and by being in a Dish 36:11 , making sure that they stay accessible by every home in America.
So, just across the board, you see this phenomena that we described a years ago — channels becoming apps, people using them on their smartphone and Smart TV just as easily. So the fundamental pieces is getting validated, that’s great. And for us, it’s both more on competition and it is more consumers coming in the market, speeding up because internet TV is becoming so mainstream.
Mark Mahaney, RBC
Question for David on the streaming content obligations, those rose to $9.5 billion in the quarter. What levels are you comfortable with ? Should these continue to rise, this is a sub-base rise. Is there a natural level that would show what the appropriate range is for those?
David Wells, CFO, Netflix, Inc. (NASDAQ:NFLX)
Well there is no absolute number but when I look at the streaming obligations in the table and even the ones that are not estimable but you can put a range on those as well, a little bit wider. i would say that the ratio has been fairly consistent in terms of it is scaling with our business. So you should expect them to continue to grow especially as we launch additional international territories. In a produced contents side, the more we license content, the more we that will grow in an obligation.
The interesting about it is that in the production world, when you produce content and you own it, because you have the discretion to cancel it at any time, it doesn’t show up as a content obligation. So if you look at some of our peers and some of our suppliers in Hollywood, you don’t have the same sort of accounting when it come to an obligation, even though you may say that there’s a high probability of finishing or producing a full budget on a particular project.
I would say, I think in terms of our revenue and our revenue per obligation, I think it has been trading in a tight band. It’s been on a tight band along with our scale growth.
Richard Greenfield, BTIG
Sticking on financials, can we talk about internet connection a little bit. You signed deals with four of the large companies over the last several months. Curious how those internet connection fees add up. Is this a number where it is now adding up to north of 10 million plus a quarter? Related to that, maybe a question for Reed in terms of do you expect the FCC policy on internet regulations to actually make the deals that you signed with ISPs actually invalid meaning you won’t have to pay for interconnection going forward.?
