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Netflix, Inc. NasdaqGS:NFLX

Company Conference Presentation

Tuesday, December 10, 2024 9:30 PM GMT

Contents

spglobal.com/marketintelligence

Table of Contents

Call Participants

..................................................................................

Presentation

..................................................................................

Question and Answer

..................................................................................

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Call Participants

EXECUTIVES

Theodore A. Sarandos

Co-CEO, President & Director

ANALYSTS

John Christopher Hodulik

UBS Investment Bank, Research

Division

NETFLIX, INC. COMPANY CONFERENCE PRESENTATION DEC 10, 2024

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Presentation

John Christopher Hodulik

UBS Investment Bank, Research Division

Okay. Thank you all for joining us. Again, I'm John Hodulik from the media and telecom team. I'm very happy to introduce our next

and final speaker of the day, Co-CEO, Ted Sarandos from Netflix. Ted, thanks for being here.

Theodore A. Sarandos

Co-CEO, President & Director

Excellent. Thanks for having me. It's like a holiday tradition, being here at UBS.

John Christopher Hodulik

UBS Investment Bank, Research Division

Yes. Absolutely. So before we get going, Ted brought along a quick video that we're going to watch, and then we'll get into Q&A.

[Presentation]

John Christopher Hodulik

UBS Investment Bank, Research Division

There we go. Awesome. The Netflix effect.

Theodore A. Sarandos

Co-CEO, President & Director

In the morning. We got everybody pumped up.

NETFLIX, INC. COMPANY CONFERENCE PRESENTATION DEC 10, 2024

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Question and Answer

John Christopher Hodulik

UBS Investment Bank, Research Division

Exactly. So that was a great selection of content. So why don't we dig into the content side? Sitting here at the end of this year, you

guys had a great year in '24. What are you excited about for '25?

Theodore A. Sarandos

Co-CEO, President & Director

Well, '24 is not even over yet. So we've got -- thank you. We have had a great run this year, and we've got -- we're going to end the

year launching the return of our biggest show in our history, maybe the biggest show in television history, Squid Game 2, which is

following a day of NFL football for the first time on Netflix on Christmas Day. So we've got a really good way to go out with a bang

for the rest of this -- for '24.

And in '25, we have an embarrassment of riches. I mean it's the -- probably the most strong slate of programming we've had since we

started doing original programming. I say that because it's unimpacted by COVID delays, unimpacted by strike and all those other

things and returning our biggest brand. So including another season of Squid Game in '25. Stranger Things, Wednesday, which is our

biggest hit around the world.

Incredibly global as well. Stranger Things season 4 was a top 5 show in Japan, which is very hard for a Western programming to work

that way. And then we've got the returning episode -- returning seasons of all of our shows, Ginny & Georgia, Emily in Paris. Our

biggest show from 2023, Night Agent, comes back in the year. We've got an incredible slate of movies that complement that, which

would be our Knives Out movie called Wake Up Dead Man; Guillermo del Toro's, Frankenstein, which is a total reimagination of the

Frankenstein story from the master of horror storytelling, Guillermo del Toro; Back in Action, Cameron Diaz return to the big screen

with Jamie Foxx; Electric State from the Russo Brothers. So we've got an enormous slate of programming all throughout 2025. And

we'll be launching WWE live every Monday night starting in January. So we're excited.

John Christopher Hodulik

UBS Investment Bank, Research Division

Great. So obviously, a ton of different genres, a ton of different content in different local markets. Can you talk about sort of the

balance of your spending? Are there verticals where you're increasing spending, areas where you're decreasing? And what about sort

of spending on sort of English language versus international?

Theodore A. Sarandos

Co-CEO, President & Director

So that gets balanced out. And the one thing that's been interesting, when we started doing this, there was a strange phenomenon,

which I think was mostly a business remnant, that most of the TV watching around the world was U.S. content dubbed and subtitled

around the world. And we've started developing our original programming years ago and doing things kind of like big premium TV

shows in the local markets. I think we're better at today than ever before are things that are really resonating with the local market.

So we spent many years focusing the team, don't try to make global content from anywhere. There's no such thing really as global.

Storytelling in a way that sometimes it's so good, it's mostly because it's so authentic and real. And so if you try to manufacture a

global story, you really aren't serving the local audience or the global audience. So you're really making something for nobody.

So in general, all of our successes that we've seen globally from our local content, it's because of local authenticity. Korea as an

example, Squid Game, there's nothing watered down or Korea light about Squid Game. It's a very straight-up Korean horror story and

that the world fell in love with. And so they're ready for more.

I think on top of doing those kind of scripted stories, thing that was kind of in the early goings for us is local language unscripted

programming, which is quite popular outside of the United States. And some markets where the majority of television watching is in

kind of competition shows, game shows, talk shows and other forms of unscripted that we're really pushing hard into had incredible

success this year out of Korea with Culinary Class Wars and Physical 100, which kind of creates almost a new genre of unscripted

television in Korea. And those shows have been so successful around the world that we'll be launching spin-off brands or formats of

that show all over the world on Netflix.

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John Christopher Hodulik

UBS Investment Bank, Research Division

And do you try to balance your spending for where you see the most opportunity for subscriber growth? Like if you're underpenetrated

in Asia Pac, do you think, okay, we've got to make sure we've got sort of the 4 quadrants?

Theodore A. Sarandos

Co-CEO, President & Director

Yes. It's a very much working on what -- if we're underpenetrated somewhere, why? So is it a financial problem? Is it a content

and programming problem? Is it a technology problem or some mix of all those things? So main thing is that you've got to have

an audience that is hungry for entertainment that you can have a product that's presented to them that they can -- that fits with their

economic reality and the programming that they can't live without.

So as long as we could do all those things well and it's in -- different parts of the world are all at different stages of that. It's hard to

believe that we're under 10% of total television time even in our most mature markets. So our percentage of total viewing has got a ton

of runway to grow. And with that, I think our fandom and our membership and our revenue and our profits all grow accordingly.

John Christopher Hodulik

UBS Investment Bank, Research Division

Yes. I think we're all sort of U.S.-centric here, and we see the Nielsen Gauge under 10%. That's the case everywhere in all of your

major markets?

Theodore A. Sarandos

Co-CEO, President & Director

Yes, correct.

John Christopher Hodulik

UBS Investment Bank, Research Division

Correct. So what would lead you to sort of move ahead more meaningfully in terms of content spend or pull back? I mean what are the

things that -- the dials sort of that you're looking that sort of guide that spend?

Theodore A. Sarandos

Co-CEO, President & Director

Well, the thing that drives more content spend is more revenue. So basically, we find that there's -- we've had a really effective

virtuous cycle of if we add enough value to the member, every once in a while, we can come to them and ask for a little more to fund

the next cycle -- the next cycle of content improvement. And that to me -- so the thing that will grow that is more members, more

revenue, more content spend. And today -- and I think we've done a really -- the better that we spend money -- our goal, we're to spend

that next $1 billion better than the next -- than anyone else can spend the next $1 billion. And I mean that by finding things that matter

most to viewers and fans, things that they really love.

So I talked about like our North Star, the thing that we focus every employee at Netflix on. And we just had our company meeting

with 14,000 people to tell them that everyone's goal is that we've got to make the programming better and better and better. And what

I mean in that, I don't mean win more awards and get good reviews. That's nice, too. But what I mean is to make the programming that

people really love and talk about that generates that Netflix effect that we're just talking about.

The flywheel that we talk about, it's not as obvious as you seeing something play out in the theme park. But it is -- every bit is real

and tangible. You see that in consumer sales. You see that in what people are posting about. You see that in events that we can fill up.

And I think you can see that in things like the big live events like we didn't even have the ability to do just a few years ago that we

do regularly today. And it becomes the center of conversation. And that's why, for us, that is as core as anything we do, is we've got

to make content that people love about. Love it. We have to make it so great that they want to talk about it, which kind of creates a

FOMO effect around the world. And if you do it really, really well, you get richly rewarded from fans.

John Christopher Hodulik

UBS Investment Bank, Research Division

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So the network -- the Netflix effect is, I think, a sort of a relatively new issue with it. But are there -- and there are a number of ways

you're already doing it. But do we think we are in the sort of the early days of monetizing that of whether it's through events or, like

you said, consumer products? Or what are the ways that you see this evolving over time?

Theodore A. Sarandos

Co-CEO, President & Director

The main way we monetize it is in -- deep in fandom for the product itself so that when the next season is coming, you can only see

it on Netflix. And so for me, that's the main monetization model, is to make it more valuable through the -- and it happens through

a sale of a T-shirt or you go to the -- on the West End right now, we have a stage show that is the origin story of the Upside Down

called First Shadow. It's a very successful show. It's been sold out for nearly a year. It's coming to Broadway, for folks who live in

New York. And you'll see what I mean about that when you see that. Now there's monetization there, but really the value of that is this

kind of generational love of the brand of Stranger Things. And that's how that really gets played.

If we look back at the Netflix effect on things that sometimes we have nothing to do with the monetization of, but definitely, the

deep fandom has paid us in the case of Queen's Gambit where the 100-year-old company that makes chessboards in Spain was going

bankrupt and their business went off the charts. Now we didn't get any of that money, but Netflix and Queen's Gambit is only on

Netflix. So the ability to see this thing that drove the passion for chess all the way back to Netflix is -- that's how you really monetize.

John Christopher Hodulik

UBS Investment Bank, Research Division

Makes sense. Maybe let's turn to sports.

Theodore A. Sarandos

Co-CEO, President & Director

I should say, too, along those lines is the -- this year, we're going to be launching 2 Netflix Houses, which is kind of a maturing of

our -- traveling event strategy, which is we've done over 70 traveling events like the Stranger Things and Upside Down experiences

and these kind of things that travel city to city around the world. And this is -- our launch of Netflix House is a 100,000 square foot

experience that is immersive retail, food and ticketed events that all happen underneath one roof that we're kind of experimenting with

this year. So we're really excited about that.

John Christopher Hodulik

UBS Investment Bank, Research Division

Where are those?

Theodore A. Sarandos

Co-CEO, President & Director

Dallas and King of Prussia.

John Christopher Hodulik

UBS Investment Bank, Research Division

Okay. King of Prussia Mall, probably.

Theodore A. Sarandos

Co-CEO, President & Director

Yes. Very close. Very close.

John Christopher Hodulik

UBS Investment Bank, Research Division

Yes. So let's pivot to sports. First, give us your take on the Jake Paul-Mike Tyson fight. How did that go for you?

Theodore A. Sarandos

Co-CEO, President & Director

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Off the charts. I told the team afterwards because we have the most brilliant engineers on the planet. And I will tell you, they beat

themselves up for every little glitch that happen. And I -- but the truth of it is, at the end of that thing, all that was left was imagination

and what's next. Such excitement. Off the charts. Now we hate to disappoint a member for one second. So yes, there was some of that.

But the real thing is we had an enormous live audience, 108 million people watching live. You'd have to go back to the '80s to get a

live audience that big that wasn't a Super Bowl. It's really phenomenal. It's a Super Bowl-like audience that we were able to draw for

this fight. This is a combination of our content team recognizing that this was going to be a thing, our marketing and publicity teams

and our social media teams and everybody making it a thing that you could not -- you were not going to miss no matter where you

were in the world. And then there are build -- and the tech teams that were able to deliver it.

And they really made a show of it. I got to tell you, it's some combination of sports and circus which was -- that people really needed

to see. But I hear all these great stories that people -- if someone went to their kid's high school football game on that -- on Friday

night and everyone in the stands is watching the fight on their phone instead of their kids playing football. So there was all that kind of

thing that was going on that really required expertise across every function that we have that all just fired on every cylinder.

So it's just -- the must-seenness of it was phenomenal. And then the delivery of it was also -- I mean I think if you think about the

number of devices -- and that night, we were stressing our own technology. We were pushing every ISP in the world right to the limits

of their own capacity. We're stressing the limits of the Internet itself that night. So we had a control room up in Silicon Valley that was

reengineering the entire Internet to keep it up during the fight because of the unprecedented demand that was happening. So the largest

streaming event in history. I'd say one of the largest live audience in almost 50 years or 40 years. And people really had an incredible

time. And people loved it and talked about it in every way.

And the underlying thing that gets lost in there, too, this was a 5.5-hour streaming event. The first undercard fight had about 30

million people watching it. The Taylor-Serrano fight though was the most viewed professional women's sporting event in history. So

about almost 50 million people watching that fight going into it. About 74 million around the world, 50 million in the U.S., about 74

million around the world watching that fight. So that is -- a lot of records were set that night. For a company that we basically broke

down during the Love Is Blind reunion about 1.5 years before that. So that's a lot of positive trajectory in a very short amount of time.

John Christopher Hodulik

UBS Investment Bank, Research Division

Does it increase your interest in live events or maybe combat sports in particular? And then what I find fascinating about the whole

thing is you guys created this event. It wasn't like -- we get the NFL. But it wasn't like, okay, you released the NFL, but you guys sort

of invented this, put it together and it became -- you said the biggest live event in the streaming history.

Theodore A. Sarandos

Co-CEO, President & Director

It's been -- I mean even the production that you saw on television, the way it was put together with all, again, our teams doing that,

which we're really thrilled with. And if you think about it, it doesn't -- what we're really interested in is big live events. These are

big live events that happen to be sports like Christmas Day football is a big live event within football season. This boxing event is a

boxing event, but it's a big live event. But it could be the Tom Brady Roast, which is a comedy event. Or when Chris Rock decides to

finally tell his story on what happened at the Oscars, it was Selective Outrage, and it was live on Netflix.

So to me, it's like we're really excited about the opportunity to get people very excited about coming together and watching something

and talking about it. And I think those moments are rare and very, very valuable. So that's why we're kind of leaning into it. And

I don't think a season of league sports -- the economic challenges aside, every one of those nights is not necessarily an event. And

really, I want to focus these live complexity and the live excitement on things that are truly events.

John Christopher Hodulik

UBS Investment Bank, Research Division

And can your number of live events sort of ramp from here? Like if we have your crystal ball, like we look out 3 to 5 years, can you

-- do you see Netflix doing a lot more live events and not just ones that are based in the U.S. but sort of take that globally and do ones

that are important for different regions?

Theodore A. Sarandos

Co-CEO, President & Director

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Right now, our focus is on doing them from the U.S., and they're big events in that way because the technology is still building. It's

still -- we want to make it so turnkey that we could do local for local streaming as well. But right now, it's really focused on big-scale

events. But we'd like to do -- we're going to do more frequently. WWE is going to be live every Monday night, so starting in January.

We have John Mulaney, which is going to be a live show that's going to also run next year. But we also think that there's plenty of

others to do that will be...

John Christopher Hodulik

UBS Investment Bank, Research Division

Makes sense.

Theodore A. Sarandos

Co-CEO, President & Director

And then NFL football, keep in mind, I think that day, not only we have 2 great games. We have the Beyoncé halftime show. And

it's going to feel like you're watching like -- it is Christmas Day. So we will be aware that it is Christmas Day. The show and the

broadcast itself and all the entertainment that's wrapped around it will all be very special and very unique and I think bigger than the

game itself.

John Christopher Hodulik

UBS Investment Bank, Research Division

Got it. So what is -- the NFL games and WWE starting in January, what does it do to your ad business? Obviously, with sports,

especially given the natural breaks in the game, sort of comes advertising. So do you expect it to sort of kick your advertising business

into a new gear?

Theodore A. Sarandos

Co-CEO, President & Director

Yes. Look, I think there's a lot of demand -- I mean, both games are sold out. So we're really excited about that. And I feel like the

-- there is an emotional and somewhat irrational attraction to live with that for advertisers. It makes sense really because I do think

people remember the events that they watch versus kind of the day to day, what they're paying -- what they're watching and paying

attention to. And so there's an outsized desire to be there. And there's a built-in scarcity with sports that drive CPMs and advertiser

interest.

So I think when you can have something that is -- by the way, we severely undersold that fight. If we knew the audience was going to

be that big, we probably would have done a lot more selling on that fight. But I do think that the -- our ability to monetize those events

is very high.

John Christopher Hodulik

UBS Investment Bank, Research Division

So just finishing up on sports, what type of additional sports properties would sense for you? And I think in the past, you've talked

about getting -- obviously, you have a global reach. So sports that resonate globally, but just any thoughts.

Theodore A. Sarandos

Co-CEO, President & Director

Look, I think what every sports league wants is their audience to be more global and younger. They want to ensure the longevity of

the sport by introducing new generations to the sport itself. And remember, there's so many distractions now in people's lives that the

fact that they follow sports at the way they do or a sport the way they do is something that you're constantly being challenged by every

other thing that's trying pull on your attention from gaming to social media and everything else, movies and TV, everything.

So for them to be able to reach a younger audience and to reach a global audience, it's of interest to every league. They understand

what our business is and our model is, and they are very excited to kind of create more bespoke products. They don't have to come

from within their league necessarily, but it's a nice one. I think NFL Christmas Day is a good example of that.

And so I do -- but I don't know if there's any one that we're saying that we wanted to get that one. But something that's special,

something that's unique and eventizable, we can make an event of it, and it could be global and the audience will be much broader

than they can achieve anywhere else.

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John Christopher Hodulik

UBS Investment Bank, Research Division

It kind of feel that WWE fits that mold a bit, right? Global, younger but also big events, right?

Theodore A. Sarandos

Co-CEO, President & Director

I mean honestly, that is a big event every week. And the idea that people -- all these years that WWE has been on television, very

successful. Good example about the kind of X factor that is Netflix, we did a press day to kind of introduce the press to the sport

because the press didn't pay much attention to it -- to the sport until it got to Netflix. So they basically -- we had a huge attendance of

reporters from all over the world who were learning what this game, what this is about. So to me, I think that's the first step of the X

factor that is Netflix for that sport, and people will see that applied.

And what excited us about WWE at the beginning, it's the inverse of Formula 1, which is it was very well distributed in the U.S. and

very little known outside of the U.S., where when we got into before Drive to Survive, Formula 1 was barely watched in the U.S. And

now obviously, it's incredible live events and ratings have gone up many folds. So I feel like we have the ability to do that with WWE.

We give a bigger audience for it in the U.S. and blow it up outside of the U.S.

John Christopher Hodulik

UBS Investment Bank, Research Division

Yes. Outside of sports...

Theodore A. Sarandos

Co-CEO, President & Director

We also like it because for a sport, it also has a 40-person writer room. So it's much closer to our core wheelhouse of creating and

storytelling.

John Christopher Hodulik

UBS Investment Bank, Research Division

So maybe we'll talk about engagement. So outside of sports, what are the opportunities you think to the biggest sort of pockets of

engagement that you can tap into that maybe you haven't penetrated yet and to drive engagement? What kind of content or what areas

do you think that you need to invest more to drive engagement?

Theodore A. Sarandos

Co-CEO, President & Director

Yes. Look, we said before, I think the mix of local to global programming, I think, gets much more intense. We've got -- right now

in Latin America, we launched Senna from Brazil. That is going to be -- a very big hit for us in Brazil, obviously, but it will be

watched by Formula 1 fans around the world and certainly play pan-regionally in Latin America. We also have One Hundred Years of

Solitude, which is an enormous book out of Colombia that had a very big global following. So we feel very excited about that.

So our ability to do event programming this way from everywhere in the world for anywhere in the world, that continues to be a big

focus of the business, and then focusing on event films and event series. So I talked about all of this in 2025. We've got all of these

returning shows. And in some cases, they're finale. So we've got the finale of Stranger Things. It will be the finale of Squid Game in

'25.

And I look at those and it begs the question, what have you got coming up then if you got -- kind of go back? And we've got incredible

stuff coming up like Four Seasons, which is Tina Fey and Steve Carell based on the movie, but it's a series based on that film. And

we've got Kate Hudson and this really fun show called Running Point. It's a comedy set in the world of NBA basketball. We have

Zero Day with Robert De Niro.

So we've got a big slate coming -- on its heels. And the idea is we want our people to understand that what we do on Netflix is a

different level of ambition than typical television or typical premium television. So when you see these things that come across like

Electric State, making a Russo Brothers movie for Netflix is the same ambition as to making a global tentpole film. We want them to

use all the storytelling skills that they have. We give them the resources they need to do that. And we give them the most important

part, which is the gigantic audience reach. We have 600 million watchers of Netflix. And they're typically watching about -- we got

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200 billion hours of watching last year. So the idea that we can bring -- when people are ready to watch that they are ready to watch on

Netflix and then we can deliver that audience for them.

John Christopher Hodulik

UBS Investment Bank, Research Division

Got you. Let's talk a little bit about subscriber growth. With the 2025 guide, you suggested about that more than half of the 11%

to 13% revenue growth that you would see next year would come from subscriber growth, suggesting another very healthy year of

subscriber growth. I think that was a major concern coming out of password sharing. People are thinking, okay, maybe it would slow

down. You guys aren't going to divulge the subscriber growth every quarter. Where is the next layer of sort of subscriber growth

coming from, maybe from a regional or demographic?

Theodore A. Sarandos

Co-CEO, President & Director

Look, we were at 280 million at our last announcement, and we've got -- which gets a little less than half of the total addressable

market if you use the kind of television as kind of the total addressable market. So we've got plenty of room to grow members around

the world. So we did 16% growth in member base in the U.S. and EMEA and 19% in APAC and almost 10% in Latin America. And

so I think that, again, we're seeing that kind of uniform growth, which tells us that we're doing a lot of things right in a lot of places.

And we just have to keep doing more of it.

Back to that 10% number, you think about where that's coming from. It's like even though we've got plenty of room to grow the

member base itself and plenty of room to grow engagement of the member base itself, and then on the heels of that, the monetization

of it.

John Christopher Hodulik

UBS Investment Bank, Research Division

And we'll get to that from a pricing standpoint. With the paid sharing initiative fully rolled out, how should we think about the cadence

of price increases going forward?

Theodore A. Sarandos

Co-CEO, President & Director

Similarly, which is the underlying philosophy is we have to prove value first. So when engagement is happening and we're adding a

lot of value to our members with -- sometimes with live events but just kind of in the day in, day out, 2 hours a day they're spending

with us, how much they value that. So you start seeing it in your ability to come back and ask for more. You can't do that if we don't

do those things right. That's why I'm saying that those 14,000 people who work for Netflix are in service of doing that right all the

time.

John Christopher Hodulik

UBS Investment Bank, Research Division

Do these live events -- are we going to see them -- I can probably do the math myself, but move the needle from an engagement

standpoint, like the fight and then the football games, you're going to get tens of millions of viewers on that?

Theodore A. Sarandos

Co-CEO, President & Director

Yes. It's tough to tell because there's so much watching. So a couple of hours of streaming in a year of 200 billion hours, it's tough to

see. But again, all hours are not created equal. So those are quite valuable hours.

John Christopher Hodulik

UBS Investment Bank, Research Division

Maybe shifting to advertising. This has been a big topic of discussion, of course, for Netflix. You recently announced you have 70

million monthly active users in the past year. Is the adoption of the -- the size of the audience at this point still the biggest barrier to

scaling the advertising business?

Theodore A. Sarandos

Co-CEO, President & Director

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I had to say when we got into this, the thing I was most concerned about was that piece, which was we've counter-positioned against

advertising almost since the existence of our brand. I had no concern that we build technology to do a really great job of audience

matching. That's all we do every day. But I think that part of it was how we were going to position it with our members in a way that

would say this is an opportunity for those people who want a lower price and don't mind advertising to have another choice to another

entry point into Netflix.

I think that, to me, is like that 70 million, we've grown about 35% quarter-on-quarter in terms of the growth of that MAU, which

gives us the ability to get to critical mass, which we think we will in 2025 in all of our ad markets to where we can then be relevant to

advertisers. So growing that, I've been so proud of the team and their ability to grow that addressable audience and grow supply. And

now that we've done that, then we've got to continue to move into monetizing it better.

John Christopher Hodulik

UBS Investment Bank, Research Division

Yes. And you're putting together the other pieces of the puzzle as well. So how do the new programmatic deals and adding tech in-

house help drive the business on this?

Theodore A. Sarandos

Co-CEO, President & Director

We launched our own tech in Canada this past quarter, and we're going to roll that out in all the ad markets in '25. We've got

incredible partnerships with Trade Desk and Google to kind of work up all those things. And again, this is multiple things that we're

doing at the same time, developing our own tech, building our own ad team, better integration with others, with programmatic sellers.

So those things are -- we have said this over and over again, that we're crawl, walk, run in this, but we're crawling faster.

John Christopher Hodulik

UBS Investment Bank, Research Division

[ We're in ] the crawl.

Theodore A. Sarandos

Co-CEO, President & Director

Yes, yes. So -- and I do think, like I said, getting that building supply and then building -- then capitalizing on demand is -- that's the

key.

John Christopher Hodulik

UBS Investment Bank, Research Division

And that's where you're running.

Theodore A. Sarandos

Co-CEO, President & Director

That's where we're running. And to do that, it goes all the way back to that first one again. You got to have programming that people

care about and advertisers want to be next to. The real value in this is I want my brand associated with that thing that people love and

keep talking about.

John Christopher Hodulik

UBS Investment Bank, Research Division

And I think you guys said that the business won't scale in '25 but maybe '26, '27. I mean is that the sort of timeframe when we could --

we can maybe move from the crawl stage to the walk stage.

Theodore A. Sarandos

Co-CEO, President & Director

Look...

John Christopher Hodulik

UBS Investment Bank, Research Division

I don't know if you've laid it out yet, but we...

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Theodore A. Sarandos

Co-CEO, President & Director

I think the walk stage is -- it's a meaningful revenue contributor. It'd be kind of in that post '25 stage.

John Christopher Hodulik

UBS Investment Bank, Research Division

Yes. Got you. And how large of the business over time do you expect the ad supported business to be maybe over, say, a 5-year

period?

Theodore A. Sarandos

Co-CEO, President & Director

That's a big question. That's -- I mean, again, I think we've got to continue to grow both. We do both businesses. So basically, it's up

to the consumer if they want the service without ads and they pay X or if they want it with ads, they pay Y. And we want to be able to

monetize those in a way that is generally growing the business in total. So that, to me, is how big that's going to be. It could be a small

percentage, a large percentage. The North Star is growing total revenue.

John Christopher Hodulik

UBS Investment Bank, Research Division

A couple more on advertising. Do you expect the products -- obviously, you have great demographics, mix of live events. Highest-

quality content in the industry. Do you expect that over time that you'll command, and you maybe now, the highest CPMs in the

industry, maybe within CTV but also as we look at sort of broadcast and cable? How do you expect CPMs to evolve over time?

Theodore A. Sarandos

Co-CEO, President & Director

Yes. Look, I think the core is the scarcity that comes from being really great at the storytelling piece. Yesterday, we were the most

nominated at the Golden Globes across film and television. So to me, like there's an opportunity there. If you want to see the best stuff

on TV, you've got to have Netflix. And then if you want to be part of that, advertisers want to be there, too. So I really -- I do think

there's no reason to believe we couldn't be at the high end of the premium CPMs with our programming.

John Christopher Hodulik

UBS Investment Bank, Research Division

And you announced -- you talked about the launch of the ad server in Canada. Any early reads there or any sort of new data points you

could share? Or is it ready for prime time to roll out today?

Theodore A. Sarandos

Co-CEO, President & Director

Nothing really to share, but no material problems either. That's what most of the words -- that's what we're looking at, is trying to roll

this out problem-free, and it's been pretty problem-free.

John Christopher Hodulik

UBS Investment Bank, Research Division

Great. One question that we get in terms of the ad business is the sort of the amount of investment required. So not just on a

technology standpoint, but you have to hire a sales force to sell ads. Obviously, you guys have programmatic partners. But is that a

sort of meaningful number as we look into sort of '25 and ' 26? I know you've got the guidance out there for sort of 100 basis points in

margin. But does the sort of spend on building the ad business change that equation?

Theodore A. Sarandos

Co-CEO, President & Director

That's included. So when we did the '25 guide, I think that includes investing in live games and ads, which I think are all meaningful

investments into our kind of the future growth in the business. And we think it's kind of the right trade-off with the current margin

guidance we've given, which is expanding margin by 1 percentage point on a pretty oversized 2024.

John Christopher Hodulik

UBS Investment Bank, Research Division

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Massive '24. Yes, I mean massively up. So a lot of people that think that you guys gave guidance for '24 and you sort of massively

be -- the same dynamic could play again at '25. And I think some of the drivers were like FX and other issues, but I guess you're not

going to change the 100 basis points.

Okay. Maybe turning to competition. How do you see the competitive landscape evolving now that streaming has sort of begun to

mature? And I guess this is a question that will lead us to sort of the whole the industry itself, but what do you think sort of the next

steps are in the streaming landscape?

Theodore A. Sarandos

Co-CEO, President & Director

I think we're at a very unique and special time in the business where we are growing. The sector is growing. Everything that we do in

terms of the business, in terms of film and television, games and ad-supported watching is a growing industry. And our competitors

are circling the wagons a little bit and cutting a lot. So when I look at this, I like where we're at right now. I like where we sit for

2024, 2025, in the foreseeable future from there because all of those competitive dynamics are out there. It's going to be a competitive

marketplace because it's a big business. And we've never expected it not to be very competitive.

But what's interest -- and we've got old media players who are kind of trying to figure out their migration from linear still and who are

cutting their way to profitability in a way that's making their products, I don't think, more competitive. That's for sure. And then we

have kind of the tech players who are trying to -- were juggling what the motivation is for what they're doing and how good can they

get at it. So Amazon and Apple, they have plenty of money and plenty of patience. So they'll still be out there, and we've got -- it's a

very competitive landscape not just among those kind of consistent players but also just for time and attention.

YouTube and TikTok and everyone else is kind of -- they're all trying to get the same thing, which is entertainment, attention,

and eventually, how do you monetize it. And we so far have been quite good at doing that against both traditional media and tech

competitors and new forms of entertainment as well, which has actually been additive to us -- to our business. If you saw on the

Netflix effect video, how much of that was fans trying to express their fandom which actually works as a promotional tool for us. So

you have like 400 million to 500 million people doing Wednesday TikTok dances, which does nothing but make Wednesday bigger.

So yes, they did spend a few seconds watching it on TikTok, but it actually made Wednesday a much bigger show. So I think about

trying to figure out how do you not just compete with folks but then eventually co-opt their spaces to make your spaces better and

bigger.

John Christopher Hodulik

UBS Investment Bank, Research Division

Right. And a lot of people now have a big theme of the -- the last couple of days has been just the changes from the new

administration. And there's a lot of belief both on the telecom side but on the media side that it could usher another sort of wave of

consolidation in the media space. And how do you think of that? Would that be good or bad for Netflix sort of at a high level? And

then also, is there an opportunity for Netflix -- I mean obviously, most of the growth has been organic. I mean...

Theodore A. Sarandos

Co-CEO, President & Director

We're better builders than buyers. I mean historically, we've been buyers of IP here and there in small pockets, but not big company.

Better builders, I think. And I don't know that the consolidation changes the competitive landscape that much because it's the same

programming basically that we're competing with every day in different models or different revenue model for other folks, which tend

to be when companies get together, they're not to do that to charge more. They're likely doing it to try to charge a little less, which I

think continues the economic stress as long as they're still navigating their legacy media businesses.

John Christopher Hodulik

UBS Investment Bank, Research Division

Right. And then another sort of way...

Theodore A. Sarandos

Co-CEO, President & Director

To answer your question differently, I've done all the kind of what about -- when do 1 and 1 equal 5 in that landscape. And I can't find

one of those scenarios, I don't think.

John Christopher Hodulik

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UBS Investment Bank, Research Division

Right. Got it. Another way that some of the DTC, which is a very fragmented market, and you see the Nielsen Gauge data, have

looked to compete in the absence of sort of structural consolidation is bundling, DTC bundling. And it seems like that was a theme of

the conference here the last couple of days. I mean how does that change the competitive landscape? Does a Warner Bros., Disney+

bundle or others that are being discussed, does that make it more or less competitive for you guys?

Theodore A. Sarandos

Co-CEO, President & Director

I think for all those guys, it's a churn tool for them. And we have really, really, really low churn. So for us, I don't think we need to

have a more exotic offer. We just have to continue to entertain.

John Christopher Hodulik

UBS Investment Bank, Research Division

Right. Makes sense. Getting back to the margin issues. Again, I'm not going to ask for a change in guidance. But you have had a nice

cadence, outsized in '24, more improvement on the -- another 100 bps expected in '25. How should we expect sort of cadence? And

you guys pulled back on the guidance for sort of the steady state improvement. But what should we think of sort of the margins of

that? Because I think a lot of the value creation you've seen is just that massive increase in margins over the last 10 years. Just how do

you think of long-term sort of margin?

Theodore A. Sarandos

Co-CEO, President & Director

It is on the -- that is the long-term trajectory, which is to continue to grow top line at healthy rates and expand margin. So it is, but it's

on the long -- it's on the map, medium and long term.

John Christopher Hodulik

UBS Investment Bank, Research Division

Right. You're not going to give us a target number here? Okay. All right. Just a couple of other topics. We had Doug Shapiro in

the here last session talking about AI. How do you guys think of AI in terms of how it affects your business, how it affects just the

business of Hollywood in general?

Theodore A. Sarandos

Co-CEO, President & Director

Yes. I wish I saw that session. I think it's interesting because there's tools, I think, that are going to help all kinds of creative

endeavors. There's some really tangible ones in pre and post production today that really are producing interesting results, things that

are kind of very task-oriented that they could do faster.

What I've not seen yet is how AI is going to make things better. And to me, I would say it's way more valuable. I would take a 10%

better over 50% cheaper all day. So if the tool can actually help make things better at some point, that's great. But for the most part, I

think the way that we'll make things better is it will strengthen creators to do their jobs better. Kind of like an engineer today because

it would be very tough to get a job if you don't know how to use Code Assist, which is basically AI for -- so I look at that as different

-- every kind of creative endeavor will be aided in some form by some kind of AI tool.

But I think the idea that it becomes more than a creator tool and becomes the creative tool, that's pretty unlikely, I think. And I think

about all the different iterations of production innovation like even digital cameras. That was an enormous leap forward. I think about

things like CG animation over hand-drawn animation which today, animation employs way more people than it used to, back when it

used to be a very laborious hand-drawn thing.

So to me, it's like the business can get better and bigger as long as it actually is -- it creates a new aesthetic or a new form of

storytelling that people really love. And to me, that's the goal. First and foremost, there's a lot of tools that we use throughout business.

I think AI will play a big role in improving choosing the things that you're going to pick to watch. We've been using machine learning

for years to do just that. And this will accelerate and improve the results of that.

John Christopher Hodulik

UBS Investment Bank, Research Division

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Fantastic. Kind of like discovery in the UI.

Theodore A. Sarandos

Co-CEO, President & Director

Discovery in the UI. Like right now, we've got this -- we keep adding more content and more choice for our fans, which they love.

But along the way, you've got to make sure the UI makes it possible for people to find all this new great stuff. So we are in the middle

right now rolling out our -- kind of our first redesign of our UI in 10 years with -- it's called [ Eclipse ], and we've seen really great

results from it already, which helps aid discovery, gives more real-time predictions and real-time suggestions for members. And the

take rates and the success rates of those hits are growing. So we're really excited about that.

John Christopher Hodulik

UBS Investment Bank, Research Division

Has that been rolled out? Or is that in process?

Theodore A. Sarandos

Co-CEO, President & Director

It's rolling out.

John Christopher Hodulik

UBS Investment Bank, Research Division

It seems like the UI is really hard. I mean all the -- whether it's Disney or Warner Bros., it seems like all the digital companies that we

talk to are spending a lot of money to try to get to where you are. And you're investing to sort of get to the next level.

Theodore A. Sarandos

Co-CEO, President & Director

I think most of them discounted how important it was at the beginning and paid a price for that. I do think that that's very -- it's really

important to basically harness the Internet to do things that retail couldn't do. Being able to -- personalization is the key to it. I always

think that the core to our brand is that people always think like what is their content brand and what is it trying to be. And there's --

actually, the core to the Netflix brand has always been personalization. So it's been in our DNA from the beginning. So the better and

better we are personalization, the better we are at serving our members. It's very core for us.

John Christopher Hodulik

UBS Investment Bank, Research Division

So just 2 more questions for me. Video games. Where are you in that process? It's an initiative you started up a couple of years ago.

How has that played out? And is it where you want to be? And is it having an impact on engagement and churn that you hope it

would?

Theodore A. Sarandos

Co-CEO, President & Director

Yes, it's early. It's very early. And right now, there's a lot of friction points in how people play the games. But at the end of the day,

if you make a game that people really want to play, they've got over all their early friction points and play the games and love it. So

we've had some good positive signals on things like the Grand Theft Auto or OXENFREE, our own original games that people really,

really love.

And right now, we're about to launch Squid Game, and it's launching right alongside of the show. So it's great synergy for fans. And

it plays into something where I think -- our long-term vision for the value the games can add to members is, hey, it's a $140 billion

business that people are spending on gaming today. So if we can be a relevant part of that gaming time with those members, they'll

apply that value to the subscription.

The other part of that is that we've got a fandom that we can really feed. So imagine you're a hardcore Squid Game fan and you can't

wait for the next season of Squid Game. And you've already watched all these episodes. And you've come back and you watch them

again. Now you can go in and play the game and put yourself in the show more or less.

And so that kind of sense of agency that gaming and user-generated video has kind of created for young people that can find that in

our show, and a Netflix show to be different than a show anywhere else in the world because of this element of it being alive between

NETFLIX, INC. COMPANY CONFERENCE PRESENTATION DEC 10, 2024

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seasons or between sequels of movies and your ability to customize or your ability to introduce a new plot line or a new character

or to test out characters with super fans. I just think that, in general, it's going to play a really interwoven and integral part of our

storytelling model because -- and people will value it more than they would have without it.

John Christopher Hodulik

UBS Investment Bank, Research Division

So should we expect a Wednesday video game and maybe a Bridgerton...

Theodore A. Sarandos

Co-CEO, President & Director

right now, you can play Virgin River Christmas and you could play Too Hot to Handle and Love Is Blind. All these -- there are many

of these games that are tied to the IP that people -- and in fact, even -- it's very small number still. So you squint to look at it. But there

are people who played the Too Hot to Handle game that then went back and watched the show that have never watched the show. So a

super positive sign from a pretty small base of users and the fact that certain games are actually played better in certain countries than

others. So for some reason, the folks in France really love that game, and it drove watching of Too Hot to Handle in France in a big

way.

So we're super excited about the potential for it all. Still very early days. We have a new head of our game division, Alain, who's

really reconceptualizing and rethinking through a bunch of things right now. So it's -- in the typical way that when we do new things,

we iterate and try to get it right. And sometimes, we take several passes at it, and we're in that mode now.

John Christopher Hodulik

UBS Investment Bank, Research Division

Got it. Sounds good. All right. Last question. We talked a lot about content. We saw the video. What is the one piece of content that

you're most excited for in 2025? What do you think has the biggest potential to blow up next year?

Theodore A. Sarandos

Co-CEO, President & Director

Well, this is my least favorite question. It's like which one of your kids do you really love the most. But I would look at as I think 2025

is a crazy embarrassment of riches. I think the finale of Stranger Things is so good. It leans into the very emotional connection people

have. Remember, we grew up with these kids. So we've -- I've known Millie since she was 11 years old. So to see this cast and this

-- it's an incredibly emotional experience. So if you've not -- if you haven't watched one through the previous seasons in a while, you

might want to catch up. And this is -- it does exactly what you want a finale to do. So that, I think, is going to be very hard to beat. But

Squid Game is the biggest show in our history, and it's going to be having its finale also in 2025. And then you also have Wednesday,

which is it's first time back. So some combination of those 3.

And we're really -- from a -- artistically, I'm super excited about Guillermo del Toro's Frankenstein. What he did with Pinocchio, to

me, was like take this classic story and reinvent it in a way that only he could, rewarded with the Academy Award for Best Animated

Feature for that. And I think that fans of Guillermo, fans of horror, fans of Frankenstein and monsters, the classic monsters are going

to be blown away. Jacob Elordi plays the monster Frankenstein. Oscar Isaac is playing Dr. Frankenstein in this, playing him the way

that you can imagine like a rock star scientist would have been played. It's just -- it's really incredible. We got to look at the first cut of

it a couple of days ago, and it's a lot of really great stuff.

John Christopher Hodulik

UBS Investment Bank, Research Division

It's going to be an exciting year.

Theodore A. Sarandos

Co-CEO, President & Director

It's going to be a big year.

John Christopher Hodulik

UBS Investment Bank, Research Division

Thanks for being here. Appreciate it.

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Theodore A. Sarandos

Co-CEO, President & Director

Thank you.

NETFLIX, INC. COMPANY CONFERENCE PRESENTATION DEC 10, 2024

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