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[00:00:23] Marcus Johnson: Hey gang, it's Monday, November 2nd. Ross, Danny, and listeners, welcome to Behind the Numbers: an EMARKETER Podcast made possible by AI Digital. I'm Marcus, and joining me for today's conversation we have two folks. One of them lives up in Westchester, New York, senior digital media analyst, Ross Benes.

[00:00:38] Ross Benes: Hey Marcus.

[00:00:39] Marcus Johnson: Hey [00:00:40] fella. And calling Brooklyn home?

[00:00:42] Daniel Konstantinovic: Queens now.

[00:00:43] Marcus Johnson: No, I knew it was Queens. I changed it so many times. Senior briefings editor, Daniel Konstantinovic.

[00:00:52] Daniel Konstantinovic: Hey, how's it going?

[00:00:53] Marcus Johnson: Hello. Did you have to move?

[00:00:55] Daniel Konstantinovic: It was two years ago, I gotta say.

[00:00:57] Marcus Johnson: It was a long time ago. Hmm. [00:01:00] Pull it together, Johnson. Today's fact-

[00:01:06] Marcus Johnson: Who has won the most Super Bowls? Pop quiz.

[00:01:09] Daniel Konstantinovic: I'm never gonna get this one. What have

[00:01:12] Marcus Johnson: you got, Ross?

[00:01:13] Ross Benes: I'm tapping out. Is it the Patriots?

[00:01:14] Marcus Johnson: Patriots tied with, with six.

[00:01:17] Ross Benes: The Packers?

[00:01:18] Marcus Johnson: No.

[00:01:18] Ross Benes: Oh.

[00:01:19] Marcus Johnson: Think [00:01:20] '70s.

[00:01:21] Ross Benes: Oh, the Steelers?

[00:01:22] Marcus Johnson: Yeah.

[00:01:22] Ross Benes: Yeah.

[00:01:23] Marcus Johnson: Bang. Well played. Uh, yeah, both have six. So the Super Bowl's only been going for 60 years, so b- 12 between them, they, um, account for 20% of all Super Bowl titles.

[00:01:35] Marcus Johnson: Uh, even though the Steelers haven't won in nearly 20 years, they [00:01:40] still have the first most championships. Second place, San Francisco, or third, however you look at it, but next most, San Francisco 49ers and Dallas Cowboys. They have five each, and they haven't won, both of them haven't won in over 30 years.

[00:01:54] Marcus Johnson: But they still each have five. So those four teams account for about one-third [00:02:00] of all Super Bowl titles. Just 20 teams, 20 of the NFL's 32 teams, have won the Super Bowl. Eight teams have reached the championship game without winning it. Four teams never appeared. Can we guess those between you?

[00:02:17] Ross Benes: The Texans.

[00:02:18] Ross Benes: Yep. Jaguars.

[00:02:19] Marcus Johnson: [00:02:20] Yep.

[00:02:20] Ross Benes: Have the Panthers gone to the Super Bowl?

[00:02:21] Marcus Johnson: Yes. Went there

[00:02:22] Ross Benes: last- They, they went the right, the right, right away, didn't they? Yeah. Mm-hmm. Okay. So those... That's two of the four.

[00:02:26] Marcus Johnson: Mm-hmm. Think past those.

[00:02:27] Ross Benes: Well, the, well, the Brown- Yeah ... the Browns technically. Browns. But, uh, yeah, even though the... Yeah, 'cause the Browns are really the Ravens.

[00:02:33] Ross Benes: Yeah. But the, the new Browns. Yeah. Yeah. So that's three.

[00:02:36] Marcus Johnson: And close by?

[00:02:37] Daniel Konstantinovic: Giants?

[00:02:38] Marcus Johnson: No, close by to the Browns. [00:02:40]

[00:02:40] Daniel Konstantinovic: Oh.

[00:02:40] Marcus Johnson: You clearly

[00:02:40] Ross Benes: went- Well, well, well, the, the Bengals have been to the Super Bowl.

[00:02:43] Marcus Johnson: Yeah. Uh, they have. Not them.

[00:02:45] Ross Benes: Oh, the l- the, the Detroit Lions.

[00:02:47] Daniel Konstantinovic: Yeah.

[00:02:48] Marcus Johnson: Yeah. Detroit Lions. Well played.

[00:02:49] Daniel Konstantinovic: Well, uh, I feel like if I knew anything about, uh, football, it would really help me with, uh-

[00:02:53] Daniel Konstantinovic: party topic conversations.

[00:02:56] Ross Benes: Only if Marcus is at the party.

[00:02:59] Marcus Johnson: [00:03:00] Uh, at which point you'll probably be trying to avoid all conversation with me 'cause you realize you're gonna speak- Yeah, I

[00:03:03] Daniel Konstantinovic: gotta, I gotta go, actually. This is

[00:03:04] Marcus Johnson: fun ... another fact of the day to me. Can't with this guy. Uh, today's real topic Danny is probably pretty glad about, is, uh, not football stuff, but the big three questions surrounding Netflix

[00:03:19] Marcus Johnson: All right, [00:03:20] set the table. Q3, Netflix made a little under $13 billion in Q3, growing 12%. That's a little slower than the last Q3's 17% growth. It's the slowest quarterly growth in nearly three years. In the US, it's about 44% of Netflix's money, has been for years. That grew, revenue there grew 11%, also slower than, uh, [00:03:40] last Q3's 17% in the region.

[00:03:42] Marcus Johnson: Gents, we're here to talk about the big questions for Netflix, uh, currently. What's on their mind, what's on our minds regarding them. Ross?

[00:03:49] Ross Benes: Well, there are a bunch of executives that have been fired over the last few weeks.

[00:03:54] Marcus Johnson: Mm-hmm.

[00:03:55] Ross Benes: And I'd, I'd like to learn more about what's actually changing due to those [00:04:00] firings and, and why should we consider those firings to be anything more than sacrificial lambs?

[00:04:05] Marcus Johnson: Top of my list too, will the new content chief turn its programming fortunes around? So they parted ways with content chief Bela Bajaria, think that's how you pronounce her name. Uh, Peter Rice, former top Disney and 21st Century Fox entertainment exec, uh, will replace [00:04:20] her. Film chief Dan Lind also lost his position.

[00:04:23] Marcus Johnson: A bunch of other people as well. They cut their workforce by about 6% or 1,000 positions. The biggest round of layoffs since 2022. That's when it reported its first quarterly loss of subscribers in over a decade, so that's why people have been taking note of all of these, um, firings, some more than others, the big ones, um, that [00:04:40] Ross was referencing.

[00:04:41] Marcus Johnson: Danny, this is also top of your list.

[00:04:42] Daniel Konstantinovic: I think it's definitely interesting and worth noting that most of these top level firings were content executives. You know, the head of film, the head of content generally. Uh, I wonder what that means about how Netflix is reexamining its strategy. If these people were [00:05:00] largely in charge of something like original content, you know, original series and films, now that they're gone, what is Netflix going...

[00:05:09] Daniel Konstantinovic: D- does that signal that Netflix is going to move into kind of a different direction? Less emphasis on original shows and films, and if so, focus on what?

[00:05:17] Marcus Johnson: Yeah, quest- question here is, is Ms. Bajaria the [00:05:20] problem? Because during her tenure- Netflix released the blockbuster series, best series, um, in, in Netflix's history, Squid Game.

[00:05:27] Marcus Johnson: Wednesday as well, she helped release. She helped push the company into live events, uh, in sports like NFL, uh, football. And The Economist was saying, uh, that one of the problems here is Netflix's co-CEO Ted Sarandos still [00:05:40] holds overall responsibility for the company's content strategy. So analytics firm Lightshed Partners was asking why fire, fire Bella and not Ted?

[00:05:48] Marcus Johnson: Ross, what do you think is go- going on here?

[00:05:50] Ross Benes: Well, firing Ted would be a lot more complicated. You know, his ties and history at the company are, are way back, so th- that would even signal [00:06:00] a, a worsening confidence. But it, it does seem like when you look at the layoffs, whether it's the executives or just the number of people cut, largely focused on content, it makes you wonder, like, is content really the, the main issue?

[00:06:13] Ross Benes: Are we talking more about a business model issue here? Because how much can content really do when you, when you become [00:06:20] Nearly tapped out in subscribers in, especially in North America, and that's been, like, the problem market lately. So, like, how, how can content alone turn that around without some sort of alteration to the business itself, which would be a bigger picture issue than just, like, we're gonna change the w- mix-up of content that we have?

[00:06:39] Marcus Johnson: They're also not the [00:06:40] only ones firing people. Joe Flint and Jessica Toon of The Wall Street Journal are pointing out Netflix isn't alone among the tech and enter- entertainment companies making cuts. Disney and Amazon have both, both significantly reduced headcount in the past several months. Danny, what's one of, uh, your biggest questions for Netflix at the moment?

[00:06:54] Daniel Konstantinovic: I've been thinking a lot about what went wrong with the content strategy to get us here. Netflix, there's [00:07:00] been a lot of reporting, and including numbers from Netflix itself, about how viewers are spending far less time on the app. Uh, just the other day, Bloomberg reported that not only are viewers spending less time, but they're opening the app much less.

[00:07:12] Daniel Konstantinovic: Uh, I'm, I'm wondering were there changes over time at Netflix that led to this dynamic? Is [00:07:20] it just increasing competition from, you know, social media video, uh, which is just generally easier to pull up and have immediately, uh, or is it some combination of both? You know, I can't exactly remember wh- who I saw this from, but I saw, uh, someone positing recently that, you know, Netflix's push into [00:07:40] things like podcasting, vertical video, these formats that have, uh, been big successes on YouTube, has, uh, not worked for Netflix the way that premium content on YouTube has worked for that platform.

[00:07:52] Daniel Konstantinovic: Where Netflix adding these things as a, "premium" streaming environment actually makes it seem cheaper, uh, [00:08:00] in, in terms of quality, uh, or, like, less, uh, premium than YouTube getting, uh, content that is a very high production value, whether it's user generated or not.

[00:08:11] Marcus Johnson: It's interesting 'cause they're subscribing, but they're just spending less time watching things.

[00:08:15] Marcus Johnson: And to that stat as well, Danny, that you mentioned, I hadn't seen that one, that they're opening the app less as well, [00:08:20] um, their s- their churn, so Netflix's subscriber churn, that's the rate at which customers cancel their subscriptions, um, is the lowest in the industry. It's about 2%, uh, it was in September according to Antenna.

[00:08:30] Marcus Johnson: Uh, but Mr. Sarandos was complaining internally for a while that Americans are spending less time watching Netflix. I was looking at some of the numbers for time spent since [00:08:40] Netflix pulled out of their bid for Warner Brothers Discovery at the start of the year. Its share of TV time in America has fallen from 8.8% to 7.7 according to Nielsen's gauge.

[00:08:48] Marcus Johnson: Over that same time span, YouTube- Has grown its share from 12.5 to 15.8. So Netflix down a point, YouTube up three. The Economist article pointing out that [00:09:00] according to Nielsen, for the past four years, people have been streaming YouTube on their TVs more than they have done Netflix. Ross, what, what do you think is happening here?

[00:09:09] Marcus Johnson: Why are people so spooked with regards to subscribers watching Netflix less?

[00:09:14] Ross Benes: Well, they've been predicated on, like, continual growth and continual growth like any other tech [00:09:20] company and, and there's just the expectation that it would keep happening. And so when it flattens, there, there's kind of a, a panic.

[00:09:27] Ross Benes: But it's still number one in subscription streaming. It's still the most watched outside of YouTube by far. YouTube is kind of, like, putting it all over everyone right now, whether it's linear TV or [00:09:40] streaming. When the Nielsen's first started doing the gauge a few years ago, Netflix and YouTube were pretty similar and, and now YouTube has pulled ahead, but the...

[00:09:47] Ross Benes: It's, it's interesting that a company that's already at the top keeps putting itself just even further ahead, and I, I think it's just YouTube has something that an- no one else can really replicate with that User generated content [00:10:00] and viewer habitual pattern o- of going to the app that, uh, they don't have to make calls on anything.

[00:10:06] Ross Benes: Netflix is firing all these people who, uh, who, who put content strategy into place. YouTube doesn't really have to have, like, a coherent content strategy. It comes to them no matter what they do, and they just have to put it in front of people. It's already there. I [00:10:20] don't know how any, like, trad- traditional TV company or even streaming company, um, can replicate that without, to your point earlier, worsening the experience.

[00:10:28] Ross Benes: You, you could look at watch time alone and, and say YouTube's at the top. There, there's a lot of issues that go with YouTube that the others don't have. You're not gonna suddenly find a, you know, like a beheading video on Netflix or [00:10:40] on, like, linear TV like you do on YouTube.

[00:10:42] Marcus Johnson: Yeah. Brand safety-wise, that's a great point.

[00:10:44] Daniel Konstantinovic: I think, um, one point to make is the panic. You know, this ... Something that's notable- Yeah ... is this is the first big layoff that Netflix has had since, I think, 2022 when it, uh, lost subscribers for the first time, and suddenly dramatically pivoted [00:11:00] to developing an advertising business. You know, earlier we were also talking about does this mean some big business, or could there be some big business model change down the line for Netflix?

[00:11:10] Daniel Konstantinovic: Maybe this, you know, sustained period of engagement panic could lead to something like that. Although exactly what, I'm not sure.

[00:11:17] Marcus Johnson: Yeah, I mean, to what you guys are saying, I just wonder if [00:11:20] it is ... Yeah, maybe it is unfair to be comparing them to, to YouTube, 'cause Ross, to what you were saying, if you add up Disney and Prime Video, the time spent, um, Americans' time spent with those two platforms on TV is basically the same as Netflix.

[00:11:32] Marcus Johnson: Uh, and so Netflix is doing, is doing well in that respect. Also, they are making money from streaming. Maria Rua Agueta, uh, of [00:11:40] Omdia, another research company, was saying people watch YouTube, but they pay for Netflix. Uh, for now, YouTube's subscription business is still relatively small. Wall Street Journal, they were posing this question, its engagement slump has resurfaced an age-old debate of the company.

[00:11:54] Marcus Johnson: Were subscribers not watching more because of programming from LA or because of the recommendation algorithm [00:12:00] overseen by engineers in Northern California? So is there stuff there but people just aren't seeing it, it's not being surfaced? Um, as of the end of September, Netflix hadn't added net subscribers any month this year in the US, according to analytics firm Antenna.

[00:12:14] Marcus Johnson: They track US consumer purchases of subscriptions through sources like credit card bills, but doesn't [00:12:20] include those bought through wholesale bundles. Netflix hasn't disclosed subscriber numbers since early 2025. They disputed Antenna's data. Uh, Netflix- Has tried a number of ways to get subscribers to spend more time on the platform, adding live channels, bundling with other streaming services, adding video podcasts, YouTube creator shows, live sports, uh, vertical [00:12:40] video.

[00:12:40] Marcus Johnson: Um, one of the questions I had, Danny, was which content type is most likely to help it gain and retain subscribers? What do you think in terms of the content that might help it the most going forward?

[00:12:50] Daniel Konstantinovic: It's hard to say. I mean, sports has been such a big driver of growth at other streaming services that I wouldn't be surprised if Netflix really [00:13:00] wants to push harder into there, and they are.

[00:13:02] Daniel Konstantinovic: You know, at Upfront, sports was a really big topic. I believe they added some NFL games this year. They've talked a lot about how their existing NFL slate has been some of the most streamed games in history. Um, but something that I think complicates that, if Netflix really wants to [00:13:20] throw its hat in the ring for more sports rights, is that, well, first of all, you know, growth is slowing and revenue growth is slowing, and that could spook investors if suddenly Netflix takes a multi-billion dollar gamble on some sports rights.

[00:13:35] Daniel Konstantinovic: Uh, but they've also shown with this Warner Brothers Discovery acquisition that there's only so much money [00:13:40] they're willing to throw around. And, uh- Mm ... if they said no to that, are they gonna commit to, say, a 10-year NFL deal, uh, like what YouTube had a couple of years ago? Mm-hmm. More complications there is just the slowing viewer growth.

[00:13:55] Daniel Konstantinovic: You know, is the NFL going to necessarily wanna shop more [00:14:00] games or a season or what have you to Netflix when they know that numbers are going down, if they could go to YouTube or Disney or Amazon where that dynamic isn't at play?

[00:14:10] Marcus Johnson: Yeah, I wonder, that's interesting you talked about not buying Warner Brothers Discovery and what would they...

[00:14:16] Marcus Johnson: I mean, yeah, I'm curious now, would they... They didn't spend tens of billions [00:14:20] there. Maybe it does make more sense to spent, to spend tens of billions on, on sports. Our newsletter analyst, Marisa Jones, writing Netflix said Q4 will be its biggest quarterly live slate to date. So I wonder if Q4 can give them the boost that investors are looking for, uh, including the NFL's inaugural Thanksgiving Eve game, two NFL games on [00:14:40] Christmas Day, and then the boxing match as well between Tyson Fury and Anthony Joshua.

[00:14:43] Marcus Johnson: She also points out that advertisers are often willing to pay a premium for events that draw large audiences. Live sports ads can cost roughly twice as much as general entertainment TV ads according to February Skybeam data. So maybe sports also, I thought was an interesting point, maybe [00:15:00] changing the release cadence of certain shows could improve engagement.

[00:15:02] Marcus Johnson: Netflix typically drops everything at once, and they've been resistant to change that according to the CEO, co-CEO Te- Mr. Sarandos. They said that the members prefer to get everything at once, as they probably would, but maybe drip-feeding that content could help with, with engagement.

[00:15:17] Daniel Konstantinovic: You know, it's probably also worth mentioning that [00:15:20] Netflix's most popular shows concluded in the last year.

[00:15:25] Daniel Konstantinovic: Yeah. Stranger Things in particular. You know, that's over and done, and they really stretched out the ending of that show. You could probably attribute some amount of the, uh, engagement troubles to something like that.

[00:15:35] Marcus Johnson: Yeah, looking for the new hits. Ross, what else you got on your list?

[00:15:39] Ross Benes: [00:15:40] Advertising. Uh, you know, that's supposed to be the next big thing for them.

[00:15:43] Ross Benes: Right now it's not making as much money as fast as investors would hope. They had to reduce their forecast for their ad revenue by 300 million, and that's a little concerning because after several years already they're, they're behind [00:16:00] many of their rivals. So what do you do to jumpstart the ad business so that it isn't a minuscule part of the company's- Total revenues, but becomes a real stream that may not rival subscriptions, but really complement it in a significant way.

[00:16:17] Ross Benes: And to that degree, it, it hasn't, um, delivered on its [00:16:20] potential yet.

[00:16:20] Marcus Johnson: Yeah, revising their outlook down, they said expected to roll out some of their ad products, uh, for advertisers, but rolling them out slower than, than usual. That 300 million gap means that instead of 3 billion, it's looking at 2.7. Um, they did say their subscription revenue growth has outperformed the expectations.

[00:16:38] Marcus Johnson: Our numbers were done in [00:16:40] August, so before this came out. We were still pretty optimistic, especially next year. We had about two and a half billion this year for Netflix ad revenues in the US. Uh, 3.7 next year, getting closer to five in 2028, but to Ross's point, that's just not fast enough.

[00:16:54] Ross Benes: We'll probably revise those numbers downward.

[00:16:56] Ross Benes: Yeah. And, and we revised them downward- Yeah ... the last time they disclosed any numbers. When [00:17:00] they- Oh, okay ... when they disclosed that they made 1.5, like when they finally put a number out.

[00:17:03] Marcus Johnson: Yeah.

[00:17:04] Ross Benes: So could be our second forecast downward revision within a 24-month period.

[00:17:10] Marcus Johnson: Netflix stock is down more than 40% over the past year, so not good.

[00:17:15] Marcus Johnson: People expecting more from the company. Let's, uh, put together our top three big questions for Netflix. Gents, [00:17:20] uh, Danny, I'll start with you. What do you want to put on the list?

[00:17:21] Daniel Konstantinovic: What went wrong? Where did the content strategy go wrong that led to this decrease in engagement?

[00:17:27] Marcus Johnson: Very good. Uh, Ross?

[00:17:28] Ross Benes: How do you jumpstart the ad business?

[00:17:30] Marcus Johnson: Let's put sports up there. What can they do with sports to help maybe take a little pressure off of, uh, coming up with the next big hit in terms of original shows? Uh, there are our top three [00:17:40] for you today. Um, that's all we've got time for for today's episode. Thank you so much to my guests for helping me put together the top three list for Netflix.

[00:17:45] Marcus Johnson: Thank you to Ross-

[00:17:46] Daniel Konstantinovic: Thanks, Marcus ...

[00:17:47] Marcus Johnson: and Danny.

[00:17:48] Daniel Konstantinovic: Yeah, thanks. Always a pleasure.

[00:17:49] Marcus Johnson: And to Lance and the production crew, and thanks to everyone for listening to Behind the Numbers: an EMARKETER Podcast made possible by AI Digital. Suzy will have the Reimagining Retail show for you on Wednesday. On Thursday, Behind the Numbers will be back, where we'll be speaking with [00:18:00] GIPHY about how the way we use GIFs is changing.

[00:18:03] Marcus Johnson: And on Friday, we'll figure out the big three questions for OpenAI.