01:08:20 · Ed Elson
Average viewing time per member on Netflix has fallen 26% in the past three three years. That's gonna keep going down. And I think it's really, really tough considering that Netflix stock is already down 44% in the past year. We know that they're getting killed by YouTube in terms of TV viewing time. And I think this really begs a very important question for Netflix, which is what are you going to do about this? What is your plan? Because you're living in a very, very different world from what the world was five years ago. You you used to be competing with HBO Max. You're competing with Meta, TikTok, YouTube. This is a very, very different media ecosystem. And I... I'm not totally sure what the answer is. I I have been noodling on some ideas. But, you know, if you're on the Netflix board and you see this headline, what do you think, and what do you do?
01:09:14 · Scott Galloway
[01:09:14] S0: Netflix faces an existential crisis of being lumped into media companies that are struggling, like Disney that pays... That gets... Commenced two times sales in the marketplace versus it's at five now, and it used to be at eight or 10 because it was considered a tech company. They have to find either acquire... You know, I initially thought, why wouldn't they merge with NBCUniversal? They can go into Parks. And I thought, don't wanna be in the media business. They wanna be seen as a tech company with a media platform. I think it's gotta be something around trying to, as you put it, start to own or get into the clip economy, and that a short form video that plays well to a phone. You know, my idea was open source kind of TikTok with their 99% long tail content. But they're they're in a difficult spot. I think that they're basically saying we need better content, that we haven't had our k pop demon hunters. I actually think the content's really strong. I'm I'm watching Yusavina. Think it's fantastic. They're saying... When they when they fired Bela Bajaria, they're saying we have the wrong cook, and no one's eating at a buffet. And my knowledge is I wonder if everyone's gone vegan, and that is just fewer and fewer people are willing to sit down. I won't watch any... I won't invest an hour in anything that doesn't have 90 plus percent on Rotten Tomatoes. I mean, the the bar is just becoming so high for what you're actually willing to spend that time on. Also, and this is just anecdotal, but I think it does show up in the earnings of Meta. I find that the best use of AI to date, that people aren't really talking about is one that's invisible behind the curtain, and that is I believe Instagram Reels literally deploys AI to turn your brain inside out. It's as if it knows what I want before I want it, and I'm just... I can't get over. Like, I felt that way five or seven years ago the first time I was on TikTok. I'm like, how did it figure out I like Great Danes? Like, how did it how did it find some weird economist in South Africa talking about income inequality that I would be interested in? Like, how did it pick up on this? I believe the algorithm... Everyone said, oh, TikTok, it's about the algo. Right? I believe the in... The algorithm now at Instagram, courtesy of of the CapEx and AI, is dangerously addictive.
01:11:36 · Scott Galloway
I think it is I think it is so good right now. And when they apply that to content that competes against YouTube, wow. I just... I'm I'm really curious to see how these wars play out. But Netflix, I was actually looking at Netflix as a buy because I think the management team is so strong and a built in user base, but they don't wanna consolidate with another media company because it just cements them as having the same problems as everybody else. They have to serve up a different type of food here. They have to get into short form that is really mobile friendly. Because the other thing that's just hard to ignore is that things are going really well in the sense that the the the flow of capital has been pretty much one way, and that is it's been from a bigger screen to a smaller screen to the smaller screen. Right? In general, I know movies will pass $10,000,000,000 for the first time. Fine. It's a dead cat bounce. Movies is a shitty business. Television, still a huge business. Maybe not growing, flat, fine, whatever. Any great content on a phone, champagne and cocaine. Right? What's interesting is the biggest screen is actually doing really well right now, and that is the screen of IRL. Right? Going out, concerts, meeting people in real life, that's actually picking up, which is a really encouraging sign. But I just... This ecosystem, I think that I think that... I'm summarizing, but I think Meta Meta doesn't even look at Netflix. Meta's gonna go after YouTube. And in general, just what this is showing is that our brains, we are evolving a new species of people who just don't have the attention for... To justify, to create the consumption, to justify the cap or the amount of money that's gone into content. We were saying this two or three years ago. Like, how can they sustain this investment in content and original content? And the answer is they can't. So I think it's only a matter of time before Netflix, one, announces, you know, innovation, acquisitions, developments of new things that, give people a different type of food. Also, I think what's coming, they're gonna announce they're gonna reduce their content budget. They just can't. They're they're in the arms race, and they've they've probably gone out too far. $20,000,000,000? Anyways, I don't...
01:13:55 · Scott Galloway
So the answer is I don't know what they do other than trying to get into short form content and start to cut the content budget.
01:14:03 · Ed Elson
[01:14:03] S4: You said something which I think is really interesting where it's just like Netflix has always wanted to be seen as a tech company, and I think they have been successful in presenting themselves that way up until lately, where it's become clear that actually, no, you're basically, like, very similar to NBCUniversal, very similar to Warner Brothers Discovery, Disney. You're not really a tech company. And I think what this comes down to, they are at this very important fork in the road, which is like, what actually are you? Like, what... Like, are you are you a media company, or are you a tech company? And I think they're struggling because I don't think they know what they are. I don't think they've figured that out. I think that they're sort of dabbling with this idea of let's get into short form. Let's get into having clips and being more of a sort of a... An aggregator of existing generated content, something similar to a YouTube. But then also they're saying, no. We're gonna also spend $20,000,000,000 on on production, and we're gonna have high quality premium content. We're gonna become the sort of the luxury product of streaming. But then also there's... They... They're doing the ads as well, which was a new introduction a couple years ago. So it's it's almost like they haven't figured out what it is that they actually are, and it makes me think of Aswath Damodaran who's like, you know, you're dealing with a bit of an identity crisis as a company right now. And I think for me, what do they have to do? They have to decide what they are. Because currently, Wall Street is not buying this. This idea that, oh, we're both at the same time. We're kind of interested in TVs, but also we're interested in the phones. We're interested in everything altogether. That's not working from from both a cosmetic perspective in terms of the perception, but also from a business business perspective. So in my view, it's like you need to decide. I'm... Honestly don't think that the tech company angle is going to work. I think it's gonna kinda look like old guy wants to be young. Like, oh, we're into the streaming. We're like YouTube. I I I think that that ship has sailed, and it was a mistake. They should have kept up like YouTube.
01:16:12 · Ed Elson, Scott Galloway
They should have invested heavily, but I think they should have done that two or three years ago, which is what we were suggesting two or three years ago. But I think if they try to enter that game now, it's gonna be way too expensive, way too much competition, and it's gonna be... The the the... They're kind of gonna look like the meme, like, how do you do fellow kids? And it's and it's not gonna really work. So I'm starting to think maybe they just need to go all out media company, brand themselves as luxury premium. Maybe that boosts the multiple. Maybe they can charge higher prices. We have the greatest content in the world. It's a shittier business for sure, but it's something that I think that they could pull off. But, again, there is an identity crisis for Netflix, and they have to decide who actually are we. Do you agree? [01:17:00] S0: They can never be a niche premium provider like HBO. They have to be mass. But, yeah, I I I was looking at Netflix as a buy. I'm now thinking there's more pain there, because I think it's gonna be difficult to it's gonna be difficult to do any of this as quickly as the market wants. [01:17:19] S4: They need to figure out the story. If they figure out their story, everyone's gonna be ready to to buy, but they're they're, like, they're in purgatory right now. [01:17:27] S0: Yep. Agreed.