Colbert’s Next Home, and Netflix Earnings Flexes and Anxieties

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2:31It is Monday, July 21st. Amid all the craziness of the Stephen Colbert cancellation and Rupert Murdoch getting sued by Donald Trump over a Jeffrey Epstein story, Netflix released its earnings on Thursday. Strong numbers yet again. Remember, Netflix doesn't release subscriber numbers anymore, but the financials all topped analyst targets and the co-CEOs, Greg Peters and Ted Sarandos. They said they were raising revenue and profit forecasts for the year. Despite all that, the Netflix stock then dropped 5 % on Friday. It's holding steady today. And why is that? Well, Netflix has enjoyed an incredible run over the past few months.

3:12It's now worth about$500 billion, far more than all the other traditional Hollywood studios combined. So while the results were good, Wall Street now expects great out of Netflix. And the dollar weakness probably boosted revenue outside North America. There's that. There's also another concern about Netflix, namely its share of viewing. The share of viewing on TVs has stopped growing in the U.S. According to Nielsen, Netflix generated 8.3 % of all TV viewing in June. That is down slightly from last year at this time. It's partly due to more competition, especially for more people watching YouTube on TVs.

3:49The other services have also kind of gotten their acts together. And maybe that's because there weren't as many breakout hits this quarter. Netflix did have more Squid Game and Adolescence has been a monster hit. The most viewed show of the first half of the year, actually. But new seasons of Stranger Things and Wednesday are coming later this year. That should juice engagement, exactly what Netflix wants right now. So today we've got Lucas Shaw from Bloomberg back. We're going to discuss the Netflix engagement report and the issues they're having. Should they be worried? What's working and not working based on new numbers?

4:22We'll also touch on a couple angles in the Colbert situation that hasn't been reported on yet. Here are Lucas's take on what's happening there. It's a combo platter today from the Ringer and Puck. I'm Matt Bellany and this is The Town.

4:37All right, we are here with Lucas Shaw from Bloomberg. Welcome back, Lucas. Hello from 30 blocks south of Ground Zero. I'm very close to the Colbert Studio. Oh, you are. Okay. We're referring to it as Ground Zero now. You mean the Ed Sullivan Theater that will likely be sold in the next year or so? I think that's part of this. They are looking at that real estate portfolio and saying, what can we offload? And they can get some money for that Ed Sullivan Theater. All right. You bring it up. So we will start with that. We're going to talk about Netflix, but first we got to get your take. The people must hear your take on the Stephen Colbert cancellation.

5:15I have offered mine. Where on the politics versus economics scale are you landing on the Colbert cancellation? Well, look, I can only go based off of what we know, right? If you just follow the facts, then I lean pretty heavy on the financial, the timing and the circumstances. There's a lot of extenuating circumstances or circumstantial evidence, shall we say, that would lead you to believe that politics play a big factor. But neither you nor I are in a position to be able to say that definitively and be irresponsible to do so. Oh, but wait a second. People on the internet are definitely in that position to say so.

5:52And many, many celebrities are in the position to say that. It is obvious that the business of late night has gotten worse and worse. Now, we can ask questions about why now, and I've heard the well-crafted explanations for why it had to be now. We've talked about it. They had producer deals with all these producers on the show that go from September to August, right? So if you're thinking about canceling the show after Colbert's deal is up in May, you have to tell those people now that their next deal is going to be September through May, not September through August. You and I have heard this, and it is a very credible, plausible explanation, which is why we're going with it.

6:35The fact that it also happened right as this deal is getting approved, the day before David Ellison is meeting with Brendan Carr, not the day before, the week that David Ellison is meeting with Brendan Carr, all of these things make it hard to accept that that is the only thing going, but it's all we got. I call it a cloud. There is a cloud of politics over this entire thing. It may not be the reason for the decision, but it's a factor. In ordinary circumstances, if you took the deal out of the equation, the need for approval, all of that, you would buy the financial decision. It's a show that the audience keeps getting smaller.

7:11It's not a huge hit on social. They're losing a bunch of money. And you would maybe even give them credit for saying, rather than squeeze this thing dry, we're just going to cut it and move on. But they have lost the benefit of the doubt in a lot of people's minds because of everything else, because they settled the Trump suit against CBS, because of all the things that they have done to get this deal across. It's very hard for people to take everything that they do at face value, whether that's fair or not. That's just how it's played out. I also think people in town are kind of in denial about what's about to happen at Paramount in general.

7:47100 percent, which is what I tried to get at in my newsletter a little bit. But there is about to be a lot like if they think there's been a lot of layoffs and cost cutting at Paramount to date, it's only going to get worse. Yeah, Colbert is only the beginning. I mean, these Star Trek shows are in jeopardy. The Taylor Sheridan shows, do they go after Lioness or one of the like lower rated Taylor Sheridan shows? He's never had a show canceled by Paramount Plus. I mean, CBS programming is going to start to look a lot like ABC and NBC, less scripted, more reality, more news filler, more celebrity stuff.

8:23I mean, are Paramount Plus and Pluto about to merge? Is The Daily Show in play? Dick Wolf, the FBI shows I'd be nervous if I were him. Amazing Race. All of these things that we associate with CBS and have just kind of continued on, the model increasingly doesn't support all that. And Cindy Holland, who's coming in to do her TV slate. She's got to find the money to make her TV slate. And I think it's going to come out of a lot of these things that we consider sacred cows at CBS. And it's only beginning for all of the uproar about the show, setting aside political or not. You asked Bill on his podcast last night, like how many of the people who are up in arms about this have been regularly watching like, right?

9:07I know I put it to Bill. I'm like, tell me right now, the last time you watch Stephen Colbert or any of these guys live in linear. Nobody does. I was never a late night viewer. But like if I have ever watched any of these shows, it has always been clips on YouTube or Instagram. Always. Yeah. And there's just not as much money in that. Yeah. The question is, can they find the model to do that? It's also like the only type of television or one of the only types of television that like Netflix has not figured out how to copy. I know. Craig's been asking like, why doesn't Netflix just have a late night show?

9:38It's a good question why it hasn't worked on Netflix. I don't think they've had the perfect match of program and platform. They've had the traditional late night type people do shows for them, like Hasan Minhaj, Letterman, John Mulaney. But those shows weren't the perfect match for the Netflix platform. They got to figure that out. Is it Colbert? Would Colbert work on Netflix? If you had to bet, what do you think is Colbert's next landing spot? Does he do anything like this again, or does he do something totally different? I think he does something totally different. And by totally different, I just mean probably a weekly show, something more in the John Oliver vein.

10:21Maybe he creates another character like Colbert Rapport, or does something with Sketch Comedy Incorporated. That's his background. I don't think he does a four or five night a week show for another platform. I just think those are dead, unless it's a podcast. where he could do a podcast five days a week or three days a week and then reverse engineer it via video to get it on some platform via video, which would be ironic if he ended up on Paramount Plus or one of these other platforms as a podcast-to-video situation. And then you guys can do some cross-promos together. We could, yeah. So, yeah.

11:00I mean, what do you think? Do you think he's going to come back? Well, not in hosting a nightly topical talk show, just because I think that that format is on fumes. I think they all look at John Oliver and say, I want that. Or some of the podcast hosts, or maybe a YouTube star. I don't think Colbert is going to do YouTube native. He's just not, that's just not him. Right. I do see him, maybe HBO or Netflix, or I don't think Amazon. I think the politics of the leadership at Amazon likely would prevent Colbert from going there. but the others, I think they're open for business. I just don't get it.

11:38I've never understood why the, oh, late night can't work on streaming, particularly can't work on Netflix. I've never understood that argument. They have like 90 million subs in America, which is similar to like the peak of cable subscription. Why can't Netflix have a Colbert show that they push in front of people's face in the evening every night? I don't understand. People don't watch Netflix that way. It's not a lean back type format. Netflix is not a lean back type format. I think Netflix is becoming a lean back type place. Okay, that's a good point. But I'm saying, meaning it's video on demand is what I'm saying.

12:10These late night shows were largely a product of you'd watch primetime, then you would watch your local news, and then you would stay on the channel and just keep watching the comedy interpretation of the news. And that's not how people watch Netflix. There's also no long-term value for any of these. And Netflix is still figuring out the only live programming that they do is sort of the big, loud event where they only have to make you come in for that once every month or two. They have struggled at directing people to something every night. And Bill Maher and John Oliver do draw an audience to HBO Max.

12:47And I know that they are churn preventers. People subscribe to HBO Max because of their favorite host being there. And Colbert does have an audience. And if Netflix were to host a show, they'd probably be people that would subscribe just for that. Do you think it's possible that Stewart would leave his show and him and Colbert would team up for something together somewhere else at like a Netflix? Love it. Maybe. I think he just pitched something called Babydoll. No, he definitely hasn't thought of that. Yeah. Babydoll could make it happen. All right. Speaking of Netflix, earnings last week, Thursday, the numbers came out.

13:20Typically very strong. They grew revenue 16%. They got a record$11 billion in revenue. Profit, their term, net income, up more than 45%,$3.1 billion in profit for Netflix. For the first half of this year, Netflix has already generated$6 billion in profit. For all of 2024, it generated$8.7 billion. So we can see where this is all going. Yet, on Friday, the Netflix stock dropped 5%. And there are these concerns about slowing growth. So what is going on at Netflix, Mr. Netflix's favorite reporter? I'm just going to ignore that you're... My slander. Yeah. The first is expectation. A lot of this was already priced in.

14:12And we're seeing it not just with Netflix, but my colleagues had a piece on how it's happening sort of across the earnings and the economy where you have pretty strong earnings reports with a lot of companies, but the stocks aren't popping. because the stock market has been on a tear for a lot of these companies for much of the year. So Netflix going into its earnings had been, its shares were up more than 40%. Over the previous year, its stock had doubled. So when you already had a company that was being valued at more than$500 billion, it beat its numbers, but they were all relatively small beats.

14:42And so the only way the stock was going to pop was if it was a big beat or they made some news that got people really excited. And so the fact that it was just like solid numbers didn't get people excited. the stock went down a little bit. I think the other factor is what you're getting at, which is it's probably too early to say people are worried about it. But their share of US TV viewing is basically flat over the last year plus. And by their own numbers, their engagement report, the global viewing was pretty much flat. And since they've added more customers, that means the amount of time that every customer spends watching is probably down a little bit.

15:18But however you look at it, the total amount of time that people are spending with Netflix has not been going up at the same time that streaming is growing. And that YouTube has been growing its audience pretty significantly, which is why they're so obsessed. At least on television. It's a company that is like just everything is running really smoothly, but you want to see, you know, stock market is looking into the future. And is this a company that has a ton of growth ahead of it? Or is it becoming one of these very profitable, but not fast growing media companies? Yeah. Yeah, I mean, one of the interesting things on the earnings call was when Stephen Cahall, the analyst, he raised the question that he raised on this show when he was a guest on whether Netflix should start poaching YouTube creators.

16:03And Ted Sarandos basically said, yes, we're interested. I mean, he couched it as we want the best talent from all over the world, wherever they originate. But it was interesting for him to say like, oh, we are interested in more YouTube talent. And I think that is a reflection on this kind of YouTube anxiety that Netflix has because they're growing and Netflix is not. Can I tell you why that framing is, I want to be nice because I like Steven, but like wrong. Please. There is no world in which Netflix can or will poach talent from YouTube. Why? Because they're not going to leave YouTube. There is a world in which Netflix can make shows with talent that also wants to be on Netflix.

16:45Sure, but you know what? People said the same thing about Shonda Rhimes. People said the same thing about Ryan Murphy. Money talks. Why wouldn't a YouTube drop their current following in order to take hundreds of millions of dollars at Netflix? It fails to understand the relationship between a lot of those big talent and YouTube. They see YouTube as the home base where they're going to be for years and years and years. And just leaving to do a show at Netflix that may or may not work is not worth it to them. Look, Mr. Beast, biggest star on YouTube. He made an Amazon show, but he didn't stop posting to YouTube.

17:19Yeah, that's the example. But not everybody is Mr. Beast. I don't know that there is anyone else out there that is going to get as much money as Amazon paid Mr. Beast to make that show. And by the way, you don't lose that YouTube audience. It's still there. You just go to Netflix for a few years and make content exclusively for them. Ryan Murphy ended up going back to Disney after he was at Netflix and he still had his franchises at Disney that he could go back to. And your audience sits there for a while on YouTube, but then you get$200,$300 million to be at Netflix. Maybe there are one or two people who will do it, but I do not think you will see some stampede of 10 or 20 top YouTubers saying, we're going to go exclusive to Netflix.

18:03That would require probably hundreds of millions of dollars. And I don't know that this is high enough on their priority list from a programming perspective to do that. The competition with YouTube, yes. But I don't know that their answer to that is going to be, we need to take the 10 biggest stars. Because the other thing to keep in mind about YouTube is YouTube is not dependent on any one talent or any few talent. It is a volume scale game. So you could take the 10 biggest stars off YouTube and it would not matter. That's true. I think Netflix is increasingly a scale game as well. They do depend on specific talents.

18:37They are, but it's a totally different type of scale. Yeah, I agree. But then you look at something like Miss Rachel and how well Miss Rachel did in the recent Netflix engagement report. I mean, the numbers are insane. One of the 10 biggest shows on Netflix, the new Cocomelon. So imagine if Miss Rachel was exclusive to Netflix. But she doesn't have to be. That's exactly my point. She doesn't have to be. But imagine the benefit to Netflix if she was exclusive to Netflix. I don't know how much it would benefit Netflix if she were exclusive to them. Because how much of it is that people are going to Netflix for Miss Rachel and how much of it is that people are already on Netflix, they want a kid's programming and they pick Miss Rachel?

19:17I don't know, man. You don't have a toddler. When the toddler starts screaming Miss Rachel, Miss Rachel, you got to turn on fucking Miss Rachel or else you're going to have hell to pay. It's an interesting argument and I don't know the answer to that. clearly Netflix will tell us what it thinks over the next year or two and whether it starts poaching YouTube talents. Yeah, YouTube is top of mind for all these companies. I just don't know that that exact strategy is how it's going to play out.

19:48Evening. Buyers remorse. Buy a new car? I'll be moving in. Let's get started. Sorry, I think there's been a mistake. I bought it from Carvana. You what? Yeah, great price. I even have seven days to love it or return it. So there's no... No, no buyer's remorse. More like buyer's rejoice. I guess I'll let myself out. Congratulations. I mean it. Buyer's rejoice. Buy your car today on Carvana. Limitations and exclusions may apply. See our seven-day return policy at Carvana.com. This episode is brought to you by the Active Cash credit card from Wells Fargo. That's a mouthful, but that's because it packs a lot in.

20:24earn unlimited 2 % cash rewards on purchases with it big or small. So whether it's buying tickets to the game and grabbing a coffee, it earns unlimited 2 % cash rewards on purchases. Say it with me. The active cash credit card from Wells Fargo. Be a two percenter. Learn more at wellsfargo.com forward slash active cash. Terms apply. Other than the Miss Rachel, was there anything else in the Netflix engagement report that really stood out to you? On the kids front, I think the power of Peppa Pig. Yeah, it's the number one show if you add together all the seasons for kids. Yeah, I mean, it's kind of insane.

21:00And that's another one where like the kids audience, I think, is so undervalued by the mainstream media, people like you and me, because we don't watch that stuff ourselves. And it's just such a driver of value for these services. It's kind of amazing. the top netflix movie was back in action the cameron diaz jamie fox movie not a surprise there to me those huge talent fees well worth it yeah exactly and the fact that they can put cameron diaz on a tile and people haven't seen her in a while the top non-netflix movie was secret life of pets 75 million views no surprise there the venom the last dance was up there which is pretty surprising given how much people hated that movie, but did well on Netflix.

21:51The top docu-series, not surprising. American Murder, Gabby Petito, 56 million views. Were you surprised by how big the gap was between adolescence and everything else? A little bit. Adolescence in the streaming report was 145 million views. And that is at least double the viewership of every other show except Squid Game Season 2. And three. So everybody on Netflix has watched Adolescence. It's kind of crazy. I have a confession to make. I still haven't seen it. No, I haven't either. So I guess everybody except us. Yeah, we really got to get on it. Are you going to do a box office over under, even though it doesn't count as box office, for Happy Gilmore 2?

22:37Oh, we should. That's a good one. Yeah. I do think Happy Gilmore 2 would do well in theaters if Universal made that movie and put it in theaters. They chose to let Netflix make it. Probably had something to do with Sandler's deal at Netflix and him saying, I will do this if it's at Netflix. But yeah, that's a big whiff for theatrical. That movie would have done well, and it's probably going to be huge on Netflix. I want to talk a little bit about something else they talked about on the call, which was AI. There is an Argentinian post-apocalyptic thriller called The Eternot. I think I mispronounced that.

23:12And they acknowledged that they used AI tools developed by the Netflix in-house, what they call the production innovation shop. That is a very intentionally vague term. And they used AI on this. And it is not a SAG-AFTRA production. It is a foreign production. And to me, that just highlights the kind of farce of what the guilds are doing here on AI. They can prevent the American-based productions from using AI in certain situations. They can always make sure that everyone's getting paid and getting credited. But Netflix and Amazon and the others, these are now global platforms. They are hosting content from all over the world.

24:00And the stuff that's made outside of the US, not under the guilds, is going to have AI on it. It was notable in that, other than the Amazon House of David show, this is probably the foremost example of a major Hollywood studio company streaming service kind of owning to use of AI. Yeah, everyone's using it. But they're not talking about it. Ted Sarandos in particular has been very consistent in his messaging saying that it's not all about saving money. We think this will make our stuff better. Whereas you've had some people really pushing about how it's cost savings. They're trying to make it not just about cost savings.

24:38At the same time, they said that what they did in this program wouldn't have been possible without it. Yeah. I think that we've seen a subtle shift in the messaging from the executive class in Hollywood. I think that the messaging now is about the ability to save money and to, quote, do more on these movies if we are able to save money. I mean, Kevin Feige at Marvel has been talking about that in his press rounds and Ted Sarandos. And you're hearing it more and more as, you know, this is an innovation tool. This is coming to help all of our creatives. And we are able to be more efficient. And that's a subtle shift from, I think, the head in the sand aspect of the public discourse for a while on AI.