Netflix and SVOD Unit Economics

What’s your personal view on where ARPUs could get to, in the US, for example?

I actually don’t think of it as a Netflix or a Disney Plus question. I think of it as an ecosystem question. You look at cable where, basically, up until six or seven years ago, people were spending $100 plus, in the US, on cable. Then several hundred dollars on entertainment, writ large. I think there’s an argument to be made that television has got better. The quality of televisions, the quality of sound systems, etc. have got better. I personally think, and I speak as someone who has young kids, the value of going to the movie theatres is going down and the value of cable is going down. You think about all this spending on movies, other than tentpole movies like Star Wars and the Marvel movies – I used to go to the movies once a week. Now I maybe go once every other month.

If you look at that, then the question really should be, as those other forms of spending decrease, I don’t believe that entertainment is going to become less valuable, writ large, as a sector. Then it’s just how much of that gets redistributed into SVOD’s versus other things.

How do you look at customer lifetime value for Netflix? There is an analogy from the AT&T acquisition, where I think value per subscriber netted out at $1000 but the world has changed now. We have HBO, Disney Plus, all competing online. How do you look at that lifetime value discussion?

Let’s take Disney Plus, for example. Let’s say that all of their movies are going to come through. I may stop going to see Marvel and Disney movies in the theatre and they have a movie a month. Then I look and I say, jeeze, for me to take my family, I’m going to spend $50 to go and see Star Wars. Now I’m just going to wait, so that month that Star Wars comes out, that’s worth at least $20 or $30 to me. Maybe it’s not quite the same experience as going to the movies. If that’s a once a month thing, as a consumer to Disney Plus, I could easily see paying $20 or $30.

To answer your question, I think the people that have valuable content propositions, the Narcos, The Crown, Stranger Things, The Witcher, The Irishman, the Disney Plus things, I think there is price inelasticity. I don’t have any data; this is just my instinct. People are going to be willing to pay a lot of money for services that are bringing tentpole content, on a monthly basis.

The market is just big enough?

Sketched out is how many services are going to be able to do that. I bet the winners can charge $30, $40, $50 over time, but I don’t know how many winners there are. There’s probably three of them; there’s probably not 10.