Chit Chat Stocks - Netflix, Disney, And Investing In Media In 2026, With Alex Morris (NFLX, DIS)

Episode Date: August 12, 2026

On this episode of Chit Chat Stocks, Brett and Ryan speak with Alex Morris from TSOH Investing Research on the state of the media sector. We discuss: (00:00) Introduction (02:09) Major changes in the media sector over recent years (08:12) Disney's current position (12:51) The challenges and opportunities in sports (22:40) Impacts of social media platforms on media consumption (34:38) The influence of platforms like YouTube, TikTok, and Reels (44:24) Netflix's content strategy, gaming, and future directions (47:37) Netflix stock performance and valuation concerns (55:41) Regulatory and competitive landscape in media mergers TSOH Investing Research: ⁠https://thescienceofhitting.com/⁠ ***************************************************** Subscribe to our newsletter, Emerging Moats: ⁠emergingmoats.com⁠  ********************************************************************* Chit Chat Stocks is presented by Interactive Brokers. Get professional pricing, global access, and premier technology with the best brokerage for investors today:  ⁠https://www.interactivebrokers.com/⁠  Interactive Brokers is a member of SIPC.  ********************************************************************* Fiscal.ai is building the future of financial data. With custom charts, AI-generated research reports, and endless analytical tools, you can get up to speed on any stock around the globe. All for a reasonable price.  Use our LINK and get 15% off any premium plan: ⁠⁠https://fiscal.ai/chitchat⁠  ********************************************************************* Disclosure: Chit Chat Stocks hosts and guests are not financial advisors, and nothing they say on this show is formal advice or a recommendation. Learn more about your ad choices. Visit megaphone.fm/adchoices

For the past three years, Interactive Brokers' individual clients averaged 24.3% annually, beating the S&P 500. Lower costs and access to 170-plus global markets matter. Visit ibkr.com slash performance. Welcome to Chit Chat Stocks. On this show, hosts Ryan Henderson and Brett Schaefer analyze businesses and riff on the world of investing. As a quick reminder, Chitchat Stocks is a CCM Media Group podcast.

Anything discussed on Chitchat Stocks by Ryan, Brett, or any other podcast guest is not formal advice or recommendation. Now, please enjoy this episode. Welcome into the Chitchat Stocks podcast, a podcast to help you find your next great investment. My name is Brett Schaefer, and I'm joined by my co-host Ryan Henderson. And today we bring back on recurring guest, Alex Morris from the TSOH Investing Research Service. We are planning to discuss one of Alex's specialties in investing research that he covers a lot over on the website and newsletter. It is the media sector. We're going to be talking about, in no particular order, Disney's potential from here, Netflix, competition from social media in short form,

as well as some listener questions around things like advertising, the Paramount-Warner Brothers merger, Universal Comcast, whatever they got going on over there. For anyone interested in more of Alex's work, we will have a link to the website and newsletter that you can sign up for in the show notes and check things out there. But Alex, we've spoken many times on the podcast, but it's actually been a few years since we've done a full snapshot

of the media market. We covered back, honestly, I would use this podcast for any listeners that are new as a case study back in 2022 we talked netflix in depth but besides that we've only maybe hinted at some other things some small topics what are the major headlines that's changed within this sector over the last few years because i know for yourself you've been covering it for many many years now yeah thanks for the intro calling it my specialty is uh well my disney investment which is the years keep going by is you might question whether or not my specialty is as good as i i'd hope it would be uh the netflix discussion that we had that was a

that was a good call i think the day we were recording it like an hour or two before we got the news that ackman had dumped his stake that he acquired like three months earlier and it was like oh boy this is uh this situation's getting interesting um but that one turned out pretty good so we have we have our mixed bag we had a winner and uh i guess we're going to call it a loser at least for now on disney but we'll discuss further um you know what's changed i think the big things that have changed are this continued move to to streaming which really started with entertainment programming and that's been going on for um better part of 20 years now um and you know for a long period of time the traditional media companies were basically just suppliers to

to netflix and others and we've seen in the past you know really in the past eight years or so they've they've turned their strategy to to d to c on their own obviously starting you know the most meaningful presence starting in in the u.s their home market where the the brands are most well known ip is most well known um some of them you know they depending on the competitor taking different levels of aggressiveness in terms of then trying to to build out a global presence and get into global scale, and we've seen a real divergence there, some of which reflects financial realities for these businesses from leverage or the P&L for the media businesses, et cetera,

which we can get into. That's the entertainment programming piece. Then you have this other question of live and really, more than anything else, sports and the transition going on there, which coincides with this period of, in the U.S., a meaningful increase in the amount of churn in the pay TV bundle. Also, significant market share shifts from the legacy players like a Comcast Xfinity or, to a lesser extent, Charter to someone like a YouTube TV of the MVPD, which has gone from not even a player in the space really 10 years ago to fairly soon here will be the largest distributor in terms of live TV north of 10 million customers. So that's been a really significant shift that is impacting a lot of things as well. You know, besides that, and I'm sure we'll dig into all this more, you have YouTube proper and the fast services, these free ad supported streaming services that have started to take more of a market share in terms of engagement of TV time.

I mean, a stat that I called out recently from the Nielsen data from the gauge was that YouTube proper, not YouTube TV, had added like five percentage points of market share of US TV time over the past, I believe it was the past three years. That was their incremental share gain. That is roughly equal to the cumulative current share of HBO Max, Paramount Plus, and Peacock. So it just really goes to show you how much YouTube's position has continued to improve. What exactly is being viewed there I think is open to some debate, but that's probably been one of the more significant changes throughout that period. You mentioned the transition that we've seen from a lot of these legacy entertainment media companies transitioning from Linear to DTC. I'm curious, before we dive into some of the specific companies, if you had to rank the legacy companies that made the transition the best versus those that suffered, who would be at the highest, who would be at the lowest? Yeah, well, best can be interpreted a number of ways. I mean, I think Disney has acted fairly aggressively here, particularly in terms of entertainment programming.

Now they're also in a somewhat unique position relative to some of the other players. You know, they famously added 10 million subs on day one, which kind of really was a revealing statistic in terms of the breadth of this brand. And the product also came out at, I think it was $6.99, which is a lot different than where the price is at currently, particularly as you look at their bundled offerings. But they've since added a very significant number of subscribers and have really started to build a revenue base that, excluding Hulu Live or anything like that, it's now in the low $20 billion, which is fairly significant growth over the past, again, six, seven years. um the other ones are tougher because their strategies have kind of changed over time i mean the warner media discovery deal when that happened ceo david zaslav was saying you know we're going to build a global streaming business with 200 300 400 million subs um and it didn't take long before the financial realities of that business was so much exposure to linear tv

and so much leverage, in addition to a lot of issues that HBO had in terms of content that they controlled internationally versus stuff that had been subbed out to partners for long periods of time, they basically just didn't even pursue that strategy for more than a couple of quarters to the extent they did at all. So the goalposts just moved fairly quickly. So yes, they didn't get to the same place on subscriber and revenue growth, but they did get to profitability quicker than some other players, which for them had to become the more important goal. They effectively didn't have a choice. Paramount's kind of similar.

They've had some changes in how they report their results over time, whether it's Paramount Plus versus a broader portfolio with BET and Noggin and some other stuff. They've also had this issue of subscriber growth, but at what cost, with an ARPU, and the same is true for Warner Brothers at a period of time, subscriber growth, but at ARPUs that are meaningfully below what you're seeing from someone like a Netflix. So it's kind of like empty calories to some extent, or you have to close that gap over time or the other, which will be easier said than done if you don't have the content to

keep people, right? So a lot of people building that foundation, but then investors still stepping back and going, okay, where is this going to get us to in five, 10 years, right? In terms of revenues and profitability um so i'd kind of lump them in a somewhat similar bucket then you have peacock which was really late to the party um has never even attempted at going global um i think it's fair to say peacock is has found its footing in terms of the domestic market but again the question is that people step back and ask is like where is this going to be five 10 years from now you're at you have 40 million subs whereas the scale players like a netflix is going to be too exercise and that's just in the u.s they have a global business so it just seems

like they continue to be in a challenging spot and and now we're going through not only separating out versant and and going through that whole restructuring or change you know now now comcast is going to spin out mbcu entirely um which could open up some interesting developments there all right let's talk we'll have some follow-ups on some of those specific companies but one i think that illustrates really as the leading legacy company out there is disney uh the stock as you mentioned and hinted to earlier has kind of been stuck for the last 10 years it's there's been changes there's been you know good momentum kind of two steps forward one step back a lot of the time. But right now, I looked at one of your updates and they're growing earnings.

They have a PE of roughly, I'm seeing 20. They're now repurchasing stock. It seems like there is a lot of positive momentum going forward. Is the company finally set in your mind to deliver durable earnings per share growth? Yeah, I think they're in a much better position than where they were a few years ago. The experiences business is really humming and they've made a lot of investments there, whether it's at the parks or adding capacity in the cruise ship business. And I think, you know, not to be too short-term focused, but even the results in some of the recent quarters kind of highlight that Disney's experiences business is just head shoulders above anybody else in that business in my opinion um and it speaks to it speaks to kind

of the the core disney flywheel in terms of the ip that they have and and again just the differentiation that they have relative to to other players in the industry um and that's a business that this year is going to generate you know on the order of just shy of 11 billion dollars in operating income when it's grown very significantly over the past 10-15 years as well So that's a hugely important part of their business. And again, I think it's really directly tied to core IP of, you know, Pixar, Marvel, Lucasfilm, etc. animation. The video side of the business has been an extended period of transition, both in terms of the products and how they're distributed, but then also the financials. um so we're at a place now where as i'd kind of define it the entertainment programming side we've we've bottomed out in terms of the cost to get to the place where d2c is now going to be

a profit growth engine um and a meaningful profit growth engine i think they saw the most recent quarter that they're not low low double digit even margins in that business whereas you know not too long ago the business was was losing a few billion dollars uh kind of like annual runway basis. So that's a really important lever. And obviously, if they continue to scale that, I'm not sure. I wouldn't bet that they necessarily will completely close the gap with Netflix on margins. There might be more of a structural gap there, particularly at smaller size. But I think the low double-digit EBIT margins of today, if things go well, are somewhere close to double that level, you know, five to 10 years from now. So that's a huge opportunity in terms of

profitability. The final piece that's tough is US linear. And, you know, they've also made this increasingly difficult to track with all the accounting or segment reporting changes they've made over time. So it's hard to even track some of these developments. But you have, you know, call it somewhere on the order of 60 million households in pay TV bundles still. And it's been declining at a mid to high single digit rate. I think Fox said in their last call that the linear bundle declined somewhere right around six and a half percent year over year. So, you know, fairly substantial volume declines, obviously. Um,

and as they're trying to make the transition to, to capture some DTC customers, you know, as I said a moment ago, like, you know, Disney Plus when it first launched at $6.99, you get to 10 million subs in the first day. The sports offerings are so much more expensive because the content costs are so high. So the standalone ESPN Unlimited product, D2C, is $30 a month. So obviously, you can imagine the amount of adoption outside of the bundle that that's going to see. Just as importantly, the amount of churn that that product is going to see throughout the course of the year,

people will sign up for football and then they won't pay for it for potentially six months out of the year, right? There's also a lot of risk with password sharing and a bunch of other things that are relevant when you're talking about a product that's 30 instead of seven. So I don't think they've found the perfect solution to address that problem on the demand side, that P times V equation. And then obviously sports have a really significant issue in terms of costs and the amount of competition that you're seeing from, you know, the basically big tech companies, right? So it's a challenging dynamic where there is a role for it, both in terms of their linear and D2C portfolio, but it also presents a lot of challenges in terms of what's the price point of

that product? Again, what's the P times V equation that we're going for? And what strengths do we bring to the table as we compete with these massive companies on acquiring that content? This is not directly related, but I thought it was funny looking the other day at Meta and seeing that their revenues per DAU, which is 3 billion people or whatever, and obviously that's a global number, it's like $6 now, monthly. You just think about, well, first of all, what that $3 billion bucket encompasses, and $6 is not far off from the ARPU of something like a Paramount Plus, a paid product. It just helps you to appreciate how well these services that are not paid, obviously, can monetize time spent on their platform, and it's getting better and better over time. It just helps you to appreciate, again, obviously the content on there is very different, but you can imagine a scenario where... They can justify economically having any type of content on their platform because they can monetize it so well, I guess is what I'm kind of getting at. It might not make sense strategically or otherwise, but what these ad-supported services can do, especially the big tech companies who are really good at advertising, I just think it's really kind of changed the game.

And it's something that I just think legacy media companies are clearly not as good at for a number of reasons. And so I think it's kind of a mixed bag with the core entertainment IP and parks business feeling like it's in a pretty good place in terms of that earnings trajectory. But the question is how much of a drag, if it's a drag, are you going to get from kind of the linear slash sports piece? yeah it feels like you could have looked at disney any point in the last six years and maybe excluding the experiences business and said it is in transition it just whether they're changing names changing reporting whatever it always seems like they're transitioning let's stick with the sports assets for a second because that's kind of a landscape that's has been changing pretty quickly over the last couple years

Do you think ESPN and any of the other Disney sports assets will be more or less relevant in the world of, call it, U.S. sports in five years? A quick aside before I answer that, because I think it's such a good point. One number I've been tracking closely for a while now at TSOH is just basically the combined video profitability at Disney. And to your point, six years ago, seven years ago, where you looked at this business and said, hey, it was right around $7.5 billion of combined EBIT for D2C. It was nascent at that point, but D2C and linear. That number over the course of the next four years went from $7.5 billion to $4 billion. So it was almost cut in half. And to your point, people who are playing that transition throughout that period, myself included, that was the headwind that you were coming up against, and it didn't work. I mean, largely for that reason. P&L can't go in the wrong direction like that for an extended period. You look at the last three years from FY23 to now, you went from $4 billion, FY24 was $6.3 billion, $25 was $7.6 billion, and this year I think we'll be around $8.5.

So you are getting you are getting the earnings trajectory now. Again, a lot of that was DTC going from unprofitable to now low double digit even margins. But if that trajectory continues, I think you have a good reason to believe that that the stock can can do a lot better than it has over the last five years. Right. We're past that pain now. Again, assuming experiences is also helpful in terms of ESPN specifically. i mean again they start from a good place that espn the business generates something like 15 billion dollars of revenue in the rough ballpark um so they do have a large revenue base in order to fund these things and obviously they have distribution platform whether it's through linear or you know their digital properties so they they have that component um i think the question for them becomes okay how do we how do we figure out the the level of content spend that we can justify here? And how aggressively do we push price? I mean, one thing I've been, I think they haven't pushed aggressively enough on linear distributors in terms of how much price

they should be taking at ESPN. Now, I say that there is a little bit of an accounting mirage where they have the rest of the portfolio. So ESPN might be providing the protection and the economics are showing up somewhere else, right? So that's a little bit not totally black and white but they have to really aggressively push price for their remaining sports fans if they're going to be the main reason why people subscribe to linear right um so to the extent they can do that and see some success with with the the premium digital offerings which they haven't said anything up to this point that would lead you to believe it's it's been overwhelmingly successful right um but to the extent that they can do those two things

I think it can, you know, call it roughly maintain the quality of the portfolio that it has currently. And I think if you see something like, you know, something like the NFL deal is a smart way to try and, you know, shore that position, right? And if you have to give up some of the economics, I think so be it for that sliver of the broader portfolio. I think sports are, it's funny, I thought about this a lot as it relates to like a Peacock or a Netflix or Disney, there's something nice about having a much more limited sports

portfolio in terms of the amount of costs that you then have to cover with that D2C service. You know, you can't put all VSPN into a D2C product and charge $10.99 a month or whatever. You can narrowly put some sports rights in Peacock and charge $10.99 a month. So that's kind of the challenge that they're trying to figure out. And I think you even hear them saying now for the most recent call when they're saying stuff like in Disney Plus, we're going to start to feature more sports content there. And obviously, if you if you want everything, it's going to be an upsell as part of that unified product. But I think they're trying to navigate this question of how do you how do you balance those two sides of the coin?

It's difficult, but they start from a reasonably strong place, especially relative to other legacy media companies. but is that a business that's going to have mid-single digit profit growth over the next five, 10 years? I don't think that's, I think that's far from certain. You research your investments, you analyze markets, you manage risk, but have you researched your broker? For the past three years, Interactive Broker's individual clients averaged an annual return of 24.3% compared to 23.1% on the S&P 500. IBKR's lower trading costs, competitive rates, efficient execution and access to 170 plus global markets help investors keep more of what they earn and put more capital to work over time the broker you choose matters interactive brokers member sipc

if you care about performance find out why the best informed investors choose interactive brokers at ibkr.com slash performance again visit ibkr.com slash performance what's okay let's say Disney went, you know, they're at the board meeting, management meeting, they say, we don't want any association with sports anymore. We want to sell this to whoever working with the NFL, however it would work out. What would they lose in your mind if they got rid of the sports content? And, you know, maybe we'll just leave it at that question. What would they lose? Is there a risk if they say just wanted to dump that as kind of it's, you know, not contributed much in earnings anymore yeah i mean it depends when we say dumping sports whether that

means everything they have on linear or not would be would be one thing i'd say if they're dumping everything so if they're getting rid of fx they're getting rid of abc except like if it's all going with it then i think they have a much cleaner portfolio where they're you know they're back to leaning narrowly on their core ip and then the prices that they have to command in in that you know d2c offering or are low enough where i think you can broadly serve households globally to the extent that the disney content travels globally like it does in the u.s which i think is probably directionally true but not totally accurate um but to the extent that it does that you can then have a business that's you know at a fairly low price um and can drive again like that traditional

disney flywheel um it's a smaller business um and it's it's more exposed to kind of hit driven hit driven dynamics and you know it's it's not it's not necessarily the app that when you turn on the tv and now you're going to open at first because it's going to be much narrower it's not going to have or potentially not going to have in addition to the sports content it's not going to have like the hulu general entertainment programming if it's just narrowly marvel marvel pixar you know what we kind of think of as the kind of the top ip um so there's definitely risks with that strategy i think the ip is probably good enough that it can still work and it doesn't necessarily have to be exclusive to their own d2c offering um but yeah it'd be it'd be a fairly significant change

And I've seen this both ways for a while now. I think my main thing has always been, you just got to pick what strategy you're going to go with and go ahead and do it. The middle road where they were not willing or didn't have a unified app or where they were kind of putting, there's some content here on ESPN Linear, but there's other stuff on ESPN Plus. And by the way, ESPN Plus isn't even ESPN. It's not the whole product.

It's just this kind of supplemental thing that it was just a waste of time, basically, to even have that strategy. So anyways, I felt like they need to just pick a lane and go down that road. And I feel like we're closer to that than ever before. But getting out of sports is obviously becoming more difficult as they do so. Okay. Am I misremembering? Am I dreaming here? Or is Bob Iger still the CEO? He is not the CEO now. okay when did he leave i for the for the fourth time uh yeah it's hard to even remember now

because he's left so many times it was uh at the start of this i can't even remember the start of this year six months ago stuff like that and how do you think how was the transition the management transition gone i think so far it's gone it's gone fine i mean there hasn't been there hasn't been well it's disney so disney is always in the spotlight for whatever reason um it's it's definitely a unique company in terms of its rabid fans and, uh, rabid detractors, if we want to call them that. Um, but the typical stuff, I mean, I think it's, uh, I think people were worried in terms of, you know, the investment community, people were worried when, when Comcast came out and said that they had seen some softness in, in parks business and specifically called that

Orlando. And they, they implied that it was a broader market issue. Um, and to the discussion earlier. Disney's P&L trajectory over the course of the next five years is obviously hugely tied to what experience as P&L looks like. So I think the market was a little shook when that was announced, but then they came out and reported results that were actually pretty darn strong. So that was encouraging, and it gave DiMauro a little bit of protection here in the moment. But so far, it seems so good. I don't think we're going to repeat the Chapek situation. Hopefully, all involved have have learned including the board of directors maybe got to cut off bob eiger's corporate cell phone if he still has one yeah he's not keeping his office

yeah so it might be time to like actually move on for better or worse like take his key card the yeah i didn't uh he quit as a ceo but he kept the ceo's office that is a bit visually probably for the workers that was probably a tough one at the corporate offices the last question i have on disney rhyme it i have another one they've always talked about and i think you've talked about this as well creating for lack of a better word synergies with the experiences meaning uh really you know disney world the theme parks are uh the cruises what have you all that stuff mainly the theme parks but creating synergies with disney plus making that more profitable as a whole, or even as a loss leader to lead to more experiences spent.

Has there been any progress there? I know they talked about it a lot, but I'm not someone that's knee-deep in the business. Has there been any signs that this has been successful? Just real quick, I think it's important to say on that Chapin point, because I think it's relevant to the broader Disney discussion. You know, one of the things that I've kind of been a little perplexed by, and it's happened, And it was, again, in the quarterly letter as they talk about on D2C us being in the early stages of kind of local international programming. And the reason I find it odd is because if you go back in 2021, Bob Chapik basically said having local international programming is hugely important to succeeding in D2C and laid out the specific number of titles that they were going to release over the coming handful of years.

um you know fast forward 12 months and the d2c business lost four billion dollars that year and i think he was effectively i mean as part of the broader issue was effectively fired because it was like we can't this is too much and i think in hindsight you look back and how i wonder in some ways how do you get from a to b um part of it is scaling the business but also some of it's getting tighter on costs and it's just a challenge for disney as with any of these other of the other legacy media companies is you really do have to make those investments i think if you're going to be competing on a playing field with someone like a netflix or amazon whoever it may be um and you know for them to be in the early endings of this when when disney plus launched

you know uh seven eight years ago whatever it is it's just it's really indicative of how how challenging challenging this is in terms of just the time and financial commitment to to competing here um so that's been kind of notable to me repeat your question a little bit again so you're talking about more the integration between disney plus subscribers yeah the kind of the core the heavy spenders the families connecting that with the experiences yeah i think they you know they talked about it again this quarter as something they want to do and obviously new ceo new management you can try new things right and bring a new strategy um and and disney has this to some extent i think with you know super fan um clubs or events whatever

you want to call it um i don't it strikes me as something that's fairly challenging to do um and in a way that really i mean forget about if it makes economic sense for a minute like what is the what is the presentation or how does this even work right if i'm a disney plus customer i can get five percent off merch or park tickets or something i mean they had to be really thoughtful about how that's structured and then even where it's you know is it presented in the app or how does that work i think they tried i think they tried smaller versions of this in the early days of disney plus and um you know for some reason i i think it basically didn't go anywhere and my sense would be that it's really challenging to do this outside of outside of having something

that's not disney plus as a starting point right it needs to be like a d23 or whatever it's called like a super fan membership that's that's probably separate from disney plus i think it's probably a way for them to do it and have disney plus be much more focused on being a broadly accessible service that features their content and to the extent that it drives traffic to the parks or to consumer products whatever it may be um it's just kind of organic versus something that's you know driven through this membership okay one last question on disney before we move on i'm getting older and so i keep thinking disney's losing mindshare with customers but it's more likely it's just losing my chair with me do you think disney carries as much weight

for families and their core audience as it did a decade ago i'd probably say no and i'd probably say nothing does at the same time i just i just feel like everything's become everything's become more fragmented everything's has a shorter shelf life at least you know a given piece of ip maybe you can extend it in ways i got like they've done successfully with spider-man and other stuff um what what's at the top of that heap i think is also getting smaller in percentage terms the things that really stand out you know it's kind of funny you think of not to deflect this way from disney but you think of like when hbo max launched and you talk about like the really the really well-known ip on there and people say

things like you know sopranos or shows of that ilk how much are people really watching the soprano you know go back and watch some of those shows and even just the the technology and i just don't think things like that generally resonate with with young it's just too hard there's always new things coming now from hollywood and obviously ugc and things getting better and better and accessibility everywhere i i just i think it's hard to i think it's hard to believe that it has the same hold in terms of like in terms of the amount of time people are going to spend with it that said i do think there's an ability for some of the disney ip to break out in terms of of being viewed in a class of its own which that's i think that's probably more difficult than ever

and then that has to inform the strategy right and it's it's where i it's where i when we talk to this question of sports which i think then is also part of this question of hulu and general entertainment programming and being kind of a netflix competitor versus being a narrow ip cheaper service you only use it a handful of times a month but it's also ten dollars or whatever it may be and you're going there to watch new movies or you know a much smaller selection of series but that are perceived differently again think a traditional hbo strategy or like even an apple strategy currently um just very different strategies and very different businesses um and obviously really challenging to compete with netflix as everybody has has learned

over the past 10 years or so so yeah i think i think it's probably true i think it speaks to the broader development of media entertainment etc okay let's shift gears and talk about some of the uh disruptors maybe we can call them you alluded to this earlier in the discussion about how much money meta makes off of its average users platforms like youtube reels uh tiktok i don't know maybe there's some other ones that i'm not thinking about what sort of an impact have they had on the media landscape broadly and maybe can you talk through some of the like market share uh numbers or any statistics that you've got yeah well i think one interesting place to start i think is is first of all the form factors which i've never heard

this before i was watching a ted sarandos interview and he said i'm gonna get this number wrong now but i think he said um the character he's talking about netflix specifically are kind of these call it premium entertainment svod services he said something like they account for five percent of video view time on mobile devices and that number has basically been on change for the last handful of years and obviously that implies the significant majority of what's left or all of it i guess is is youtube and and shorts and reels and whatever you know whatever else none of it almost none of it is this professionally produced content from hollywood or wherever else and that's on mobile devices which obviously is as we all know and experience

ourselves the amount of time that we spend staring at our phone instead of at our computer or tv obviously there's been a lot of share shift um over the last whatever 10 15 years um so that's including mobile which all the numbers that everybody references from nielsen and wherever else almost always do not include mobile we're just talking about tv time and even there even there you're seeing a significant shift in terms of how much goes to again youtube proper like a youtube app not youtube tv or or some of these fast services like the roku channel or to be or to a lesser extent pluto um so yeah you've seen the market you've seen the market kind of continue to evolve and you've seen netflix has been again this is us data netflix has kind of been stuck in

the seven and a half eight percent range for a while now um you know the the emerging services the the paramount pluses of the world and and disney plus and hulu and peacock and hbo max like all of them have basically been unable to drive significant share gains as well which obviously So they came to this party way later, right? So I think in some ways you look at their data and you go, that might even be more concerning than if I was sitting in Netflix's position, right? So, yeah, I just think it highlights how incredibly competitive this all is and the variety of models going after view time. And, you know, I'm sure for all of us, I mean, I personally, if I'm not sitting down with my wife, I would consider putting on YouTube on the TV just as much as I would consider putting on any other service because I can find an interview or something that the breadth of what I can watch is just as wide, albeit different. The quality of what I can watch ranges from really low to really high.

There's all kinds of stuff there. Um, so I, I just think it's, it's, it's kind of to be viewed in the same, in the same breath as like professional content, um, depending on what you want at any given moment in time. Right. So it's, which is very different, I think, than what it probably was perceived as even 10, 15 years ago. So, yeah, it's been, it's been a huge development, which is, I think, informed a lot of the changes that we've now seen with companies, you know, everybody really leaning into Avon in a big way. um and then even potentially fast services i mean anecdotally it's kind of funny we put on what if i put on a movie on oh is that ryan ryan gosling uh project hill mary i think it's called it's on prime video we watched that movie and there was a 30 or 60 second pre-roll ad and that

was the only ad that was shown the entire movie on this is on amazon's you know their their avon tier, their standard tier now that they pushed everybody into. I mean, you have an experience like that and you start to realize like, oh, this is why people are not paying the extra $5 a month for the ad-free tier because it's pretty darn close to being ad-free. And again, I think this goes back to what I said before on the ability of these companies with modern tech to probably pretty effectively, again, over time, pretty effectively monetize the inventory. And we're we're really far removed from the days where Viacom would have 13 minutes of ad per hour of linear programming.

We were in a different world now. Yeah. I remember as a kid, the old comedy central days and luckily not, not there anymore. Uh, two, I guess,

followups on that. You can take them, uh, however you want. Um, do you think the investments in, and I know they call them podcasts, but really they're talk shows from the Netflix's of the world,

maybe netflix i think as well as spotify and youtube do you think netflix is seeing that as kind of the casual competition um that they can maybe inch their way into for the tv household especially if they're not going to really be relevant on mobile devices anymore and then second are watch hours the most important metric for netflix because maybe they can be the anti-slop for lack of a better word in okay we spent two hours on a high quality movie with them or high quality 10 hours on a high quality tv show season per month but then you're spending much more time on mobile but you get that value from netflix you know higher per hour at least from a quality standpoint yeah yeah i think a lot of this is a lot of the specific specifically the podcast push

i think it's coming from this perspective of wanting to drive again that form factor question like how do we have any presence on mobile um and it also is this day park question of okay we're doing great on you know weekdays at 7 p.m how do we become relevant at all on weekdays at 11 a.m yeah morning something like that yeah right so anything like that where so i think they're testing and i'm i'm you know i'm personally a little um i'm less convinced something like that specifically is going to work i also think that i guess you guys would have better much better data on this than i do but i think youtube is just becoming a bigger and bigger presence in this space especially as every podcast has gone from an audio experience to a audio and video

experience it's just that the tools are the tools are better than any other platform i think um and obviously a ton of people a ton of people on youtube um so i think that's part of part of that decision you know i think there's other things they're doing like and maybe this specifically won't work but i think it's indicative of where they can try to play you know they had they had the black mirror episode a couple years ago that was like kind of more interactive pick your pick your storyline sort of thing and now you're seeing them you're seeing them getting to gaming where they're they're doing more of party games where we all have our phone and has this next netflix controller for anybody who hasn't used it i'd recommend go use one of these games this controller

works wonderfully and obviously it's a different it's not monetizing like basically all the other mobile games where there's all these annoying ads or you know you're buying coins or whatever for 99 cents so they have like a different strategy in terms of how they're going after it and i think even they've shown recently with some of these um it's like a horror film almost but it's a game some of these titles that they've released that again are it's the phone is really the input device then they're showing how they can play in a space like that with something that's really differentiated and unique to them whereas again the podcast i just don't really know what are you doing there outside of exclusives that's any different from kind of the customer experience on

on youtube or spotify or whatever it may be so um i'm a little more encouraged with with that road than in the podcast stuff but yeah i think they're continuing to test all these all these ways to go past or go beyond you know our legacy is license and then original original programming of of films and series and obviously over time got bigger and and and the worlds of stand-up comedy and documentaries and all that jazz and now you're moving down the road of okay what do we what do we do in the world of sports what do we do in the world of of news what do we do in the world of you know more broadly defined live programming um what does all that look like um and then how do we have to change monetization in order to align with kind of those business models um so i think they start

from a position of huge strength and they can have more mistakes than anybody and still kind of shrug those off and keep going. But yeah, it's definitely changing. And the engagement share stuff is a good indication of that. And as I referenced, the US share has been kind of static for a while now, which doesn't look particularly bad relative to anybody besides YouTube, but YouTube has kind of ran away from them. So obviously people take note of that. Um, and they have these reports that show effectively low single digit growth on total engagement time, which we don't have the sub numbers anymore, but you would certainly think that implies some degradation in terms of the average user time, you know, to their

point, fairly, you also are adding users and markets where they're not watching as much TV necessarily as, as we do in the great United States with our, with our love of television. um but but yeah so i think there's i think there's a little bit of uh there's a put and take there in terms of the interpretation of of what that date is saying um but yeah over time i don't think driving engagement time is the end all be all of what success is going to mean for netflix but i do think it's it's a relevant consideration that must be considered alongside like you know quote unquote quality of what people are watching um and again like expanding the breadth of of what that is um so yeah in toronto every arrival is a statement and nothing says it

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I get it. I'm Siyaya and I live in Ice Cove. I've made some questionable decisions that didn't end up the way I planned. And today I'm still figuring it out. somehow things usually get worse before they get better apparently that's how i roll so bundle up and come along for the bumpy ride stream a new episode of north of north tuesdays on cbc gem one follow-up uh specifically on the video game stuff because it was a hot topic i mean i think honestly we talked about it a couple years ago on the podcast the cloud gaming thing and it's

kind of fallen out of favor at least from the investing world no one's really talked about it but I saw, I think, the Take-Two Interactive CEO mention something about how World 3X are user-based once we get cloud gaming up and running. Where do you think Netflix's position is there? And have they mentioned anything about making any massive investments in cloud gaming once, let's say, the technology or latency is good enough

for the vast majority of people? Yeah, I think their play, at least as of now, and it kind of gets to the AI slop comment you said before. I think their play is more focused on a family knowing that they can go on there and find these games where it's like, you know, think of Monopoly or Scrabble, like a version of that where you're either playing on your TV with the TV remote or each individually holding a mobile device,

whatever it may be. There's versions of that where you know, one, it's going to be, the game's going to be, you know, high quality, it's actually going to work. there's not going to be in-app purchases or whatever you know when they had the original original iteration of their gaming stuff i think you'd go into the netflix app find something that you liked you'd click it you'd have to go download a separate app there would be a way of it authenticating that you were a netflix member it was just too it was too cumbersome and and i think

now it's getting it's getting cleaner and again i think it's really for these games where where you're having the connection between the mobile remote and and the tv as the output um i think it's an area where i think they can they can be differentiated and obviously that doesn't serve anywhere close to everything in the gaming market but it's kind of place where they can narrowly play and that'd be supplemental to their business and also without making you know huge investments so um i think it can be a nice little addition to what they do currently um but in terms of the world of broader cloud gaming and you know what we've seen with game pass and some of these other things it's that's that's probably a it's probably a bridge too far in my opinion um or at least at

this point in time no xbox netflix merger right i don't i don't think so i think that'd be i i've always been skeptical on you know when it was when the discussion was mbcu and and ea which our our mutual friend francisco olivera i think he's more bullish on things like that i've i've always been skeptical on what those deals actually mean at the i mean like big bets like that not not adding something for a half billion dollars or whatever um i just don't really know what that looks like at least at this point in time even if they are going to start to blend with each other a little bit more as technology continues to improve okay let's talk specifically netflix's stock ryan ryan unless you have a fault uh no nope i'm gonna i was about to ask the same thing

All right. The stock has done well the last few years, but it's down 44%. I'll keep it simple. Why? Yeah. Well, I think for one, it went up a lot and it was trading at a healthy multiple on a much improved margin profile relative to three, four years ago. And, you know, as we saw in 22 when the stock went down a ton on combination of revenue fears and margin compression, or at least margin compression relative to the trajectory that people were hoping for, you get those two things at the same time and you'll get a nice contraction in the multiple as well. You know, I think it's been less so, at least in the near term, a meaningful degradation in Netflix's financials. That said, I think maybe next quarter is a little weaker than some people were probably hoping for, but not much so. Yeah, I think a lot more of it is just the multiple coming in. And, you know, I think the Warner Brothers situation, I think it made a lot of sense why they went after those assets. I think, and people can go read my thoughts from at the time, which I think in hindsight

stand up pretty well, the price that they were paying and the amount of the expected synergies that were to be generated, and importantly, synergies that I think are specific to what Netflix could generate with those assets as opposed to somebody else, the amount of that that was being sent off to the WBD shareholders in terms of value, I just thought it was excessive. And it gets to Netflix's broader kind of content strategy, right? Like we've seen with the WWE deal as an example, global deal. There needs to be recognition for what they bring to the table in terms of the price tag on the content acquisition or the structure of the arrangement. To me, this felt a little bit out of whack in terms of what that looked like. And I think – and also, by the way, it was a really big number relative to – even though Netflix is really big, they only make, what, $10 billion a year of EBIT or something like that, a little more than that, $15 billion a year of EBIT. The price tag was north of $80.

So it was a big number. then as they got pressed on the deal terms and walked away from the table quickly which i think was the right decision to be fair i think for you to then come back and say it got to a right place where we were uncomfortable with the price and that's only 10 above what you had just agreed to like that that for me that's too narrow right there's not enough there's not enough margin between those two numbers or at least you were just paying like at your actual max and kind of out of the gates right and the fact that they also and i realize this is how these things kind of work but the fact that when wbd was at eight dollars a share or whatever maybe

proactively you go have those discussions as opposed to peace guy pushes on these discussions it then is in play then you show up to the table and start so i just think a lot of it looked like in hindsight reasonably going after this pretty darn expensive price tag and and fair questions from people to then go well do you guys feel like you need to do something like this or are you just being opportunistic um so i think that's all fair that that in combination with a stock that was you know to be fair pretty richly valued um yeah that can lead to a stock price going down a ton I showed in my most recent update on Netflix where, full disclosure, I added to the position for the first time in a long time. I showed my whole trading history with it over the last handful of years.

And it's funny to think, it got to be a fairly sizable position for me. I think it was in the mid-teens. But when I started trimming as it was going up, obviously, at the time, my thoughts on the valuation, where I started trimming was in the – I think people can go check on this. I think it was in like the call it 60, 60, $65 range somewhere in somewhere in that ballpark. Point being, like, I thought it was starting to get rich at that price, starting to being the key word there. But it then went a lot higher than that. So in hindsight, I probably should have trimmed even more aggressively than I did. But such is the life of trying to actually own things for the long term.

You go through periods that it's you wish you hadn't kept owning them. I watched the last year with me and Nintendo. i saw it go to 10 to 25 to 10 and i didn't do anything so at least at least you tripped a little bit there you go i guess while we're on the wbd discussion i do think it's interesting the way you put that too like uh 10 price hike is like no we're walking away is kind of yeah right they must have been that sort of their max to begin with um what do you think i'll let you maybe have your antitrust or antitrust take here paramount warner brothers discovery what impact if any at all do you think that a combined company would have on competition in the media landscape

to the extent that deal goes through you're saying yeah yeah i mean i think the challenging part is the challenging part is what does what does the financing look like for that business and and how exposed are they to short-term pressure from from linear which you know said differently how much of this is just another redo of wbd in 2022 or whatever where they had i haven't looked at this in a little while so i don't have the numbers off the top of my head but it was something like it was something like within three years we'll have 15 billion of of global dsc revenues and and three years later they weren't at 15 they were at i think they were at less than 10 so they weren't even close to what they've been going for again

partly because they changed the strategy because they couldn't afford to even do what they had thought was the right thing to do when they consummated the deal same goes for same goes for revenues of the combined company and and ebit offer the combined company and you fall short on that stuff and you have a ton of leverage and your decision making starts to get hamstrung really quick um so i think there's a risk of that that being the same thing here and i think they have they have a really chat and netflix would have had this too by the way they have a really challenging decision in terms of what do you actually do with these two products over time um you can just run them separately and have kind of a bundled offering i don't really know how you

how you what your brand is behind that maybe just have them branded individually and people can have add-ons whatever it may be i just don't feel like that strategy is as effective as actually just being a netflix and having a single product or you know even to where disney plus is going where it's going to be it's going to be one platform even if you have subtitles in there to me that's still different than this idea of like we have these two platforms that you can subscribe to one or you can subscribe to both or whatever it may be i just think that stuff is really messy and it's gonna have to be worked through eventually um so yeah i think that'll be easier said than done um you know and obviously they have they have regulatory challenges as well um they have

to rationalize content spending um i think it'd be a real competitor um if i was netflix i don't know how much more concerned i'd be about the combined company than i would be with either of them individually um but maybe that's maybe that's short-sighted to me to say that okay i think that's pretty much all the questions we have brett any any further questions we had a listener question on comcast universal spinoff predictions any thoughts there i know you follow them well uh you follow the company for a long time so i own comcast for a long time uh thankfully i thankfully i sold as i started to realize that i did not sufficiently appreciate the competitive threat from from fixed wireless and i also realized that i don't think management did

either so so i was like maybe i should maybe i should get out of here um and that at least for now is looking like a good decision um yeah i i you know it's funny there was a i think it was a wall street journal article that said brian roberts effectively decided that if the stock hit 20 a share that they needed to spin off mbcu and i'll take it as faith that that's actually what happened um i just don't know strategically if if they have a lot of clarity on what they're trying to do and i don't know his willingness to sell i don't know his willingness to change the strategy of NBC significantly from what it is currently. I think there's deals to be had here that make a lot of sense.

I think it's a very valuable asset, but none of that really matters if he doesn't want to sell. And it also doesn't matter if it's poorly run for, you know, the next five years or something like that. Yeah, not to say this too negatively, but I think there was a point in time where I exhibit i attributed thoughtfulness and uh long-term decision making to a lot of comcast decisions that i think in hindsight were just bad decisions that were they were just bad on their face as they appeared to be it was just a reality it just wasn't a good decision and i think

i think if this is true that you decided to spend something just because the stock price hits some arbitrary number um that is also potentially not a very good decision or at least not a good reason okay i think that wraps everything up our closing question is going to be what do you think or what is something you are watching covering the media landscape as an investor and this could be you know all the way from social media i know you followed meta very closely down to the legacy players what are you watching worried about thinking about that maybe the market or wall street is under appreciating or not following closely huh yeah i mean i don't know if it's things that the that the market's not following closely but

i'd say youtube's position is is the the big one for for the media space you know the the role of the fast services and how people then react to those having gained traction um and again And they're products that I don't think your typical analyst is too familiar with using and maybe doesn't totally grasp where that's coming from or what the demand is for. Or just this idea of people being able to find ways to monetize through cheap or free ad-supported tiers is an important question in terms of what's then going to be the paid addressable market, again, in the U.S. and broadly. So I think that's a big one there. And then in the world of meta and those other guys, obviously, the massive CapEx ramp is something that I continue to watch with some understanding of what's going on, a reasonably good understanding of what's going on, but also no appreciation for what the limit is here. I mean, I wrote in my latest Meta update that their contractual non-cancelable obligations were $30 billion a year ago. And as of this quarter, that number was $350 billion.

And it was up 50% over the last 90 days. And it obviously can continue to grow. So even for a company that the core business is printing north of $100 billion of EBIT, at some point having $500, $600, $700, $800 billion of non-cancellable obligations is at least a risk. I don't know if it's an existential risk, just a material risk, whatever it may be. But I'm just more and more uncomfortable with what all that means. And that's probably more a position, size, and comment than what I own these comments. So, yeah, those are probably the main things that I'm watching and also, obviously, what Comcast is going to do with NBCU. That could be a fascinating one as well.

I love the monthly YouTube – or not YouTube. Well, it's the Nielsen chart, but it should be just the YouTube chart now. The market share one is lovely. People should at least follow you on Twitter or Substack to get that chart. You always post it for free. All right. We're going to get out of here. Thank you for taking the time, Alex.

For any listener that wants to read more of your work, check things out. Where can they find it? Yeah, easiest place is TSOH Investment Research. You can also follow me on Twitter, Substack Notes, LinkedIn, wherever you want. Beautiful. All right. Thank you, everyone, for joining today. As a reminder, we are not financial advisors.

Anything we say on the show is not formal advice or recommendation. Ryan and I are any podcast guests, may hold securities discussed in this podcast, may have held them in the past and may buy, sell, or hold them in the future. Thank you, Reverend, for tuning in once again. Thank you to our sponsors, Fiscal AI and Interactive Brokers. And we'll see everyone next time. do you wish you could just hit skip on the worst parts of your life you know the same way you can skip an ad i get it i'm siaya and i live in ice cove i've made some questionable decisions that

didn't end up the way I planned. And today I'm still figuring it out. Somehow things usually get worse before they get better. Apparently that's how I roll. So bundle up and come along for the bumpy ride. Stream a new episode of North of North Tuesdays on CBC Gem.