Yet Another Value Podcast - $NTDOY: is Nintendo's flywheel actually there? | Accrued Interest

Episode Date: September 18, 2026

Nintendo's flywheel is not there. That is Simeon McMillan's call, and it is the one that has media longs emailing me. His case: Switch 2 is the best console launch in history and the attach rate still came in well below Switch 1, the Mario Kart bundle flattered even that number, Nintendo Switch Online accounts have been flat for years and almost nobody has noticed, and Nintendo just took its first mid-cycle price increase because memory costs are not coming down. He is not calling for a crash. He is saying you cannot put this one away for two years.I push back hard. Ocarina of Time is going to be a top five selling game in the world and it is a remake, which is the old Buffett line about Disney being an oil well where the oil seeps back in. Simeon's answer is that Disney kept buying new IP to refill the well and Nintendo has not, and that two to three movies a year and a dozen parks would change his mind.Then we flip to the two he is long. Spotify is his highest conviction idea and he opens with a mea culpa: he assumed the labels would hold the margin hostage forever, and missed that the 2024 and 2025 renegotiations made the royalty rate fall as Spotify grows. I read those same deals less charitably, as Spotify winning outright rather than everyone winning together, and I think the next round goes further. We get into why advertising keeps underperforming, why that might be fine, and what marketplace programs actually are once you have worked in radio. On Netflix he is bullish on a stock that has been cut hard, and I ask the obvious question: Netflix trades at half Spotify's multiple with the same growth and the same margin story, so why is Spotify still the top pick.Also, the NFL ratings test. Netflix's Melbourne game did 18.5 million in the US this year against YouTube's 17.3 million globally for Brazil last year, and Netflix needs a login while YouTube was free.This episode is sponsored by Fiscal.ai: https://fiscal.ai/yav. I am a customer and I pay for the API myself. Two things I actually use it for: the fund letter database wired into the API, so when I prep a podcast I get every letter thesis on the name in one pass, and audited financials where every line in the model links straight back to the source. Use my link for 15% off the AI connector.Chapters:(00:00) Intro(01:02) Sponsor: Fiscal.ai(02:35) The quarterly media check-in(03:58) Why Simeon is bearish on Nintendo(08:37) Remakes: is Ocarina of Time the oil well?(11:48) Memory costs and the first mid-cycle price hike(14:30) The attach rate and the Mario Kart bundle(16:47) The bull rebuttals, and subscriber growth that isn't(19:08) Nintendo margins, and whether 40% is real(22:19) Should Nintendo have sold itself?(24:32) IP, movies and parks, with Pokemon as the template(28:09) Spotify: the mea culpa(31:39) The label deals, and who actually won(32:41) Advertising, and payola by another name(36:16) What AI does to Spotify(39:00) 40x earnings: priced for perfection?(42:36) Daniel Ek steps back, and are CEOs overrated(47:08) Netflix as a value stock(53:13) AI generated content and the Netflix moat(59:49) NFL on Netflix vs YouTube(1:02:08) Gun to your head: Spotify or Netflix?(1:05:34) Wrap, and the student tierSimeon McMillan / Accrued Interest: https://www.accruedint.comLinks:Yet Another Value Blog - https://www.yetanothervalueblog.comSee our legal disclaimer here: https://www.yetanothervalueblog.com/p/legal-and-disclaimer

Visit BetMGM Casino and check out the newest exclusive. The Price is Right Fortune Pick. BetMDM and GameSense remind you to play responsibly. 19 plus to wager. Ontario only. Please play responsibly. If you have questions or concerns about your gambling or someone close to you, please contact Connects Ontario at 1-866-531-2,600 to speak to an advisor,

free of charge. BetMGM operates pursuant to an operating agreement with Eye Gaming Ontario. You're about to listen to you another value podcast with your host, me, Andrew Walker. Today we have on Simian McMillan from Accrued Interest. Look, accrued interest follows all things TMT. And if you know me, you know I love all things TMT. And I just really enjoy Simeon's takes on everything.

I'm a happy subscriber. I think he might have been his first subscriber to Accrued Interest to disclose my priors. But he's great. We're going to talk about a lot of stuff. I'll include a link to his website in the show notes if you want to go follow up. But we're going to talk about Nintendo, which is always top of mind for me because I love Nintendo. And I had a stomach bug the other day and had to kind of take off work for a day. So for a few hours, I just fired up the switch and played some Nintendo games for a while because I couldn't do anything else else.

It's over the cramping of my stomach and all the things I don't want to tell you about it. So we talk Nintendo and then we're going to talk Netflix and Spotify where he is very bullish on both Netflix and Spotify. Oh, and I should mention he's controversially quite bearish on Nintendo. So we're going to talk all that plus little quick hits on other things media. I think you're really going to enjoy the conversation. I really enjoyed the conversation. We'll get there in one second, but first, a word from our sponsors. Today's podcast is sponsored by Fiscal.A.I.

Fiscal.A.I is the modern financial data provider for global equities. Look, that's what they have me tell you, but let me tell you how I've been using Fiscal. Dot AI. And I'll remind you, I'm a customer. I paid with my own money to connect to the Fiscal. com. There's two things that I've really found it useful for. Number one, this is something super unique.

They've got a huge database of fund letters, and the fund letters are connected by the API. So whenever I'm researching a company, whether it's researching the company, because I'm interested in them or looking up an event or prepping for a podcast. The first thing I have my AI do is I say, hey, I'm prepping for a podcast on, what are we, I'm prepping for a podcast on HIMS. Go to and the first thing it does is it says, hey, here's all the recent letters on fiscal.A.I of people talking about HIMS and here's their thesis, here's their bare thesis,

all that sort of stuff. So that's the first thing. And that is really unique and that is really fun. And then the second thing I do is I use it for edited financials, right? I've got my model and I say, hey, I'm looking at Hymns. Go build me model. And it says, sure, I'll build you a model. And every line in that model has a link. So I can see, oh, they're pulling this EBIT on number. They're pulling this segment number.

They're pulling this number from three years ago. I click on it and it takes me right to Fiscal. At AI and it says, hey, here's these company-specific KPIs. Here's these ratios. And I can see exactly where they're getting in and exactly where they're kind of from it. So it is a super reliable data provider that can connect to your AI. I found it super helpful.

I'm a big fan of the podcast. If you want to try it out, you can use my link at fiscal. A.I. slash YAV to get 15% off their AI connector. That's fiscal.a.ai slash YAV. And there'll be a link in the show notes. All right. Hello and welcome to yet another value podcast. I'm your host, Andrew Walker. With me today. I'm excited to have I think it's the third time, Simmy McMillan from accrued interest. Simian, how's it going? Great. Andrew. Great to be back and look forward to making another great interview, a friend of the show or a friend of the pod, whatever you want to call it. No, there's always something interesting. on in media, so we're never at a loss of topics. Well, A, you sold that from me because I told you that right before we started

recording. Synergy. Synergy. I really enjoyed, you know, once, I'd say once every three weeks I get an email from a furious long of some media stock saying, look what Simeon said on this. So you're making waves and I'm super excited to do it and talk with you. I think we talked last at the end of Q2 towards the beginning of Q3. It's now rapidly approaching Q4, the end of Q3.

So we were just doing our, we said we're going to do it, people enjoy it. We're going to do our quarterly media check-in. I've been following a crude intro, so I know you've got lots of thoughts. I think the place you wanted to start with, oh, disclaimer, nothing of this podcast investing advice. Full disclaimer at the end of podcast in the show notes. The place you wanted to start with was Spotify, but I am super excited to talk Nintendo. So I'm going to pull up my host video card and talk Nintendo, which I'm a 10 out of 10 to talk about. and then we can do Spotify, which I'm a nine out of ten to talk about,

and some other stuff that works for you. Sounds good. Great. So Nintendo, look, I said you were roughly in people's feathers. You, I think in August, you published a bearish piece on Nintendo. And then you published another one after they did their big conference earlier this year that said, hey, I watched their conference. I'm, you know, it's everything that the bears said.

And I know a lot of fools in Nintendo. And a lot of them were very upset with you. So I just love to start, you know, Nintendo's a lot of, beloved company. They finally are kind of getting their media strategy together. You know, the Super Mario Galaxy 1 and 2 do great. Nintendo, sorry, Legend of Zelda live action coming early next year. I think people are bullish for that. Nintendo, the theme parks, all this sort of stuff. Why are you bearish on Nintendo? Sure. So simply put, I'm bearish on Nintendo or far less bullish than the average bull because I think it's incredibly cyclical stock that has not

been able to break out of its dependence on the hardware upgrade cycle and that I think why I tell people I pride myself in my shorts I went six for six my shorts my short scorecard for the first half of the year so I'm not afraid to go against consensus my average short was down or 30% the absolute basis and more than down the relative basis so I'm not afraid to ruffle some feathers but my issue with the 10th is that this is not a stock you can put away and and forget about I think a lot of bulls retroactively. The stock, it was down like, maybe 50%. And everyone wants to act like they bought it at the low.

And they say, oh, look, it's up a little bit off the low. But it is far below it's high as of last year. And you could say that, you know, okay, stocks sometimes overshoot. I get it. But the whole thesis was that they have a flywheel that is going to let them escape from the console cycle. And my only observation, my latest piece, is that the flywheel is not there. If you want to buy it, if you want to buy it, I think you buy it when it's down, you buy it going to major game releases. But to give you some more tangible information, what I'm always worried about is that when I look at the sales, they've done a better than expected job selling Switch 1 software this long into the cycle.

And for me to really believe that I can hold this for more than a year, because again, I'm not a day trader. I don't get excited if I can just get 20% pop and then I don't tell you when to sell. They need to sell more Switch 2 software because that's how you bring the audience over to the next cycle. Because eventually, Switch 1, it's going to run out of steam. And so I had an article up, it was last week, it was coming out of the Nintendo Direct, the 9-9 event. It was a two-day event, and a lot of Bulls got excited because on day one, they presented the new Zelda game, which is amazing, okay?

I think working in media, I sort of learned to check my biases. I think that the people most excited about it are millennials or 40-year-old people who played the old game 20 years ago, because in the grand scheme of things, remakes only get but so much juice. So just simply put, I'm very worried. going into this holiday season. Because typically, the biggest time to sell console is during the holiday season, and now we're going into Nintendo's second Christmas without any more flagship titles. To give your listeners of viewers, like a quick overview of like Nintendo ecosystem,

in my mind, their tier one characters or titles are in no particular order. You have Mario Cart, Mario, whatever Mario game of the cycle, Super Smash Brothers, Legend of Zelda, and Pokemon. Okay, and I'm sure I forgot a couple other ones, which your readers will let me know. Well, at launch, they gave away in a bundle, which they never done before. A lot of copies of the new Mario card. Great. Okay. And it helped himself switch two consoles because without that, I think those have been quite weak.

And now, at the direct event, all right, the biggest game they have going into the end of Christmas is a Legend of Zelda remake. Now, what the Bulls are saying is that, well, it's not a problem because eventually they'll make more flagged. ship titles. But now we're out into 2027. And if you go to 2027, we have visibility on Pokemon coming in in Q1 or in the spring. We don't even have a date. So okay, maybe you hold Nintendo until then. But I can't wait forever. You know, I think eventually I'm going to want to see more of these other games if I believe that Switch 2 is a viable alternative. Otherwise, they're just elongating the life cycle of Switch 1, which doesn't get me excited. Can I pause you there. So that's a great summary. And I've got in your note, you've got four reasons. You've got a lot of

things. And I actually had in my notes, you know, hey, I want to go through the four things I hear from Bulls all the time. And you actually are hitting on the number one thing, right? I hear from Bulls all the time. And it'll be, hey, the next X remake is going to be huge. You know, the Star Fox remake earlier this year was huge. I remember a few years ago, they got really bullish on a Golden Eye remake that was coming out. And this year, it's the Occurane of Time remake. And I, I, I always get confused because the bulls on one hand, they'll tell you, hey, this is the next Apple. And then on the other hand, they'll be like, this new launch is coming up. But I think it's interesting on two places, right?

You rightly are saying, hey, this shows kind of the dearth of depth. I mean, if you're buying a switch, you're doing it really for the exclusives. And if they're not coming out with the exclusives, that isn't driving hardware and you kind of, you're looking over at the PlayStation 5 over there and saying, oh, GTA 6. You know, like that, that's not going to, like, it's really interesting. But on the other hand, look, you and I both follow media. If Avengers comes out with a remake of Avengers Endgame, you know, that's digitally enhanced and an IMAX, it'll sell a couple tickets, but nobody cares. But isn't part of the story, hey, this Occurion of Time, it might be behind Grand Theft Auto.

It might be the, you know, it's going to be a top five selling game in the world at the end of this year. It's a freaking remake. And, you know, the thing that Buffett used to say about Disney in the 60s, they're like an oil well where the oil seeps in, right? every 10 years they re-release Cinderella or whatever it is. Isn't this just kind of, I think a bull, the more, the better case to make would be, hey, what you guys are pointing out is this is the oil well where it comes back in. Like, who else could re-release a game and have a bestseller? Like, isn't that speaking to the brand and the legacy and all that sort of stuff on the bullish side?

I think it does. And that's why the stock is bounced up, you know, a little bit over the lows. There is life there for the Bulls to point to, and I won't deny that. But using the Marvel or Disney example that you gave, over the last 20, 25 years, Disney did a lot of acquisitions to refresh their IP. They're not just doing Mickey Mouse part 10. So along the way, they added new franchises and started the cycle over again. And then, you know, everyone's hype about Spider-Man. And in a couple of years, honestly, I think no one will care about this because the X-Men will be here and they can milk that for a long time.

but, you know, we just came out the period where people said Marvel's dead. It's getting tired. They had to bring back Robert Danny Jr. and lots of other actors at retirement. So I hear everyone. I think the game is going to do well. I think that, again, I could see it doing well between now and to the spring with the Pokemon release. But I just want to see more, or at least some release dates. You know, and the other thing, too, that's a little bit different, I think, from other forms of media, is that inflation's everywhere. And everyone knows that. But, the inflation and the costs for the parts is noticeable. So this is also the first time, it's the first time that Nintendo has raised the prices of a new console so early in its life cycle. You're going to lose some demand. You're going to lose some demand there. So this is actually my next question. So I'll just pause and expand.

So what you're talking about is inflation and memory, right? The switch to all these consoles have a lot of memory. And if anyone's been following the stock of Micron or they, memories in high demand and they had to, I think they were eating like $150 of cost in memory. So what you're referring to is, hey, Nintendo had to either eat it on margins or increase costs. And they're kind of in this, for the first time, they're in a tough spot where the cost of the hardware is going way up. So that hits them in multiple spots. So I just want to pause so people know what the inflation you're talking about is.

Yes. No, that's absolutely right. And what I'm afraid of is that in order to make this transition, yes, This might work a little bit longer because people love the Switch 1 games and it'll take them a little bit further. I recognize that. This is not like the absolute Alpha short. But, but consoles are supposed to get less expensive over time, typically. Exactly. And they're supposed to. And in the past cycle, you had, it get less expensive because they came out with a Switch 1 light, I believe. All right. And by raising prices so early, Nintendo implicitly told you that they don't see memory costs coming down any time. soon. So I'm not expecting a switch to light anytime soon. So I don't know how long they could

bridge this gap. And I was also very disappointed. And I just want to point out, because I hear Bulls point this out, the stock started tanking during the presentation. Okay. So a lot of people were disappointed at what they saw. I wasn't the only one. And not that you should always listen to angry people on the internet, but a lot of the fan reviewers on the YouTube community, in the gamer community, who aren't even talking about the stock. We're like, that's it. In addition to remakes, they also have a lot of third-party games that were already released in other systems, okay, over years old.

So I think that puts even more pressure for a Nintendo to deliver on this Legend of Zelda remake. Yes, they have the movie coming out. They do have the movie coming out. I want to point out to people that not all media franchises are created equal, Zelda doesn't have the same resonance with young kids as Mario does. It just doesn't. I am not calling the box office the bus.

I'm not. I think we'll probably do well. But this is not the same as like a Mario Galaxy movie. And yeah, I just really worry that, you know, no one's buying a Switch 2 to play Resident Evil because the graphics are better. They're not. So we'll see how long they can play this game. Pokemon needs to come out as soon as possible.

you know it's funny you mentioned Zelda because like when I think of Zelda and I think I've played pretty not all of them that would be like but I played the major releases right and you don't play Zelda for the story you know like yes it's cool you like the Zelda and the you play it for the beautiful music and the innovative game mechanics it's kind of like now I guess you could say you don't really play Mario for the story too but it is a little surprising that a movie I don't I guess movies have been made on less. I mean, I think I saw a headline the other day that crazy taxi is getting turned into a movie. And if there's a game without any story, it would be crazy taxi. Let me go to the next thing that it thinks interesting. You really hammer home the

declining attach rate, right? And I think a lot of bulls would have a lot of different arguments against you on the decline in attach rate. So for my listeners who, you know, for some reason, haven't read your article, aren't as familiar. Can you describe what the attach rate is and then why you are so worried about the attach rate? Sure. So the attach rate, simply put, is the number, and there's different ways to estimate this, and we can get into that. It's the number of games that are purchased with a new system. And it's a measure of enthusiasm or interests or, yeah, yeah. So it's, it's, okay, how excited people are for this new system? And out the gate, the attach rate out of my exact numbers ahead of

me were significantly lower for a Switch 2 than it was for the Switch 1 when it was. came out in a prior cycle. And then I argued it's even, I would argue, worse than it looks because they bundled this free game along with it. And the game that they bundled is literally, I think Mario Kart is actually their top selling franchise, believe or not of all time. So they're giving away their Avengers game. It's like giving away a free ticket to Avengers with it. So I was like, okay, that's a little concerning. But I get it. The attachment rate is going to grow over time. I will concede that as you have less bundles in the sample. But I look at the top selling titles and the longer these Switch 1 games keep dominating the sales,

it just makes me worried. It just does. So I'm curious, what are the Bulls saying as a rebuttal to the Tatrate or what have you heard? I think it would be both, right? Like, hey, you're seeing, if you look at a PlayStation, right, you're not seeing last years or two years ago's games be the top sellers. It's all the new releases. That might change with Grand Theft Auto because I bet that's going to be the top seller for a while. But I think they would say, hey, again, you're seeing that these games carry much longer lives. And the fact that the Switch Guns games are seen, I think they say, hey, you have the evidence. People are upgrading from the Switch 1 to Switch 2. They still have the Switch 1 library so they don't need as much attach rate. So I think they're saying,

hey, this is the signs of a healthy ecosystem. And then the last thing I think they push back is, is it Nintendo Direct, the subscription service? I can't remember off the top of my head. Yes. Nintendo Direct. They say, hey, maybe one of the reasons the attach rate isn't so high is because people are signing up for Nintendo Direct. So they're playing the long back catalog. And yes, that's decreasing the attach rate. But that's actually great.

We're growing this huge subscription business that makes people very sticky. So I think they would argue you're kind of, and I'm not saying this is right or wrong. I'm presenting a lot of different things. And I'm kind of like spreading peanut butter on a lot of different arguments. I think they would say, hey, you're kind of missing the forest for the trees. Like what really matters is this is the best selling system of all time. there is pretty much no argument there. Maybe it's not quite as good as the Bulls' hope, you know,

Nintendo did. And you pointed out in your article, they cut down production targets a lot. It's still the best selling system all the time, but it's not like the greatest of all time. So I think that's where they would push back on you. One point I just wanted to make about Nintendo Direct, because let's talk about that.

Something that Bulls haven't talked about, which maybe I put it too low in my article, is that Nintendo discloses the number of accounts on Nintendo Direct, and it's not growing. So I think that's sort of like an elephant in the room that I also I rarely hear brought up. And I actually had to triple check it several times. I think it's been fairly flat the constant over the last couple of years. So I'd feel differently if I saw Nintendo wrecked, you know, if I saw the number of subscribers growing, but it's it's not.

They're milking more and more out of a strong fan base. And I just, yeah, I just, I just wonder how long they have to go. That is really, I did not realize that. I would have just assumed it was growing quite rapidly. I put that way too little on the article. I should have, I should kick to it up. But for all your readers and listeners, you can go back and read the article and you can see. The number of subscribers is not growing.

It's actually quite studying what they're doing. Let me go to margins real quickly, because I think this loops into a lot of the things we've talked about. You noted the declining margins that Nintendo has right now. And look, that's expected. When you launch a hardware title, you're going to sell a lot of hardware. Hardware is a lot lower margin than software. And in general, as we talked about earlier, your first, I mean, this is the way it's always working until memory prices went crazy.

When you first sell the console, it's much less profitable than, you know, a console that's five years old because tech gets better, memory costs come to, everything comes down. So it's not surprising that this year their margins went down. I think where you kind of push back against Bulls a lot is you're saying, hey, margins are in for a rough time. And I know Bulls who think this becomes a fully subscription service a la Apple with the App Store. And the margins are going like, I mean, I've seen people talking about 40, to 50% operating margins for this business in the long, long term, which I think is kind of crazy, but they're saying this goes fully light and full recurring revenue, all that sort of stuff. You think margins are going to are low.

They're not going to say probably this low forever, but you're saying, hey, all the IP things people are talking about, if you look at the lines, they haven't really grown, like the margin is lower. Let's just talk about margins real quick. Sure. So I absolutely agree that margins are going to expand as we have more. software and that is not in dispute. The best case for margins would probably be if they never release another console,

okay? I don't think. That's the funny thing. That would be the best case. But then eventually, actually, that might be great for the stock because then they could just sell to Comcast and just be like a normal business. But if they're going to continue the exclusive, like they have to release a console at some point.

Exactly. So I feel margins are more of like a timing issue. And you know, so maybe I'm a little off this year or next year. but it's going to ebb and flow. I think I've actually been spending more time offline talking to gaming experts. And I think, again, take aside the fandom, Nintendo is not known for strong online play. They're not.

They are not known for multiplayer games, not known for online games. The multiplayer, that the online games are mostly going into the bad catalog. I thought it was interesting that Nintendo tried to get some goodwill with the fans by having, a tariff discount where they were giving out, instead of giving back money to consumers, they were putting a lot of their back catalog on sale. And I'm like, okay, that's what every game developer does. So I think that online is actually one Nintendo's weaknesses. And if that is what the Bulls are hoping for, I think they might be a little concerned because most of multiplayer games Nintendo are really meant to be played with friends who are in your living room or friends you know.

it's very different from the from the PlayStation Xbox and PC world where you go you connect to the World Wide Web yes the games have online events I won't doubt that but yeah if if online is is what we're hoping for then I go back to the Nintendo direct subs which have been stuck in place like show me some momentum there and then I'll concede the point otherwise you're just draining more out the cow until Pokemon comes no it's a great point you know Look, I think a lot of the arguments come down to, I've always, people can probably hear, and I think people can probably hear from you too. I'm a huge Nintendo fan. Again, I've played a lot of Zelda's Mario Party.

With kids, my Mario Party skills have gotten really rusty. I can't wait until my kids are old enough to play. But like, since I was a teenager, I've played Mario Party nonstop Marika. But I find them to be very Japanese. They obviously should have sold the company. If this was getting run for shareholders' benefit, they should have sold the company years ago, right? Like in 2020, 2021 in particular, they would have committed a huge premium. I mean, people tell you, Comcast says all the time they'd love to buy them.

The online play, they don't have mobile. It's just, it's a great niche company, but I worry that they're very Japanese. And it's kind of the legacy of the Japanese company that gets run for a dream and, you know, shareholders are there. But it's not ever going to maximize value. I worry about all that. Yes. And one point that I forgot for margins, which is related, in theory, if the media, if the IPE, if the movies, if the theme parks, if they were bigger, if there were more of them, I could say, yeah, you got that great licensing revenue, excuse me, which is typically higher margin coming through the P&L, but I point out in my piece that they don't have that much. If for them to really go in on this whole connected universe, I need to see two to three movies a year, every year, not just every, you know, when they feel like it.

I don't need just a handful of theme parks. I need a dozen. I need way more TV shows. You mentioned Crazy Taxi. It's actually a Sega property. And Sega, not to jump ahead, excuse me, I want to mess up your flow, but Netflix announced sometime this week that, that they did deal with Sega to create new Sonic shows, new shows around Sega IP.

And in a perfect world, I think that's what Nintendo should do. I think they should be in arms deal. Look, that's exactly it. In the long run. But they want to go to loan. Yeah, go ahead. I think we had slight connectivity addition.

I'm completely with you there. Like, I know they've got this high standard and everything, but I don't understand. I've always said, like, you know, you've always got to be raising the next generation. And my daughter, she, we, I don't even let her watch TV shows. And she loves Mickey Mouse and she loves these. And like, there's no Mario.

And maybe she's a little too young for that. But they need to be plastering. Netflix should have Mario shows freaking everywhere. Or, you know, Legend of Zelda is for seven to 10 year old. Or Disney Plus. It should be on Disney. Exactly. And the fact that they don't like, hey, millennials like you and me, we're going to love that

forever. But the next generation, it's easy to. if you neglect them, all of a sudden they're 22 and they don't have this nostalgia and it kind of falls apart. So I actually think they're running a strategy that even though they say they're long term and they're maximizing, I think they're maximizing the fans from the 90s. I think that it's going to be troubling in the long term for them. I think you were spot on.

Hey, it's when you said it earlier, millennials are really excited about this Ocariant of Time remake. I don't think 13 year olds are that excited for it, you know? So I have one last question for your Nintendo unless there's anything else. else you want to sit there. Just last question, Pokemon. I think it's really interesting. They own 35% of Pokemon. They've, I think it's about 35%.

There's different theories about like a nesting doll of different things. But, you know, that is one area where I think of people have argued for a lot of upside. And that's one brand that's really managed to stay super relevant. So I'd love to just, how do you think about Pokemon as it relates to Nintendo? I think I want to just be saying yes back in four. I kind of see it similarly. I think this is a brand that I wish they own 100% of. If they own 100% of, then it could move the stock a whole lot more,

and I'd feel a whole lot better of it. But they sold, I believe, Pokemon Go to a gaming company that I think is owned by a Saudi conglomerate. You were talking about the nesting dolls, the different ownership rights and whatnot. I think another thing about Pokemon that we want to sort of keep in mind is that the game sales are still very strong. Yes, but a lot of Pokemon is consumed outside of the game

in ways that Nintendo doesn't capture, like the toys and the cards. I would probably argue that the younger generations are actually more into the collectible cards, which, by the way, I never thought Pokemon cards would have still be a thing and collectible. So more power to them. I didn't see that coming. But yeah, I think it's a... Go ahead.

Just Pokemon. I would argue the fact that Nintendo has... has a big stake but doesn't own it. What you're saying, like, that's the sign of really good brand health, right? Okay, they don't have to monetize it only through games. The ecosystem is always growing. And I actually think when you look at Pokemon hugely valuable for Nintendo. I mean, it might be worth, their sake could be worth not, I mean, Nintendo is like a 70

billion company, not all of it, but it's worth a ton. But I think the fact Nintendo doesn't own shows you, like, that is what a Mario or a Zelda, that is how they should be growing. It's not just games monetization. I understand Mario might not be perfect for trading cards. but there should be more licensing all this sort of stuff. Pokemon does that

and I think the fact that they're a little more entrepreneurial, I think it speaks to the brand strength and yeah, it's not all through the games, but I think it's actually showing you what an ideal Nintendo would be to me. I agree. It's the ideal and I hope to see them do more of that,

do more of that, excuse me, with their brands. But right now it's too lumpy for me to hold it for two years. Well, I appreciate you humoring me and talking Nintendo for it's been 30 minutes. I love talking Nintendo and I can talk about it for somebody who needs to have me on a podcast, talk for four hours about Nintendo. But let's turn to what you want to talk about in a company that I follow, I follow pretty closely. I've always been pretty bullish on them. And that's Spotify. And I'll just give my bias. I've always regretted in 2021, 2022. I did a lot of work on

Spotify when the stock was probably in the 150s. And I ended up passing. And the reason I always liked it was I spent like 12 hours a day just listening to Spotify and background. I listen to all my podcasts. It's a very sticky subscription that's like on the front of my phone. And I passed because at the time, you know, this is when Ackman was taking

UMG public through PSTA and all this and stuff. I passed because at the time I was also doing work in the music labels and all the music label bowls I talked to were saying Spotify is we're going to run over Spotify in the long term. And I disagreed,

but I was having that like imposter syndrome was like, man, if everybody who studies music labels to help me Spotify's in trouble. Anyway, Spotify's done great since then. You are quite bullish on it. I think it's your strongest conviction long right now. So I'd love to just ask, you know, as we, the end of 2020, stock price is about 550 last I checked. Why are you so bullish on Spotify right now? Sure.

So it's uploaded. It'll be fresh at the top of my page. And I wanted to do sort of a mea culpa of myself because I miss Spotify probably call it from 2024. I should have been paying attention. And the article is called Spotify is a quiet compounder that I will never underestimate again. And very early in your article, I actually alluded to how I mistakenly thought that the record labels were just going to hold them hostage for their margin. I listened to, I don't want to pick on any one investor because a lot of investors. had the same sort of theories and theses on universal music.

I spent, I like to in my writings bring into my experiences working in the corporate world. I've done corporate FPNA far longer than I did any sort of professional investing. And I also worked in radio. And I was turned off from Spotify, one, because I thought they never get right with the labels. The labels would keep the margins down. I, two, mistakenly thought that the Apple tax, well, they're going to have to, you know, pay for a chunk of their subscriptions to other people, and they eased up on that. And then something else I missed, and this was a big turning point, was that Spotify made peace with the record labels in a series of deal renegotiations.

We don't have to get into all the all the turns, Swiss and turns, but I want to say between 2024 and 2025, Spotify set up new deals with all the record labels in which, for the first time, I would argue, everyone was incentivized. to be on the same side. And what I totally missed was that the way the licensing agreement is set up is that Spotify's royalty rate actually goes down the call the faster they grow. The more subscribers they get. It's a basket of metrics. It's not just any one metric. But it incentivize them to grow and that helps the whole ecosystem.

So that's good. It also allows you there, Samian. Sure. I had a slightly different takeaway than you. there. So I think you said everybody's incentivized. And I actually, when I read that, I kind of, and again, I should have been longer too. Like both of us missed it. But I think I had a different read it as the label saying this was Spotify winning. Right. The label was like, you know, the Spotify argument was always, hey, we have all the listeners. If one label cuts us off, like, we'll

shift everyone. And it's, you know, we're going into audiobooks and podcasts so we can like push people up. And I kind of read it as not just everyone's on the same side, but this was Spotify saying to label's like, hey, we own you now, right? Like, we're increasingly less relying on you. And guess what? The next round of renegotiations, I bet Spotify takes more. So I almost didn't just read it as we're bringing people on our side. It's our way or the highway. So pause there and I'd love to hear everything else plus your commentary on that. Sure. So that's the more blunt version of it. I think, I think maybe this is like the corporate side of me that that likes to soften the language a little bit. So you ran it through your PR department and you made sure that nobody came out looking bad even if

somebody lost. Exactly. You want to present as a win-win, even if it isn't. But yeah, it's, it's it's it's it's it's it's it's it's it's it's it's, it's, it's, it's, it's, it's, it's, it's, it's, it's, they, they, they, they, they, they, they, they, they, they're, and, and, and for, for, for, for, for lots of reasons, um, again, coming back, coming from radio, oh, I'm biased to against audio's advertising form, that I think video is just better. I think, I think they was always going to have more share,

higher CPM. So I was like, eh, I don't know. And then I was turned off again when I saw that the advertising tier, so usually in most media businesses, like in the history of media, without pontificating too much,

you typically have far more advertising revenue than you do subscription revenue, typically, because people like free. And I, and if you look at the numbers, I lay this out in my piece, the mix of advertising revenue

has actually been falling, whereas some people are hoping that I would be growing. And the more I dug into it, I said, well, actually, advertising, it is underperforming. And in my risk section, I talk about, okay, well, I do wish it was stronger and I do want to be stronger.

But the mix of advertising has been falling relative to the pie because the premium section has been growing at a mid-teens kegher much longer than I ever thought it would. And you mentioned how they were bringing on audiobooks and that's great. And I underestimated or I overlooked the fact that Spotify got a lot more price discipline when it came to podcasts. Podcasts used to be burning money. They were candidly giving out way too many of these trophy deals.

I'm not criticizing. They're still waiting up Prince Harry and Megan to deliver some of those Spotify contracts, I think. Right, 100%. The only one that probably paid for herself was Joe Rogan, but a whole lot of the other ones didn't. But they pulled back. So podcasting went from being like a money pit to a positive one. Audio books are great.

And what they've also pointed out is that with audio brooks, they are now able to sell additional hours to people, which I'm quoting, man. management here. So, you know, caveats, they don't break it out. Exactly. But they said that very quickly that they have, I think, like a $100 million run rate business on just extra audio credits. I think something else I underestimated too is that part of the way Spotify was able to make more money was not by necessarily making more money, but by getting a lower royalty rate from the labels who would lower the rate in exchange for marketing and promotion. Now, what does marketing promotion mean in digital? Well, in radio, a lot of people think

there's a term for your listeners called payola. It's a very old word. Yeah, so look it up if you guys ever heard of it. It's it's the allegation that you, the record label, whoever, are paying the DJ, paying the station to get more spins. A lot of people think that happens. But it's illegal. But in the digital world, well, it's called marketing. We can get you more placement in the in the playlist and other digital nudges, which technically you don't have. have to hit the button when you get to the playlist. You could skip it, but it's a huge boost. And now as everything's more algorithmic, it's amazing for them. It's one of the reasons I was bullish Spotify back in 2021, 2021, because what's the best space in media for advertising?

It's the Netflix homepage, right? Well, Netflix doesn't let you. What's a really good space for advertising in music? It's the Spotify homepage, right? You open up Spotify and you've got the labels right there. And if they just start, they don't even need to do it. you know, wink, wink, not just, if they start putting you on the front page or, you know, UMG,

you've given us some problems. All right, we're going to go have Warner is going to be in all of our playlist and everything. Like, they've got a lot of ability to shift really quickly and without people even knowing they're doing it. And I'm describing something a little more sinister,

but, you know, all of that I thought was, uh, I thought was real wish. I mentioned Netflix, which I'm, uh,

preluding, I'm kind of foreshadding her next thing. But let me go through the three things I wanted to talk to you about Spotify with, just three high level things. You know, I think the first, we live in the AI world, you have to ask, how do you think AI is impacting Spotify? And I know some bears who think AI is negative for them in two ways.

Number one, the rise of AI music, Sloppifies a lot of the platform. Or number two, one of the reasons Spotify is so sticky is they know all the music I like, right? The high school music I listen to. The Taylor's, they've got all that history. That makes it really difficult for me to go to Apple Music, unless I can just have an AI go read all that and import it to wherever I want and just kind of I can seek the cheapest music player all the time using AI to kind of backfill my content. So those are the two negatives. I think you had a positive take on how they use AI for algorithmic and to increase playing time. But I'll just pause there.

What do you think about AI for Spotify? I think it is a net positive for them. But I think it's also probably it probably gets more oxygen than it deserves on both sides, I think. So, So I won't repeat all the points that you made in just the time. Yes, the smart algorithms, you know, you have a network effect. The longer you've been on it, the smarter it lets you, it knows you, excuse me. I think another benefit that Spotify has that is unappreciated is that because they have the rights and the clearance to all the songs and the publishing or whatever, they can do remixes and other sort of AI creations that another company can't do unless they want to face another large lawsuit. So I think there's that there. I don't, I never want to be dismissive of anyone's opinion.

But I actually think, I think AI music is probably the least of their concerns. You know, okay for easy listening or whatnot. But until I see an AI song, you know, really dominate the Hot 100 charts, I'm a little bit skeptical about that. It's coming. But I actually think it's a bull case because AI, it's not represented by a label, right? So if they're just filling it and you're just auto listening stuff, I think the profits go up. Let me turn to the second case. You know, actually I start here.

The other interesting thing here is Spotify trades for about, let's call it 40 times earnings and you can push back if you want, but about 40 times EPS. Right. Yeah. Keep this in mind because Netflix has something similar. But Spotify is growing revenue, just looking, low double digits. I think it's fair to say they're growing revenue. You know, a low double digit grower with 40 times EPS. I would say not crazy pricey, but that's on the pricier side.

Like you're really starting to price this at an annuity rate at that point. And for a business that I know they've held off the Apple music competition, I know they felt off the YouTube music competition. I know they felt off the Amazon music competition. But for a business that has a lot of very well-funded competitors that are making this a core part of their bundle, like 40 times earnings on double-digit revenue growth, seems price for perfection. So I think the main pushback I'd have to you is, hey, man, you've got a one-

category thing with a lot of well-funded competitors and the market is treating into this like a category winner like it's priced pretty richly so how would you respond to that sure so not to get off topic but this this also reminds me a little bit of some of the knocks i've heard about apple um when people from time to time get bearish on apple and they say oh well you know it's growing it at quote unquote low rate here's what i would say um and a big crux of my piece and again something else i love about spotify and why i call it a quiet compounder is that most people, not you obviously, but most people stop right there when they say, oh, just going at 10 and 11% a year on revenue. But this margin expansion that is well underway is actually leading to earnings growth, probably high teens.

I can see them growing actual earnings at maybe a 20% Kager over the next couple of years. Because, again, for a long time, their operating margins were incredibly thin. I think on an LTM basis, I think it might be about maybe, 14% or so right now mid-teams. They have a line of sight to 20% to 20% even margins between now and 2030, which I think is achievable just on the run rate that they are. And because of everything we said before, I think beyond that, it could go to 30%. So I think that this is a situation where, yes, you're always going to get a higher multiple

than what some people might be comfortable with because it is an oligopoly. And actually, I would argue too, I think, Spotify doesn't get enough credit for off Apple, YouTube music and Amazon music. They're never going to slay the beast. They're never because they're always going to be there. But they're the clear number one. I'm most worried about YouTube. But yeah, I think that a low 30s multiple for something that's compounding earnings

in like an oliglip in the oligopoly for 20% year every year, you have to look at the earnings growth and the cash flow growth. They're upping the buyback. I think the cash returns are higher than people think. And in my case, I'm not arguing for any margin expansion. I'm just saying, let's just roll the multiple forward a couple more years. And you could see 25 to 35% upside easily. And then beyond that, if they keep growing these premium subscriptions and lowering their costs,

this could be a winner. If anything, I think it even shows. how low Netflix as multiple could be. Well, we're going to talk Netflix. Let me do my last Spotify question. Then we'll go to Netflix because I think this is also relevant to Netflix. You know, I think the last pushback would be, hey, Daniel Lack stepped down as CEO at the end of 2025, handed it off to co-COs and EC is now the executive chairman. You know, I can't think of many places where the Daniel Lack founder, visionary CEO, step back.

Now, he's executive chairman, not fully stepped back. but right you know i think you need look no further than the netflix you know if reed hasting steps away it's been a little bit of a rocky tenure for netflix since reed hasting stepped away and anytime that happens you have to look and say hey did the visionary say oh the next couple years are going to be a little bit rocky maybe i step back collect my riches dial it back a little bit and let somebody else handle the the rocky period so i think that would be the last interesting pushback i would have on Spotify. And that's fair. And that's fair. And there is a little bit of, I guess, adverse selection, because you're right. The CEO knows more than we do. Sometimes they want to run off into a high.

Allegedly. Allegedly. Allegedly. You know, not to mix streams, but, you know, a lot of people were more skeptical in Apple after Steve Jobs left. And, you know, Tim Cook is not a creative guy at all. But I think, look, this is a high. take in general, I think CEOs are overrated in general, in my personal opinion, having, having worked for a lot. I think they get like quarterbacks. I think they get too much to credit and too much of the blame. I think that the current CEO, he comes from like a tech background, engineering background.

This is very much an engineering product. And what they're trying to do, I mean, they aren't making music. They're doing a platform. They're trying to get the best economics out of it. I think this is a trend that is far bigger than the executive suite. So I don't really read too much into the management transition. And I think the proof has been in the pudding with the margin expansion. You know, the margin just in the past three years have exploded without Daniel Eck there.

And I think it can keep going higher. You know, on the CEO overrated, I think I would push back in here this way. I agree. I think most CEOs are overrated, but use quarterbacks. So we'll stick with quarterbacks. I think it's one of those things where, you know, there's such a thick, right tail. Most of them are overrated, but if you have one of the top three guys, and I'll just use Patrick Mahomes and Tom Brady, like, why are they holding up the trophy

year after year? If you have the top guy, I think those are actually underrated and they're always underpaid. If we went to the NBA, the max contract, if you have LeBron at his absolute peak because of the max contract, he's way undervalued. I think Mahomes and Brady have been way undervalued because they also value winning and consistency and all this sort of stuff. Like, I don't know if Daniel Eck, I think building this business from nothing, you know, A, he's a great founder. He started this great company. I don't know if he was like an A plus plus plus plus multi-billion dollar CEO.

I kind of think he was, but, you know, I would agree with you. Most CEOs are overrated, but a Daniel Eck or as much as I disagree with a lot of his stuff in Elon Musk, we could probably find three or four. Like the right tail is just so thick for that thousand X engineers to use the tech barlands. Like I would say those guys have been and are still underrated. Mark Zuckerberg. who I know you've done a lot of meta. I would probably put him in that category.

I mean, I know people hit or miss based on the spending, but that would be the one area to discriminate. Unless you have anything else on Spotify, I'd love to talk Netflix real quick. I guess the only concluding thought I would have in Spotify is I think another benefit that Spotify got over the last five years or decade is that they actually have a lot fewer streaming competitors than they used to. I think that it's a little bit hard, I think,

to play Monday Morning quarterback in terms of how Daniel would have navigated the renegotiation of these rights deals five years ago because back then, and people might forget this, there were a lot more streaming alternatives. You had title, you had, I think, Dizer, I'm, sorry, I'm butchering the name. I literally forgot them. So many of these up and coming upstarts have fallen by the wayside. And I think for a while it really looked like, oh, this is a copycat platform. But now they have the scale to compete with the best of the best.

And you know, you can do new things. And maybe this is the point where a B, a B-level CEO can steer the ship because the foundation is that strong. Let's go to Netflix. So Netflix, you know, I think it's an interesting time. If I was a good podcast host, I'd have how much they're down year today and how much they've down since the Warner Brother bid came up. But it's a lot, right? Yes. The stock is, it's been a rough run for the stock.

I think people are pretty curious. You know, as soon as they did the Warner Brother deal, you heard skeptics saying, hey, what are they seeing in their numbers that they see the need to go do kind of their first big acquisition of all time? And we've talked about that. I don't think we need to beat them up for a deal that isn't happening in the six months in the past at this point. But they've also, they've been shifting their KPIs down around a little bit, all this sort of stuff. The stock was down after their most recent earnings report. So it's been a rough ride.

And I think you have a different view. and I've heard from a lot of bulls. Bill Ackman, a prominent bull who, you know, he sold it in the dole drums of 2022 and he's back in now. But I know people who followed it all the time. I think a lot of bull say, hey, yes, it's not going at our like top end A plus stream of what we wanted, but the business is performing really well.

This is the cheapest it's been in a while. They think it's really interesting. They've won the streaming war. So I just love to turn it over to you. You know, as we sit here, September, is it September 16th? The stock's in the high 70s. How do you think about Netflix on a go-forward basis? I think this is going to be, well, first of all, I think it was very impressive for, for Ackman and Pershing to change your mind publicly and in a big way.

Because I know a lot of people who wouldn't go back to a stock that they were so publicly wrong about and pick her back out. People dunk on them. It's like, hey, I'm going to make numbers. He bought the stock at 200 and sold it to 150 and this is all not adjusted for splits. And now he's buying it at 500. What a loser. And I'm like, hey, man, do you know how hard is it? is. I come on this podcast all the time and I say the stock chart is up into the right

and I feel like missed it, like, whether he's right or wrong, the mental flexibility to be like, oh, I miss something that 3x in my face, but I think the opportunity is there. That is incredible mental flexibility and I think everyone should wish they had the ability to that. So I'm spot on. Great point. So yeah. So I think that he was smart to change his mind. Candidly, I think a difficult time, I've had difficult time discussing sort of the Netflix Warner Brothers and Paramount wars. Because I think a lot of people have been rooting for Paramount as a proxy for how they feel about this administration.

Because I think that if we want to be hard on any CEO about making uneconomic decisions, I think Paramount's right there. Their UFC deals don't make any sense. A lot of their deals don't make any sense. Their margins aren't expanding. by every objective metric that people obsess over for Netflix, I never see that same smoke for Paramount. I feel like it's a lot of cheerleading where the only standard of success is do you get the deal done?

But when I hear talk about Paramount, look, I think Netflix is, it's a value stock, and they're just going to have to, they're just going to have to execute. I think being, I think too many people's minds are still anchored in the old world where I say it's in media. A lot of people are biased to, did I like the show I just watched? But when you are a global streaming service, and I remind people,

Netflix is the only truly global streaming service other than YouTube. So you can't necessarily judge it purely based on how many Emmys that they've won, which it still is a lot, or the hot show because that comes and goes. I don't know if Netflix is going to change people's minds. It reminds me of,

when people a couple years ago were saying Apple doesn't innovate anymore. When's the last time that they made a product that blew your away? Well, guess what? Sometimes they don't have to. They changed the metrics, and the answer they gave is that they want to focus on profitability and people got mad. Tough cookies. Suck it up.

Because it's the truth. And if the margins keep expanding, like they are, I think the operating margins are Netflix are in the low to mid-30s with a path to 40, okay? people can stay mad, but I'm not going to sit here and say that a company that's growing revenue in the low double digits, expanding margins, which again, if you actually get earnings growth, you're talking about high teens, 20% earnings growth. And I said on the last podcast, not to belabor this point, Netflix has gotten incredibly efficient in milking more and more out of the content library that they have. So they're less concerned about winning the war for cool,

which ultimately will send you out of business. Like, it's really cool that Paramount Plus got UFC, all right? But nobody in a straight mind could actually argue that it was actually a good monetization thing. So, yeah, let the stock stay low. Let people stay mad. And they'll keep back, they'll keep expand their margins, the PE of 18, whatever, will go down to 17, and then it'll re-rate. And just to warn your listeners and viewers,

I said, I think eventually they're going to do, to probably go after another big acquisition. There's nothing bad about acquisitions. I think it's absurd that they're anchoring their biases to what someone said three years ago. Three years ago, we said we're not going to do any acquisitions. Well, yeah, yeah. Well, it's five years later.

And we killed all the competition. And we have, you know, a billion user hours. We're going to have to buy things from the graveyard of corpses. media companies out there. And the one thing I would say about Netflix, too, watch out. Netflix, they're picking off some of the best YouTube stars, sometimes for exclusive deals, sometimes for non-exclusive deals. They're using YouTube sort of as like their pilot season.

Okay, so, okay, I'm very, I'm trying to go for more names. People look for a very perception. I think boring and uncool is the very perception here. And I think that Netflix can keep winning on that. Let me start with the most interesting thing for, well, not the most interesting, but an interesting thing. The rise of AI videos, you know, for a long time, I've thought the Netflix moat for value investors and everyone became, hey, as you said, they've got the global distribution.

They've got a billion users. When they price any type of content, they price it over a billion users. Everyone else prices over 500 million, 100 million, 100 million, 200 million. So the price per content is way lower. They've got all these advantages. They can make their own hits, you know, just think about. what they did for suits or choose your legacy media property that flamed out on legacy media and became a huge hit on Netflix. That was all the bullish thing. You know, nobody could match them in

scale. The rise of AI generated content, you know, and this goes in two ways. A, go listen to Facebook's call and hear them talk about how improved AI algorithms are causing people to spend 10% more time on Instagram and stuff. So number one, AI is getting better at generating short term form content that keeps you kind of just looped over and over and over again. And the old Netflix argument, our biggest competition is not HBO, it is sleep or whatever, right? Short-form content's really getting up there. And then B, the rise of AI content makes it easier to make TV shows, makes it easier to make, you know, algorithmically generated AI shows.

Netflix might have a lot of rise of AI-generated competition. So I just love to ask you, you know, we talked a little bit of Spotify, but I think AI is maybe more pertinent to Netflix, both on the short-form content and on the generated side. How are you thinking about AI as a related? to Netflix. Sure. So when I think about AI generate content,

the biggest place I see AI generate content is on YouTube, mostly in the children's vehicles. I see a lot of creators who use AI to skirt or just flat out break copyright law and take clips of shows or movies or other ways. I wish I could show you my YouTube algorithm because you said children, but they know, hey, show Andrew an old Superman clip, show Andrew a clip from billions, show Andrew

a clip from scrubs, and he's always going to watch it. Oh, yeah, that looks pretty interesting. Just like cut those videos up. 100%. And for children, for example, so they know that, let's just use Sonic the Hedgehog, an outside party. So they have clips, again, scurrying the laws from all the movies and whatnot, whether or not, you know, Paramount's gaining money for that is for a topic for another day. But then they have truly AI slot videos where it's like, oh, it trailers from movies that don't exist.

Yep. Particularly in the kids' ones. I see a lot of that. And kids don't know any better. So they think, yeah, Sonic 10's coming out. I'm far less worried about that for your listeners who aren't, who don't have Sonic in the background. Part four is coming out in 2027. I'm actually way less concerned about AI content.

I need to see some use cases or some examples of like actual AI shows that get people going before I I care too much about it. I see like the novelty of it. I mean, I don't know. Can I just pause you there real quick? I definitely hear you. But AI is a lot about where the Pucks is going, not where it is. And, you know, I think of that old video from it was only like two years ago where it was Will Smith eating the cheeseburger. Do you remember that?

Right. And for viewers you don't know, you know, they, you know, they. They had AI generated a video of Will Smith eating cheeseburger. And it's like Will Smith has eight fingers on each hands. And it looks almost like a SpongeBob SquarePan. It's like cartoonishly bad. But that was only two years ago. And then you fast forward today.

And if you did it, you could have like a photo realistic. It would look like Will Smith eating a cheeseburger, right? And I hear you, you haven't really seen AI content take off yet. But it can generate pretty damn good clips. I saw one the other day. It was like I had AI generated a sitcom. And it was not entertaining. But if you said, hey, this was a sitcom and be like,

well there are some weird jumps but yeah it kind of makes sense like i'm not talking about where it is today but if i run that for two years and especially maybe you have one writer monitor like monitoring the i and say this doesn't make sense change us i can definitely see a world where in two years you could have a i generate you know a friend's knockoff you know six attractive friends who are just hanging out and cracking jokes with an with a real writer like monitoring and creating a show i could see that and that feels like a pretty damn big risk to me It could happen, but look, I think that if these things are going to take off, first of all, the actors who are already on edge are going to step in. And the actors and the actors unions are going to step in to make sure that they get a piece of that because they're not going to let their likenesses be used without some sort of compensation.

Isn't that the word, though, because yes, if I. was doing a friends like just like hey here's extra episodes absolutely i'm paying jennifer anison right but isn't the worry i'm going to do make a look like of jennifer anison i'm not going to call it friends i'm going to call it acquaintances and it's going to be six lookalikes and it's just going to be one writer having a i generate the entire thing it's like hey who are you going to sue i'm not using jennifer anison i'm just using random cute blonde there like it's no likenesses i guess i'm worried about the internet getting filled with that slop i think that again i think this is more of a YouTube phenomenon. In which case, you know, I think this is a chapter, maybe a subchapter of the

bigger fight between Netflix and YouTube. And I would just say, in the history of media, in every medium, I think people have thought it's more formulaic than it actually is. You know, in every period of media, you take the top show or genre, they've had knockoffs of it that have tried to capture the zeit guys. Again, I keep going back to children's to children's entertainment because with children's entertainment, I think you get more cycles because new kids are always being born who don't have a memory of what happened before. And so if you look at all the Disney, let's just Disney,

all the Disney hits, their YouTube videos about this, where Disney came out with, I think, a bug's life. Okay. And then there was the B movie that came out or another movie came out. Well, it was Disney was Bugs Life. And then there was like ants from Dreamworks. And Dreamworks intentionally. went forward.

Yep. Yeah. Yeah. It's interesting. It's always going to be there. Yeah. So yeah. So I think that media is tough.

Media's tough. Go ahead. It is very hard. And look, Dick Wolf, all the Dick Wolf stores, Law and all the Chicago's, they are very formulaic. But as you're saying, it seems formulaic, but there's a reason that NBC is paying Dickwick a heck of a lot of money to be like basically all of their prime time schedule. And they're not paying you and.

me. You and me could probably make a formula, but we're missing that last little 2% that makes it magic. So I am with you there. Let me quickly go to, I just, I don't know if this is asking you for comment, but the NFL is back. And one thing that I thought was really interesting that I think speaks to Netflix's moat is last year the NFL kind of opening game was in Brazil and it was on YouTube and it got about 17 million viewers. And this year it was in Australia and it was on Netflix and it got about 19 million viewers. Now, that is a little bit apples to oranges because I think the Brazil game was on a Friday, which is where all TV ratings go to die and the Netflix game was on a Thursday. But on the other hand, to watch Netflix, you need to log in and YouTube was completely free.

And the YouTube game had Patrick Mahomes, probably the biggest star in the NFL. The Australia game had some good teams, but it did not have that. And I know a lot of people said YouTube played game with their ratings number. So I guess what I'm saying is it's pretty wild that Netflix can beat or match YouTube's ratings, like requiring a login. So we can talk NFL as King. We can talk Netflix. But I just thought that was a real bullpoint where, hey, they've got a lot of power here and they can drive a lot of things. If you want to do 60 seconds on that. The threat from AI, I think it just reminds people that Netflix still has the ability to take a whole lot of money away from television. They're still not done feasting off the decaying corpse of the linear

television market and taking share from all their competitors. And if they can take sports, which they're showing that they can, they can live off that for a long time because it opens up to new ad categories that they never had before, like advertising and sponsorship. So I'm more bullish because I think that Netflix can become more like TV than I'm worried about Netflix losing necessarily to short form, although we need to watch the whole thing. I agree. All right. We are way past an hour, but I'd love to wrap it up with just this question. So we talked Spotify earlier, and I said, hey, I'm preluding to Netflix.

And, you know, when I read your articles, it seems like you, I think Spotify is your top pick. It seems like you're the most bullish on Spotify. And you can be wrong or not. But when I look at Netflix, I mean, I hear you a little bit more passion I would say about Netflix in this conversation. And I look at Netflix and just high level, you know, I said Spotify is low double digit growth. Netflix is about low double digit growth. Spotify. is, you know, they've got this margin expansion story. Netflix has the same margin expansion story. And while Spotify trades at about 40 times price earnings, Netflix trades at about 20 times price earnings. Now, Netflix has a little leverage on it. Spotify is net cash. So it's a little apples or oranges,

it's different businesses. But, you know, just high level, I look and say, hey, if I was just quantitative metrics, Netflix is half the multiple. It seems to me that Samin is equally, if not more bullish Netflix. Why would Netflix not be the top pick versus Spotify? And I know you're bullish both them, but just, you know, if I'm saying, gun to your head, choose between your children, it feels like it should be Netflix over Spotify. I mean, if you want to look over the next maybe five years or more, I could see that argument. I think that I think that I'm more bullish on, I have more conviction on Spotify because I think

that they have a lot of the same financial metrics, same story with less competition. Okay. Because Netflix, I think a problem with Netflix, I think a lot of Netflix is alpha, is going to come from earnings because there's so many opinions out there in media that there's always some new upstart. There's always going to be another media competitor around the corner. And honestly, I think that's gun to my head. I wouldn't be surprised of 10 years from now Netflix is trading at 30 times because they've become more of entertainment super app. I think some of the evolution of Netflix is going to have to take a little bit longer. I'm responding. I sort of rate my

conviction in terms of not just upside downside, but, you know, what could go wrong? And I see Spotify having a much better glide path to 30% than I do seeing Netflix. But, and stay tuned for this, this is going to make a lot of people mad when Netflix starts bundling other people services and they start selling, you know, selling access to the other streamers and taking a cut. If people are going to say, oh, no, you're changing strategy. But I think I think Netflix has a lot. a lot more levers that they can pull, but I think it's just going to take a little bit longer because, again, media is fun. And in fun businesses, you have irrational competitors that are going to stay there a lot longer.

Paramount should not be in the conversation. They're only there because the CEO has a father who's one of the richest people on the planet. This should have been game over a long time ago if there was any other one. And then you have YouTube as well. I think that Netflix probably deserves a lower multiple than Spotify because Netflix is more of a direct competitor, YouTube, and YouTube's never going away. But no, I like them both. I think Spotify's a little bit cleaner, and I don't want to have egg in my face right now. But, no, I think the future is bright for both of them.

And you sort just have to follow the earnings, not the noise. And, you know, we're past hits. It's about money. If they can get more NFL games, whoo, watch out. Great. Well, let's wrap it up there. from accrued interest. It's accrued. I'm including a link in the show notes.

I mean, I can't say I read everything you publish because boy, do you publish a lot. But I, the big ones I follow a lot. And look, you do stuff other than I focus media because I love chat in media. But I know you've been following the big Uber insider buys and covering Uber, lots of tech stuff. So really appreciate you coming on. Looking forward to having you again in the future. And we'll chat soon. Thank you very much, guys.

And to all the students out there, go to the website. I activated student discounts. You can DM me, email me. I'm all the social platforms. I'm going to be having more student-focused content on how to pitch a stock, how to pitch a short, and giving you more versions of my best pitches so you can get ready for your investment clubs, for your internship interviews, for your job interviews.

So I'll be doing more of that coming forward. I'm laughing because how to pick a stock. I mean, putting my money where my mouth is. Oh, sorry, you cut out for a second there. I'm laughing because how to pick a stock. I mean, you're stepping on my toes. I mean, and how it's a picture short? The answer is just don't pitch shorts.

No, I love your video. I love your video and it was great. And I want to talk more about, you know, some of the components of it. Like, how do you get very perception? How do you talk about incremental growth and not just top line growth? So there's no right flavor. You know, everyone, if you haven't watched Andrews video, it's actually very fantastic. It's a great overview.

And there's no one way to do it. Just focus on the company that you love and you'll do the, work and you'll tell the story. I appreciate it, man. All right. Well, hey, this has been great. Looking forward to our Q4 checkup and we will go from there. Simmy, thanks so much. Talk soon. A quick disclaimer. Nothing on this podcast should be considered an investment advice. Guests or the hosts may have positions in any of the stocks mentioned during this podcast.

Please do your own work and consult a financial advisor. Thanks.