Investors fear the Netflix flywheel is broken, warns Lightshed’s Rich Greenfield

INCREASE 10% THIS YEAR. WE'LL EXPAND LIVE PROGRAMING TO REGIONAL EVENTS AS WELL. RICH GREENFIELD JOINS US NOW. FRESH OFF THE CONFERENCE CALL. HE'S CO-FOUNDER OF LIGHTSHED PARTNERS. SO, RICH, WHAT DO YOU THINK INVESTORS WERE LIKE PEAK BEARISH GOING INTO THE QUARTER. SO NOW WHAT. >> LOOK MELISSA THIS IS FUNDAMENTALLY INVESTORS BELIEVING THAT NETFLIX HAS GONE EX-GROWTH. LIKE I THINK THEY ARE JUST PROJECTING OUT AND SAYING ENGAGEMENT ISN'T REALLY GROWING MUCH. YOU KNOW, IT'S UP 2% OVER THE FIRST HALF OF THE YEAR, YEAR OVER YEAR. AND I THINK THEY'RE GOING, GOD, IT'S UP 2%. THIS THING IS GOING TO START TO SLOW EVEN MORE REVENUE GROWTH, WHICH WAS, YOU KNOW, GOING TO BE 12% FOR THE YEAR X CURRENCY. THEY'RE GOING THAT'S GOING TO BE SINGLE DIGITS PRETTY SOON. AND SO THEY'RE LITERALLY JUST LOOKING AT THIS COMPANY AS LIKE, THIS IS BASICALLY TWO PEOPLE HAVE ALREADY TEXTED ME SAYING, THIS IS NOW A LEGACY MEDIA COMPANY AND LIKE, GOOD LUCK STREAMING INSTEAD OF THE OLD GOOD LUCK BUNDLE. I MEAN, PEOPLE ARE JUST, THIS IS WHAT IT FEELS LIKE. PEAK BEARISHNESS. PEOPLE JUST DON'T BELIEVE THAT THERE IS GROWTH LEFT IN STREAMING, WHICH I THINK IS FUNDAMENTALLY INCORRECT WHEN YOU LOOK AT THIS, ESPECIALLY ON THE ADVERTISING SIDE AND HOW FAST THAT AD BUSINESS IS GROWING, HOW EARLY IT IS. BUT HONESTLY, MELISSA, THERE'S NO WAY TO DISPROVE IT OTHER THAN JUST TIME. AND INVESTORS RIGHT NOW HAVE NO PATIENCE FOR THIS COMPANY. AND THEY'RE JUST PUKING IT. >> DO YOU THINK THAT'S THE RIGHT THING TO DO, RICH? OR DO YOU SAY NO? YOU KNOW, WITH PEAK BEARISHNESS THE STOCK DOWN ADDITIONAL 9% ON TOP OF BEING DOWN 40% OR 30% GOING INTO THE COURT, YOU BUY IT. >> YOU DO. I MEAN, THIS IS WHEN YOU FIND THE BOTTOM RIGHT. IT'S LIKE WHEN YOU SEE EVERYONE WHO LITERALLY THERE IS JUST HATRED AND EVERYONE IS GOING. THERE'S NO BELIEF. I MEAN, THINK ABOUT IT. THEY'RE GROWING REVENUES AT 12%. MARGINS ARE EXPANDING MEANINGFULLY. THEY'RE BUYING BACK A LOT OF STOCK. THEY HAVE TRUE CONVICTION IN HOW BIG THE. I MEAN, GREG PETER SAID IT RIGHT ON THE CALL. WE ARE STILL VERY EARLY IN OUR GROWTH AS A COMPANY, BUT INVESTORS ARE LIKE, INVESTORS DON'T CARE. AND SO THAT'S THE OPPORTUNITY. THE COMPANY IS BUYING THE STOCK. THEY BELIEVE. AND I THINK THIS IS NOW GOING TO BECOME A SHOW ME STOCK OVER THE NEXT YEAR. THEY HAVE TO PROVE THAT THERE IS GROWTH. AND YOU KNOW, ONE THING THAT ISN'T REALLY BEING TALKED ABOUT THERE IS LESS COMPETITION. YOU KNOW, HULU IS BASICALLY BEING SUNSET BY DISNEY. HBO ASSUMING THE PARAMOUNT DEAL EVENTUALLY GOES THROUGH. WE'LL SEE HOW FAST IT GOES THROUGH WITH THE REGULATORY BATTLES. BUT EVENTUALLY HBO IS GOING AWAY AND IS GOING TO BE FOLDED INTO PARAMOUNT PLUS. AND SO THE COMPETITIVE DYNAMIC IS ACTUALLY BECOMING A LOT EASIER, I THINK, OVER THE COURSE OF THE NEXT 18 MONTHS. IN TERMS OF HOW MANY DIFFERENT SERVICES ARE OUT THERE. BUT AGAIN, NONE OF THAT MATTERS TODAY. RIGHT NOW, IT'S JUST FEAR. ON THE ENGAGEMENT REPORT, THE COMPANY EVEN SAID, OH, WE'RE NOT GOING TO REPORT THE ENGAGEMENT NUMBERS ON A SIX MONTH BASIS. WE'RE GOING TO EVERY YEAR. LIKE ANYTIME YOU PULL NUMBERS OR PULL INFORMATION, INVESTORS THINK YOU'RE HIDING SOMETHING. IT DOESN'T MATTER WHETHER IT'S IMPACTING REVENUES OR EARNINGS. PEOPLE ARE JUST NERVOUS, AND I THINK THEY HAVE LOST INVESTOR CONFIDENCE. AND IT'S GOING TO TAKE TIME FOR NETFLIX TO DEMONSTRATE AND PROVE TO PEOPLE THAT THEY CAN GROW EARNINGS, HIGH TEENS TOWARDS 20%. UNTIL THEY DO THAT AND PUT THAT ON THE BOARD, PEOPLE ARE GOING TO BE NERVOUS. >> RICH. SO I AGREE WITH YOU. IT'S STEVE, I AGREE WITH YOU. I THINK PEAK BEARISHNESS IS WHEN YOU WANT TO BUY THIS STOCK. I'LL GIVE YOU TWO REASONS. I THINK COSTS ARE PROBABLY ROLLING OVER IF NOT COMING DOWN AND THEN THE AD TIER. I DON'T THINK ANYONE GIVES IT ANY CREDIT FOR AD TIER. IT'S STILL THE BEST STREAMER OUT OF ALL THE NAMES THAT YOU HAD MENTIONED THERE, IT LIFTS ALL BOATS. SO WHEN I LOOK AT THE CHART, I THINK THIS IS A CHART I WANT TO BUY. I DON'T WANT TO SELL. JUST TALK TO ME ABOUT THE AD TIER. ARE PEOPLE LEAVING THAT ON THE SIDE OF THE ROAD? >> YOU KNOW, THIS IS AN AD BUSINESS THAT'S GROWING 50 OR SORRY, GROWING 100% YEAR OVER YEAR, BASICALLY DOUBLING FROM ONE AND A HALF TO 3 BILLION. BUT THE 3 BILLION IS STILL A TINY NUMBER. LIKE WHEN YOU LOOK AT THE AMOUNT OF TIME SPENT ON NETFLIX BY THE AD TIER MEMBERS, THAT 3 BILLION, I THINK EVEN IF THEY NEVER GREW ENGAGEMENT, YOU KNOW, SOMETHING THEY DON'T TALK ABOUT IF THEY NEVER GREW ENGAGEMENT AGAIN, THAT 3 BILLION COULD BE MULTIPLE TIMES HIGHER THAN WHERE IT IS TODAY. I DO THINK THAT THEY'RE DOING A LOT OF THINGS TO ACCELERATE ENGAGEMENT IN TERMS OF GOING INTO SHORTER FORM PROGRAMING, BUILDING OUT VIDEO, PODCASTING, LIKE THERE'S A LOT OF THINGS THAT THEY'RE DOING. AND, YOU KNOW, I THINK THE MOST INTERESTING LINE OF THE RELEASE THAT NOBODY REALLY PAID ATTENTION TO WAS THAT THEY SAID ALL OF THE NEW FORMS OF CONTENT THEY'RE ADDING, WHETHER IT'S, YOU KNOW, THE JAY SHETTY SHOW OR JAKE SHANE, LIKE THOSE TYPES OF THINGS. THEY'RE ACTUALLY FINDING PEOPLE ARE WATCHING, NOT IN THE EVENING, THEY'RE ACTUALLY WATCHING DURING THE DAY. AND SO THEY THINK IT'S INCREMENTAL VIEWING. AND SO WHEN YOU THINK ABOUT HOW THAT SORT OF COMPOUNDS OVER THE COURSE OF THE NEXT 12 MONTHS, I THINK THERE'S ACTUALLY REASONS TO BELIEVE ENGAGEMENT GETS BETTER. AND THAT'S OBVIOUSLY IMPORTANT LONGER TERM FOR THE ADVERTISING BUSINESS, BECAUSE OBVIOUSLY EYEBALLS EQUAL ADVERTISING