#960 John Pompliano On Netlix’s Insane 20 Year Takeover Of The Movie Industry

In this episode, I talk to my brother John as he breaks down Netflix's wild story behind the past 2 decades of growth into the company we know today. John also shares surprising stats about their DVD rentals and why despite their recent challenges, Netflix isn't going anywhere anytime soon. ======================= Exodus is leading the world out of the traditional financial system by building beautiful and user-friendly blockchain products. With its focus on design and user experience, Exodus has become one of the most popular and loved cryptocurrency apps. It’s supported on both desktop and mobile, allowing you to sync your wallet across multiple devices so you can have access to your funds anywhere. You can instantly exchange around 100 different cryptocurrencies straight from your wallet. Interactive charts let you view an asset’s price history and your portfolio’s performance over time. And maybe the best part, Exodus is integrated with the Trezor hardware wallet - making advanced security easy for everyone. Visit exodus.com/pomp for your free download or search Exodus on the App Store or Playstore. ======================= Today’s episode is sponsored by Abra. Based in California and backed by top VC firms, Abra is an all-in-one simple, secure app that allows you to trade over 110 cryptocurrencies, get 0% interest loans using your crypto as collateral and earn interest with up to 14% APY on stablecoins and 8.15% APY on Bitcoin. Join nearly 2 million users by downloading Abra from the Google Play or Apple App store. If you download the app today, you will get $15 in free crypto once you fund your account. You came, you invested — now conquer. ======================= DeFi Technologies represents what’s next in the digital economy -- providing simplified, trusted access to crypto, decentralized finance and Web 3.0 investment opportunities. Institutions and investors can gain diversified, secure, compliant, and easily tradable access to a diversified set of industry-leading equity products and protocols, through a single stock purchase on a regulated exchange. Currently listed on U. S. (OTC: DEFTF) and Canadian (NEO:DEFI) exchanges. For more information or to subscribe to receive company updates and financial information, visit our website at http://defi.tech =======================

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:02Anthony Pompliano?

  What's up everyone, this is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Now let's kick this thing off. In this episode, I sat down and I talked to my brother, John Pompliano, about Netflix. We talk about where their revenue comes from, what products they have, subscriber growth, and what the future of Netflix could look like. There's some wild stats and insights in this episode that I think you'll enjoy. I always enjoy having these conversations with my brothers and hope you guys enjoy these episodes as well. Before we get into this episode, though, I first want to talk about our sponsors. Today's episode is brought to you by Exodus, the world's leading desktop, mobile, and hardware crypto wallet. They offer beautiful, user-friendly blockchain products that sync

• 0:44Anthony Pompliano?

  across all of your devices, making it easier to send, receive, and exchange over 150 or more crypto assets in one place. And with world-class customer service available to you 24/7, Exodus always has your back. But the fun doesn't stop with staking and trading. They recently launched a new NFT marketplace where you can buy and sell your favorite NFTs on the Solana network. By partnering with the popular NFT platform, Magic Eden, they're offering the full Monte unverified collections with more added every single day. Ready to check it out for yourself? Run, don't walk. Over to exodus.com/pomp for your free download today. Again, if you want the world's leading desktop, mobile, and hardware crypto wallet, go to exodus.com/pomp today.

• 1:26Anthony Pompliano?

  Today's episode is sponsored by Abra. They're based in California and they're backed by top VC firms. Abra is an all-in-one, simple, secure app that allows you to trade over 110 cryptocurrencies, get 0% interest loans using your crypto as collateral, and earn interest with up to 13% APY on stablecoins and 7.15% APY on Bitcoin. You can join nearly 2 million users by downloading Abra from the Google Play or Apple App Store. If you download the app today, you will get $15 in free crypto once you fund your account. You came, you invested, now conquer. Abra, conquer crypto. Go check it out today. This episode is brought to you by DeFi Technologies. DeFi Technologies represents what's next in the digital economy.

• 2:10Anthony Pompliano?

  They're providing simplified trusted access to crypto, decentralized finance, and Web 3 investment opportunities. Institutions and investors can gain diversified, secure, compliant, and easily tradable access to a diversified set of industry-leading equity products and protocols through a single-stock purchase on a regulated exchange. DeFi Technologies is currently listed on the U.S. Exchange at DEFTF Stock Ticker and the Canadian NEO Exchange at DEFI. For more information or to subscribe to receive company updates and financial information, visit their website at defi.tech. I'm really excited about what these guys are doing. I've become an advisor to the business, and I highly suggest you go check them out. Go to their website at defi.tech today.

• 2:55Speaker 01

  Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only.

• 3:18Speaker 02

  We're talking Netflix today.

• 3:20Anthony Pompliano?

  Netflix?

• 3:20Speaker 02

  Netflix, the thing that used to send fricking red DVDs to your mailbox, and now you stream them.

• 3:26Anthony Pompliano?

  All right, before we talk about Netflix, I gotta, I gotta.

• 3:29Speaker 02

  He's got beef.

• 3:30Anthony Pompliano?

  Yeah, you know what my beef is? How you go come out here and talk about Netflix, but you texted me today and said, going to talk about Spotify today?

• 3:36Speaker 02

  Yeah, cuz I looked up Spotify and I thought Netflix was more interesting. I bet they would like it more.

• 3:40Anthony Pompliano?

  I appreciate you looking out for the audience, little learning session. All right, I just want to make sure we're all clear about the, uh, the text message game. Go ahead, what's going on with Netflix?

• 3:48Speaker 02

  We are, uh, we all started blasting DMs.

• 3:51Anthony Pompliano?

  Nah, nah, nah. All right, what's going on with Netflix?

• 3:53Speaker 02

  All right, like Netflix, obviously, pretty old company founded in 1998. Uh, Mark Rudolph, Reed Hastings, this was their first website. Bro, looks nothing like the company you see today. What they've done over the last 20 years is insane.

• 4:07Anthony Pompliano?

  Looks like a future billion dollar company.

• 4:09Speaker 02

  At least they got the word Netflix, right? At least they still have the same almost branding.

• 4:13Anthony Pompliano?

  You see the top left? Sony picked the flicks.

• 4:16Speaker 02

  Yeah, so obviously they used to literally mail DVDs to your home and that's what they did for years. This was they started to rebrand over the years, obviously, and then you get to the site that they use today and the logo they use today. But you can see over time, they have literally just tried to switch brandings the entire time. They've done a really good job of pioneering certain things, like pioneering kind of the at-home streaming service on top of what Blockbuster did. So when Netflix started to send out DVDs, DVD players were only in 2% of homes in America. When they were sending out DVDs, they were only in 2%. VHS was the time, right? It was, uh, it was kind of early mid 1990s and VHSs were running

• 5:00Speaker 02

  what people used to play their things on. And then we just have a quick timeline about Netflix, kind of break it down for everyone. So they were incorporated and website launched in 1998, monthly subscription concept in 1999. They went to Blockbuster to try to have the CEO of Blockbuster buy them in 2000, two years after launch.

• 5:20Anthony Pompliano?

  Okay.

• 5:21Speaker 02

  Blockbuster said, hell no, we're not buying you for $50 million. Turned out, bad move for Blockbuster, good move for Netflix.

• 5:27Anthony Pompliano?

  So 50 million and Blockbuster didn't want to do it? And is it because Blockbuster was launching a competitive DVD service?

• 5:35Speaker 02

  Blockbuster didn't think they were gonna do well.

• 5:37Anthony Pompliano?

  Yeah.

• 5:37Speaker 02

  It was, you know, like this was a new idea. It was just a new idea. It's like, I don't know, do people really want their DVDs delivered to their home instead of the experience, I'll call it, of Blockbuster?

• 5:47Anthony Pompliano?

  Okay.

• 5:48Speaker 02

  No, not really. Then they went public in 2002 with a $309 million valuation. So two years after. Getting declined for $50 million valuation, they went public with $300 million valuation.

• 5:59Anthony Pompliano?

  Okay, then they reach, what, a million subscribers 2003?

• 6:03Speaker 02

  Yeah, million subscribers 2003, which is, that's a lot of friggin subscribers for a business that's five years old. Then they delivered a billion DVDs by 2007, who entered the market in 2008. So you started to see, they still grew in subscriptions, but competitors started to enter into the market. They weren't like the first and only. And then they started making original content, which is another pivotal move for them in 2012, 2013. And House of Cards was one of the most popular shows. We saw Squid Games, which we'll talk about, one of the most popular shows in the world.

• 6:34Anthony Pompliano?

  2017, so what, 19 years after starting, they had the same amount of subscribers as cable subscribers?

• 6:42Speaker 02

  Yeah.

• 6:42Anthony Pompliano?

  That's nuts. That's a wild stat. It took 19 years to get there. Cable had been around for decades.

• 6:47Speaker 02

  I mean, think about their model, though.

• 6:49Anthony Pompliano?

  Yeah, yeah, no, I get it. Okay, all right, so what's next?

• 6:51Speaker 02

  Well, it's cheaper. So, why we're talking about Netflix is because I saw someone break down their economics when they released it. And I was shocked at one number in there.

• 7:00Anthony Pompliano?

  Okay.

• 7:01Speaker 02

  So Netflix, the economy of Netflix, they still making that bottom left, 182 million dollars off DVDs.

• 7:09Anthony Pompliano?

  Wait, where are we looking here?

• 7:10Speaker 02

  Bottom left, DVD revenue. They make 182 million dollars off DVDs.

• 7:16Anthony Pompliano?

  All right, so the streaming revenue is 20-

• 7:18Speaker 02

  Sent DVDs out.

• 7:19Anthony Pompliano?

  So they have 20, go back real quick, 29.5 billion. Total Netflix revenue is 29.7 billion. But streaming, so that difference between total Netflix revenue of 29.7 and 29.5 from streaming is literally about 200 million comes from DVD revenue. And they have gross profit of 12.4 billion and an operating profit of 6.2 billion. That is absolutely bonkers. Both the 200 million, 180 million of DVD revenue and 6.2 billion of operating profit 24 years later.

• 7:55Speaker 02

  That's how it goes.

• 7:56Anthony Pompliano?

  That's a big business.

• 7:57Speaker 02

  Just getting to $182 million of DVD revenue is a great accomplishment. And now that the fact that they're a $30 billion, um, $30 billion a year in revenue company is insane. Uh, but then you can see their revenue over the years has obviously grown exponentially, uh, since like 2010, 2011. In 2009, they made 1.6 billion and they've slowly worked their way up. 2017 is kind of when they took off, um, and they found their stride. Now they're $30 billion a year in annual revenue. Insane. They have the most subscribers at, uh, any streaming service outside of Amazon Prime.

• 8:39Speaker 02

  Amazon Prime cheat code, they obviously, uh, have everyone who has Amazon Prime has Amazon Prime video already. Right? So it's a little bit of a, it's a little bit of a cheat. So I think that Amazon Prime is actually, that number's greater, um, than that 150 million.

• 8:53Anthony Pompliano?

  Yeah, that is a crazy, crazy statistic. Man. All right. So what else? What else you got for us?

• 8:59Speaker 02

  Uh, well, I'm working through it.

• 9:01Anthony Pompliano?

  All right, let's go. Let's say, I'm trying to learn.

• 9:03Speaker 02

  Well, let's, let's, let's, actually let's quiz you. That's the best way to learn.

• 9:06Anthony Pompliano?

  Perfect.

• 9:06Speaker 02

  Where are most of their demographic?

• 9:08Anthony Pompliano?

  Uh, like the subscribers?

• 9:09Speaker 02

  Yep.

• 9:09Anthony Pompliano?

  I'm going to say that most people would guess the United States, but my guess is that there's more international subscribers than US. But I don't know.

• 9:17Speaker 02

  Percent based.

• 9:18Anthony Pompliano?

  What?

• 9:18Speaker 02

  Percent based. Where are most of their subscribers coming from?

• 9:21Anthony Pompliano?

  I would say international rather than US, but I don't know, like total international user base is bigger than US, but I don't know where the biggest single location would be.

• 9:30Speaker 02

  So I'm going to teach you something. We have a chart right here that'll bring it up for us. So 43% are in the United States and Canada.

• 9:36Anthony Pompliano?

  Yep.

• 9:36Speaker 02

  Europe covers 30%. That's also including Africa and then Latin America's 18%. And then Asia is actually a very low portion at only 9%, which I was shocked by.

• 9:45Anthony Pompliano?

  Yeah. So yeah, so basically I was right that it's the total, hold on, the total international percent is bigger than the US and Canada percent than North America. But actually, I would not have guessed, well, maybe I would have thought Europe, but not Middle East and Africa for sure. And then I'm actually surprised, as you are too, it sounds like the Asia Pacific region is sub 10%. I wouldn't have thought that.

• 10:08Speaker 02

  You would think that would be much, much larger.

• 10:10Anthony Pompliano?

  Yeah, yeah, it's fascinating though. And really, if you think about it, Latin America is double the size of Asia Pacific.

• 10:17Speaker 02

  Yeah, but Latin America, they only make eight, eight, just over $8 off each user. And in America, they make almost $15 per user. So they make a lot more money of just generally on the idea that America's prosperous.

• 10:30Anthony Pompliano?

  They got 222 million. That's like two thirds of the entire American population.

• 10:36Speaker 02

  Yeah, look.

• 10:37Anthony Pompliano?

  Right in size, not, not that two thirds of Americans are actually subscribed, but just like there's 330 million Americans, give or take. So 222 is about two thirds.

• 10:45Speaker 02

  They have the, the same size platform as Twitter or any of these. Thing is, they charge a subscription revenue, so they get money from each and every single one of these people, which is an insane thing to do for 220 million people. But if you see that last month right there, and then in Q1 of 2022, they lost 200,000 subscribers. And that's really important because people, obviously it's a publicly traded company and people bet on things like this and bet if their stock price and the valuation of their company is going to go up or down. So I'm not sure, I know you're aware, I'm not sure if you guys are aware, but there is a man who lost $400 million in three months on Netflix. Most expensive subscription you're ever gonna have. $400 million.

• 11:28Speaker 02

  Bill Ackman, he lost $400 million, three months. He went ahead and placed a position, I believe in late January, early February of this year.

• 11:38Speaker 02

  And Netflix tanked. Netflix obviously had a terrible, terrible quarter, but hey, look.

• 11:45Anthony Pompliano?

  Can I ask, can I ask a question?

• 11:47Speaker 02

  What?

• 11:47Anthony Pompliano?

  Can we go back to the Twitter financials real, or the Netflix financials real quick? Where they had that, that flow chart? I'm looking right now, you, you made me think that if Twitter has 220 million or so users and Netflix does as well. Look at this stat. Netflix's operating profit is 6.2 billion. The operating income of Twitter is negative 127 million on a quarterly basis. So they lose, let's just call it about $500 million versus a $6.2 billion operating profit. But even if you looked at like a net income, and so it's not perfect comparisons, but net income at Twitter,

• 12:32Anthony Pompliano?

  based on March 2022 quarter numbers was 500, a little over 500 million. So that's 2 billion in net income annualized. Netflix, even though they have the same numbers to your point about how they monetize it, ends up being 6.2 billion from an operating profit standpoint. And the reason why that becomes interesting is because Elon Musk's whole idea around Twitter is to get people to pay. And so if you pay $3 a month or whatever, all of a sudden, can they drastically increase the financial performance of Twitter? Which it shows that somebody like Netflix, even though they're charging 9.99, 19.99, whatever the, the price points that people are at, they definitely are able to make more money on a per user basis. And so it lends itself like, is Twitter, could you just make more money by simply charging people?

• 13:17Speaker 02

  Well, I think the obvious answer is yes to both in the sense of yes, you can make more money by charging people. Do people stick around?

• 13:23Anthony Pompliano?

  Yes, that's what I mean.

• 13:24Speaker 02

  Is the real argument question of like, are people actually going to pay for the product? I bet you lose a lot of, a lot of subscribers, right? People enjoy stuff that's free. But with that said, It's a different model, right? It just is like the content that you get on Netflix is different than the content you get on Twitter. In a meaning for you can get video content on both, but the time that's spent and like what you're doing on Netflix is different. And I don't think like they could institute this ad model. I don't think they're going to go straight only ads and just dip the subscription revenue. They've obviously done a good job of last 20 years using a subscription revenue. But I do think they will incorporate ads and I think Twitter will do something similar as well, where they will both have a subscription based model and an ad based model. Where you can kind of toggle between more or less ads on your feed.

• 14:09Speaker 02

  Before you watch a video, after you watch a video, there is an ad that you can't exit out of or something like that. I think Twitter will go that route, but Netflix, Netflix doesn't need ads, right? They make money, they're profitable.

• 14:20Anthony Pompliano?

  Yeah, I think, uh, I think that's pretty cool. All right, you got any more stats for us?

• 14:24Speaker 02

  Yeah, so they started making their own content. Obviously they spent a ton of money on their own content. They started in like 2012 with House of Cards, which I know you were a fan of.

• 14:31Anthony Pompliano?

  I did watch that. I liked that one.

• 14:33Speaker 02

  Did you? What'd you rate it at, one out of 10?

• 14:34Anthony Pompliano?

  Yeah.

• 14:34Speaker 02

  Uh, I don't really remember all of it. I mean, it was years ago, but like it was probably like an eight. 80% match for Anthony's Netflix, if anyone of y'all want his algorithm.

• 14:44Speaker 02

  So let's look at what they've spent. Obviously 2020 is a down year, um, but 2021, this was their prediction. They were expected to spend $17 billion just on content creation alone. That also includes, I believe, IP and licensing of other people's content as well. And then you can see they're actually just gonna, they're just gonna ramp up more and more content, more and more original content. You can see that about, what is it, 37% of their content right now or in 2020 was originals. And by 2025, they're expected to produce about 50% of that content on their platform. Instead of just acquiring it from other people, which obviously means more revenue for the company if the content works out. But we've seen a few busts from Netflix for sure and seen a few great, great movies from Netflix.

• 15:28Speaker 02

  But you can see Netflix versus the top five studios, they're coming in the game. Once they, uh, once they started getting recognition, they have some of, or I think they're what, fifth? In the total Oscar nominations in the last 10 years since they started making content. They are already up there with big name players, 20th Century Fox, Universal, Sony, Warner Brothers. They literally are in the game. So did you ever watch Squid Games?

• 15:52Anthony Pompliano?

  Uh, no, I did not.

• 15:55Speaker 02

  Wow, alright, you should go watch that. It's very good. It's actually very good.

• 15:58Anthony Pompliano?

  I just couldn't get into it, alright.

• 15:59Speaker 02

  Well, check this out. Netflix spent 2.4 million per episode on Squid Games. Their other popular shows, Stranger Things and The Crown, was 8 million, 11, 10 million dollars respectively there. But 111 million accounts watched Netflix, watched the Squid Games, within the first month.

• 16:18Anthony Pompliano?

  That's a big, that's a big number.

• 16:19Speaker 02

  111 million. That's over half their subscribers. That's just about, I would say about half to a little bit under half of the pop- I don't know how to say, like, the adult population almost in the United States. Like, the kids and stuff, like, you're not gonna have a Netflix account and stuff.

• 16:37Anthony Pompliano?

  No, they're using their parents' password.

• 16:38Speaker 02

  Yeah, yeah. I'm using yours, so be careful. Thank you, Netflix. Yeah, but they obviously made a ton, but their impact outside of what they just do is insane. So, there's a stat that Netflix, after it launched Squid Games, the sales of white slip-on vans, which were the shoes worn in the game, increased by 7,800%. So, the sale of a product that's been around for years increased almost 8,000% based off a culture that was created inside an organization that streams you videos on the internet.

• 17:15Anthony Pompliano?

  I, I just don't understand how they got this big. Like, yeah, it's 20 years, but like, that is absolutely nuts, to have that much influence.

• 17:27Speaker 02

  I think they had, they had a very, very large head start. They were one of the first streaming companies to kinda adopt that model. But I'm shocked that they haven't lost more of their subscribers to Hulu, Paramount, Disney, R.I.P. CNN Plus, right? Things like that. But streaming services are popping up all over the places. People are realizing, hey, we have all this content, we have all this IP. Disney's a great example of that. We have hundreds, thousands of movies that literally we haven't premiered in years. Why don't we just make a streaming service where people can watch that and then pay us for that content that we already made? We're literally repurposing content. It's a genius idea for every single company that already makes content to get into the, or, excuse me, not content, movies or TV shows that are successful,

• 18:11Speaker 02

  get into the streaming business and build their own platform.

• 18:14Anthony Pompliano?

  What's your big takeaway from Netflix?

• 18:17Speaker 02

  They're not going anywhere.

• 18:18Anthony Pompliano?

  You think it's a robust durable business?

• 18:21Speaker 02

  Yep, they're switching their business model every time something comes up and they're doing it well.

• 18:27Anthony Pompliano?

  $180 million of DVD rental revenue.

• 18:30Speaker 02

  You still make money from the old school business too.

• 18:33Anthony Pompliano?

  I know you like that. All right, where can we send people to find you on the internet?

• 18:36Speaker 02

  So you saw a few of these awesome stats you guys just saw here right now. Go follow me, John Pompliano. A few people tried to DM me yesterday trying to talk like we're friends because I was answering people's DMs the day before. Sorry, you missed out.

• 18:48Anthony Pompliano?

  Will you answer DMs today if people follow you?

• 18:50Speaker 02

  Nope, I will do it. Uh, well, um, nah, I can't do it. Sorry, that's too many times. I will do it later this week.

• 18:58Anthony Pompliano?

  All right, all right, sounds good. I appreciate you coming on here educating me every day.

• 19:03Speaker 02

  Can't answer every DM.

• 19:05Anthony Pompliano?

  Yeah, wait till I start DMing you.

• 19:08Speaker 02

  Thank you very much and have a great day.

• 19:11Anthony Pompliano?

  Thanks so much for listening to today's episode. I really hope you guys enjoyed this one. Make sure you subscribe on Apple, Spotify, or your favorite podcast player. And if you're looking to try to transition to get a new job in the Bitcoin or crypto industry, we've got you covered. Head over to pompscryptocourse.com. We've developed a curriculum with the top teams across the industry. It's a three-week intensive training program with over 50 events packed into that three-week time period. Go to pompscryptocourse.com to learn more and I'll meet you guys for the next episode.