Netflix, Inc.

Good afternoon and welcome to the Netflix Q2 2025 earnings interview. I'm Spencer Wong, VP of Finance, IR, and Corporate Development. Joining me today are co-CEOs Ted Sarandos and Greg Peters and CFO Spence Newman. As a reminder, we'll be making forward-looking statements and actual results may vary. We'll take questions submitted by the analyst community and we will begin with our results and our forecast. The first question comes from Steve Cahal of Wells Fargo. The question is, since the revenue increase in your forecast is primarily FX driven, we're curious about the components of the constant currency increase. Is this due to a better underlying revenue growth or are there specific expenses that are coming in better like content amortization?

All right, well, I will take that one. Thanks, Steve. So as you saw in the letter, we increased our full-year revenue guidance to $44.8 to $45.2 billion. That's up from the prior guide of $43.5 to $44.5 billion, so up about a billion at the midpoint of the range and a tighter range. As you know, it primarily reflects the FX impact from the weakening dollar relative to most other currencies. But the good news is we're also seeing strength in our underlying business. We've got healthy member growth, and that even picked up nicely at the end of Q2, a bit more than we expected. And we think that'll carry through with our strong back half slate. So we're reflecting that in our latest forecast. And we're also seeing nice momentum in ad sales. Still off a pretty small base, but good growth. And it's on pace to roughly double our revenue in the year. And it's a bit ahead of beginning of year expectations. When we carry all that through to operating margin, our operating expenses are essentially unchanged, which is part of your question. So they're basically unchanged forecast to forecast. So we're largely flowing through the expected higher revenues to profit margin. So that's why our updated target full year reported margin is up a point from 29 to 30%. And that 50 basis point increase in FX neutral margin is really just that revenue lift from stronger membership growth and ads relative to prior forecast flowing through to margin.

Thank you, Spence. We'll take our next question from Barton Crockett of Rosenblatt Securities. Why is operating margin guidance for the full year only 30% after the upside in 2Q and a forecast of 31.5% for the third quarter? Is there a timing issue, FX issue, or is there a new level of spending that will continue beyond the fourth quarter of 2025?

Well, this is really mostly timing. So thanks, Barton. We primarily, as a reminder, we primarily manage to full year margins and we expect our content expenses will ramp in Q3 and Q4. We've got many of our biggest new and returning titles and live events in the back half of the year. We've also... You know, Q4 is typically a, and generally almost always is a heavier film slate. Sure. We'll talk about, I expect we'll talk about more of this on the call. We'll also be marketing to support that heavier slate and, and we're continuing to aggressively build out our ad sales infrastructure and capabilities through the, through the year. So all of that is to be expected. We can manage to, we manage to those margins and. Even with that back half ramp in expenses, we expect operating margins to be up year over year in each quarter, including Q4. And as just noted, we expect to deliver strong full-year margins as we just took up our guide to 29.5%, FX neutral, 30% reported.

Great. Thanks, Spence. The next question comes from Tom Champion of Piper Sandler. How has your view of the consumer and the macro economy changed over the last 90 days?

Similar to last quarter, we're carefully watching consumer sentiment in the broader economy. But at this point, really nothing significant to note in the metrics and the indicators that we get directly through the business. Those are retention that remains stable and industry leading. There have been no significant shifts in plan mix or plan take rate and the price changes we've done since the last quarter have been in line with expectations. Engagement also remains healthy. So things all look stable from those indicators and big picture entertainment in general and Netflix specific have been historically pretty resilient in tougher economic times. We also think that we are an incredible entertainment value, you know, not only compared to traditional entertainment, but if you think about other streaming competitors, when we start at $7.99 in the United States and you think about all the entertainment you get, we have a belief and expectation that the demand for not only entertainment, but for us specifically will remain strong.

Thanks, Greg. I think a nice follow-up to this question will be on advertising. So from Ben Swinburne of Morgan Stanley, can you share any data points around your upfront negotiations?

Yep. As we noted in the letter, our US upfront, it's nearly complete. We've closed the large majority of deals with the major agencies. Those results have generally been in line or slightly better than our targets and consistent with our goal to roughly double the ads business this year. And what are advertisers excited about? Growing scale is something we definitely hear. Also a highly attentive and engaged audience. So bigger audience, but also an audience that's more engaged relative to our peers. The rollout of our own ad tech stack, which helps deliver a bunch of features. And then our slate, which is generally amazing and includes a growing number of live events that advertisers are excited about.

Great. Follow up question on advertising from Vikram Baird. How have advertisers in the US responded to the Netflix ad suite rollout since the April launch? What features and capabilities are attracting the most interest? And how is the initial feedback in other regions outside of the US?

We've completed the rollout of our own ads tech stack and the Netflix ad suite to all of our ad markets now. So we're fully on our own stack around the world at this point. That rollout was generally smooth across all countries. We see good performance metrics across all countries and the early results are in line with our expectations. Now we're in this phase of learning and improving quickly based on the fact that being live everywhere means that you get a bunch of feedback about what we can do better, which is great. As we mentioned before, the most immediate benefit from this rollout is just making it easier for advertisers to buy on Netflix. We hear that benefit, that ease from direct feedback, talking to advertisers. They tell us that it's easier. We see it in our overall sales performance. We've seen an increased programmatic buying. So all of these are consistent with what we were expecting, both qualitatively and from a metrics perspective. We're also, I guess, worth noting that we're going to roll out additional demand sources like Yahoo. That'll further open up the market for us. Long-term being on our own stack, that improves the speed of our execution to deliver this pretty significant roadmap of features that we have in front of us. It's things like improved targeting and measurement. There's also leveraging advertiser and third-party data sources, which we definitely hear demand for as well. And it will ultimately allow us to improve the ad experience for our members, which is critically important. So that means better ads personalization. So the ads that I see are increasingly different from the ads that let's say Ted would see, and they're more relevant for each of us, which is good for us as users and it's good for the brands. We're also going to be introducing interactivity in the second half of the year. So that's exciting. So that's all to say this is a pretty significant milestone for us, one we're super excited to get behind us because now we can shift into this steady release cycle where we're dropping new features all the time, both for advertisers and for members. And that's the development and release model that we have in other parts of the business. So it's fun to be able to get to that point.

Thanks, Greg. I'll move us along now to a set of questions around content as well as engagement. This one comes from Ben Swinburne of Morgan Stanley. 1% engagement growth year over year suggests engagement is down year over year on an average per member basis. How do we reconcile that with engagement growing on a per member household basis if that's still accurate?

So total view hours did grow a bit in the first half, 25, and that's despite a particularly back half weighted slate. But to your point on engagement on a per member basis, we've mostly been focused for the last few years on measuring engagement on what we call an owner household basis. So this takes out the borrower effect, and we obviously think this is the best way to assess our engagement per member because it removes the tricky comparison impacts from paid sharing. So that metric per owner household engagement has been relatively steady over the past two and a half years throughout the rollout of paid sharing and amidst increasing competition for TV time as more viewing moves to streaming and gets this on-demand benefit. So we're glad to have held that normalized engagement level, but we clearly also want to increase it. And to that end, we're optimistic and expect that our engagement growth in the second half of this year will be better than in the first half, given our strong second half slate.

Thanks, Greg. Great segue to Doug Inwood's question from JP Morgan. The content in the back half of the year looks strong with Squid Game 3 already the third most popular non-English series ever and Wednesday and Stranger Things releasing in the coming months. You often say that no single title drives more than 1% of total viewing. So how do you think about the business currently as being Quote, quote, hit boosted or hit driven, and are you confident that both original and licensed content momentum can continue in 2026?

Yeah, I'll take that. And thank you, Doug. On the first part of your question, we're definitely riding this long-term trend of linear to streaming, and that has a natural adoption curve. But we can accelerate our growth with big hits. But as you said, each one of them, even in success, is going to drive about 1% of total viewing. So you need a lot more than just a big hit every once in a while. So to your point, it's not about the single hit. So what it is is about a steady drumbeat of shows and films that and soon enough games that our members really love and continue to expect from us. So like by way of example, we had 44 individual shows nominated for Emmys this year. So that's what quality at scale looks like. We ended the quarter with a huge return to Squid Game. Thanks for acknowledging. Go into the second half with the return of Wednesday and Stranger Things and a really strong slate of supporting titles and favorites and new shows. Like next week, or this week, we had Eric Bana's Untamed. Next week, we have Leanne Morgan's new comedy show, Leanne. Both look really great. And that's just to name a few. And The back half of the year also has perhaps the most anticipated slate of new movies that we've ever had. That starts on the 25th with Happy Gilmore 2. Followed by we have a new Knives Out film. We have new films from Noah Baumbach, from Guillermo del Toro. from Catherine Bigelow. And it does not stop there. It does roll right into 2026. And that's the second part of your question. And we're looking forward to movies like The Rip from Ben Affleck and Matt Damon. Shirley Starr on a new movie called Apex, which is a phenomenal action movie. Millie Bobby Brown is back in Enola Holmes 3. Recall that in 2023, Enola Holmes 2 was our biggest movie. So we're looking forward to that new sequel. And Greta Gerwig's Narnia is going to be phenomenal. And then on top of that, we're talking about Return of Bridgerton, One Piece, Avatar, The Last Airbender, all three huge successes around the world. The Gentleman, Four Seasons, Point Break, I'm sorry, Running Point, sorry. Beef, which as you recall in 2023, won just about every award imaginable and was a gigantic success for us. It's back for a new season in 26th. Three Body Problem, Love is Blind, Outer Banks. And not just from the US, from France, we have Lupin. From Spain, we have Berlin. We have a new season of 100 Years of Solitude from Colombia. So big hit returning shows and new series from each of our regions around the world. And the new stuff we've got coming up like Man on Fire, Reimagining a Little House on the Prairie. The Duffer Brothers from Stranger Things have a brand new show. The Burroughs. We've got Human Vapor from Japan. Operation Saffron Cigar from India. Can This Love Be Translated from Korea? So again, popular programming, new and returning from all over the world in 2026. um unscripted shows like the reboot of start of star search uh we got into the doll universe uh with wanka's golden ticket which we're really excited about and in our live we've got a few surprises for you next year but of course we have our nfl christmas day double header that we're really thrilled about too so we're really incredibly excited about the back half of this year and confident that it keeps rolling in 26.

Thank you, Ted. We'll take the next question from Rich Greenfield of LightShed Partners, who asks, are you concerned by the stagnation in your viewing share domestically? I think Rich is probably referring to the Nielsen gauge data. Do you need to spend more on programming or spend differently to materially move your viewing share higher?

Yeah, thanks, Rich. Look, our goal continues to be to continue to grow our share over the long term. And over the past few years, you're right, we've been able to maintain our share even as we've worked through a growing number of TV-based streaming services, some free, some paid. And the impact of paid sharing that Greg mentioned earlier As well as this, you know, 2025 slate that was more back half weighted than we typically have in previous years. But over the long term, we tend to keep growing as the other 50% of TV viewing migrates from linear to streaming. And we'll do that by doing what we've always done, continuously improve the service. So keep in mind, since 2020, our content amort, has grown more than 50%, from under $11 billion to more than $16 billion that we expect to do this year. And over that same time period, we saw increased spending, but also increased engagement. increased revenue, increased profit, and increased profit margin. So that's our model in action. It is our objective to sustain healthy revenue growth, reinvest in the business to improve on all aspects of the service, and that includes growing content spend, strengthening and expanding the entertainment offering, and to drive that positive flywheel of growth by adding value to our members, and all the while growing engagement, revenue, and profit around the world.

Great. Thank you, Ted. I'll move to Alan Gould from Loop Capital next. Can you provide more information on the TF1 partnership? Why did you choose to add TF1 in France as opposed to other broadcasters as your first partner? Why is now the right time to create such a partnership? Should we anticipate similar partnerships in other countries?

Yeah, perhaps just start with the rationale for the partnership. You would think with that long list of amazing titles that Ted just rattled off, we would have enough to satisfy every person on the planet. But it turns out we actually consistently hear from our members that they want more. They want more variety, more breadth of content. So the fundamental purpose for this TF1 partnership is all about that goal of expanding our entertainment offering. How do we enhance the value we deliver to members? We want to provide more content, more variety, more quality. So just as you've seen us do with licensing and production, this is just another mechanism to expand that offering. And in this case, it's specifically about highly relevant local for local content in a country that has strong demand for that local content. This is an accelerated way to satisfy that need. Why now? Why was this time the right time? Well, we've invested a lot in a bunch of enabling capabilities that are either required or highly leveraged by this deal. You can think live, ads, the new UI, among other things. And then why TF1 versus some other partner? Well, we know each other really well. We wanted our first partner to be in a big territory. We wanted to pick the leading local programmer. We wanted to be highly aligned in terms of the deal and the shape of the partnership and the values that we thought we could generate mutually by working together for our customers. And we both look at this as an opportunity to learn, to figure out how do we scale the local content that TF1 is producing to more customers in France. So we're looking forward to seeing what consumers think. You never really know until you get out there and get the real reactions. And then obviously we'll factor that into our plans going forward.

Thanks, Greg. From Robert Fishman of Moffitt Nathanson, with reports suggesting Apple is now in the driver's seat for F1 rights, aha, unintended, I guess, plus UFC and MLB still looking for new deals and the NFL may be looking to come to market a year earlier. Can you share updated thoughts on how you are approaching sports rights for Netflix and where you draw the line on something that can move the needle?

Well, thanks for that, Robert. Remember, sports are a subcomponent of our live strategy, but our live strategy goes beyond sports alone. Our live strategy and our sports strategy are unchanged. We remain focused on ownable, big breakthrough events because our audiences really love them. Anything we chase in the event space or in the sports space has got to make economic sense as well. We bring a lot to the table, and the deals that we make have to reflect that. So live is a relatively small part of the total content spend, and we've got about 200 billion view hours. So it's a pretty small part of view hours as well right now. But that being said, not all view hours are equal. And what we've seen with live is it has outsized positive impacts around conversation, around acquisition. We suspect around retention. Uh, and so right now we're, we're very excited where we sit. We're very excited with the existing strategy. We're excited about the Canelo Crawford fight in September and the SAG awards and our weekly WWE matches, uh, and the NFL, of course, which is a great property. And we're happy to have a Christmas day double header. which includes Dallas versus Washington and Detroit versus Minnesota. So today our live events have all primarily been in the U.S., keep in mind. So over time, we're going to continue to invest and grow our live capabilities for events around the world in the years ahead. So we're excited, but the strategy is unchanged.

Thanks, Ted. A good follow-up question on that one from Steve Cahill of Wells Fargo. What investments have you made to increase your capabilities in producing live events? What have you been able to do in-house in 2025 that you couldn't do last year? And how long will it take before you have the capability to produce large-scale events like NFL games?

Yeah, thanks, Steve. I'd say, remember, when we started original scripted programming, we had zero production capability. House of Cards was, in fact, thinking about our first three years of original programming, all of those shows were produced by others. You had to go three years later, we produced Stranger Things in-house. Today, we still have shows that are produced by others. Universal, 20th Television, which is Disney, Paramount, Lionsgate, Warner Television. There's lots of available infrastructure to produce TV, and that is true of live events and sports as well. When we do more and more, we may choose to bring some of that in-house. We've already produced a few, and we're just as likely to continue to use partners with existing production infrastructure and work to make sure that those productions are bespoke and they feel like they could only be on Netflix. So you shouldn't think about the mix of partnerships and self-producing as a, we think about it as a scaling tool, not backfilling some lack of ability in some area of the company. So, and I should note by example, CBS is a phenomenal partner producing the NFL games with us and we're thrilled to work with them again this year on Christmas day.

maybe take this opportunity just to admit some commentary on the general capability we've been building with Live. When we start something new, we pretty much expect that we're not gonna be brilliant at it at the beginning. What? Yeah, that's true, unfortunately. We don't have any really reason to believe that. But we don't let that stop us from kicking off initiatives that we believe have a strong strategic rationale, even though we know we need to develop that capability. Of course, our job is to get out there and learn by doing and get world-class as quickly as we possibly can. If you look at our current capabilities around live, we are just a completely different place today compared to when we first started. as a good example that just happened last friday we had our first concurrent pair of live events we had taylor versus serrano globally delivered alongside wwe smackdown which was delivered xus both events at scale and delivered with extremely high quality so it's great progress we've seen and we've got a great roadmap of features ahead of us to continue to enhance those experiences for folks

Thank you both. Last question on the content side or the topic of content comes from Ben Swinburne and Morgan Stanley. What are the learnings from the success of K-pop Demon Hunters? More animated musicals with fictional bands, perhaps, question mark.

Man, that is a question from a man who probably has that movie playing on repeat in their home, if I'm guessing correctly. K-pop Demon Hunter is a phenomenal success out of the gate. One of the things that I'm really proud of the team over is original animation, not sequel, not live action remake. Original animation feature is very tough and has been struggling for years. And I think the fact that our biggest hits now, Leo, Sea Beast, and now K-pop Demon Hunters, are original animation. So we're super thrilled about that. The mix of music and pop culture, getting it right matters. The storytelling matters. The innovation and animation itself matters. And the fact that people are in love with this film and the love with the music from this film, that'll keep it going for a long time. So we're really thrilled. And now the next beat is where does it go from here? So, you know, we put in the letter how it just how successful the music has been and continues to be. And we think that'll drive fandom for this fictional K-pop bands that we have. But more importantly, for the song Golden and for the song Soda Pop, these are enormous hits and they all came from a film that's available only on Netflix. So we're really excited that we can pierce the culture with original animated features, considering that folks have been poking us on it.

Let's do it again later in the year with In Your Dreams, right, Ted? Absolutely. In Your Dreams, another very funny one and also completely original.

Great, I'll move us on now to a few questions on plans as well as product. So from Michael Morris of Guggenheim, he asks, Netflix continues to broaden content genres, notably with live sports and the recently announced TF1 partnership. Is there a path to additional tiers of service based on types of content available or will Netflix always make all content available at the ad-free slash ad-supported price points?

I've learned to never say never. So I would say we remain open to evolving our consumer facing model. I think we've got a few principles, important principles that we're carrying with us that I don't see changing significantly. One is we want to provide members choice, right? So how do we have a different set of plans, a different price points, different futures that allows folks to opt into what is the right Netflix for them? Also, how do we provide good accessibility to new members around the world? We want to grow, and that means making sure that we've got accessible price points. And then finally, the plans we offer, they have to ensure that we're having reasonable returns to the business based on the entertainment value that we delivered, and we're hoping to grow those, and so those returns would grow as well. Now, obviously, the reason to do that is we can continue to reinvest in adding more entertainment and building a better experience. And maybe one other thought, too, is there is a component of complexity in choice stacks that we have to consider and how we think about our offering is structured. So having said all that, though, I think we believe that the bundle is a great value for members. It allows members around the world to access a wide range of entertainment in a very easy way at a very reasonable price. So I would expect that that will remain an important feature of our offering for the foreseeable future.

A lot of value and simplicity. Yeah.

Great. From Rich Greenfield of LightShed Partners, help us understand why your new UI slash UX is so important as you expand live content. Beyond live, can you provide some color on what metrics have improved since the launch of the new UI, such as speed of users finding a title and change in failed sessions?

Yeah, as we said previously, it's really hard for a new UI to immediately compete, be better than the UI that we've had for the past 10 years that's been iteratively evolved and improved. But now that we've actually rolled out this new UI to the first large wave of TV devices, we're actually seeing performance that's better than what we saw in our pre-launch testing. And to some degree, that's expected because we made some improvements based on the results of that testing phase. So it's exciting to see that those delivered actual better results. But the rate of that change actually gives us increased confidence that this new experience will drive better performance by the variety of metrics we look at, some of which include the ones that Rich is mentioning, in relatively short order. And then maybe just a point on why do we build this and launch this new experience in the first place? Why was this so important? Bluntly, the previous experience was designed for the Netflix of 10 years ago, and the business has evolved considerably since then. We got a wider breadth of entertainment options. We got TV and film, more of those, of course, from around the world, but now also games and live events. And if you think about the discovery experience that's best suited for these new content types, it's inherently different. helping our members understand that there's a really good reason for them to launch Netflix and tune in at 7 p.m. on a Friday night versus just showing up whenever they were free and wanted to be entertained. That's a totally different job and we really need a different user interface to do that job well. Add to that, we saw the opportunity to leverage newer technologies like real-time recommendations that respond dynamically to what you need from us in that specific moment. So the Netflix you get on a Tuesday night is different from the Netflix you get on a Sunday afternoon. Put all of those rationales together and what we're seeing in terms of the performance so far, we're very confident that we've got a much better platform in this new user experience to build from, to continue to improve, and that'll help us meet the needs of the business over the years to come.

Thanks, Greg. The next question comes from Steve Cahal of Wells Fargo. YouTube is the only streamer that exceeds Netflix in terms of US share of TV time. Do you see an opportunity to bring notable YouTube creators and their content exclusively to Netflix? How big could this opportunity be?

Thanks, Steve. Look, we want to be in business with the best creatives on the planet, regardless of where they come from. Some of them are here in Hollywood. Others are in Korea. Some are in India. And some are creators that distribute only on social media platforms. And most of them have not yet been discovered. So for those creators doing great work, We have phenomenal distribution, desirable monetization, brilliant discovery in our UI, and a hungry audience waiting to be entertained. So, Steve, you recently, I think I listened to you on a podcast where you talked about our business model, and I believe on this very topic. And we largely agree with you and believe that working with a wide set of content creators makes a lot of sense for us. And as you said, if I'm remembering it right, not everything on YouTube will fit on Netflix. And we couldn't agree with that more. But there are some creators on YouTube like Miss Rachel that are a great fit. If you saw in the engagement report, she said 53 million views in the first half of 2025 on Netflix. So she clearly works on Netflix. And we're really excited about the Sidemen and Pop the Balloon and a wide variety of creators and video podcasters that might be a good fit for us. And particularly if they're doing great work and looking for different ways to connect with audiences.

maybe broadening this out for a second and taking that question to look at sort of all of the competitors that we face for a share of TV time. You know, we've always said that the market for entertainment is very large and we face competition from all kinds of directions. So whether it's linear, or streamers or video games or social media. It's also a very dynamic competitive market as we and all of our competitors seek to provide better and better options for consumers. And one of those changes, one of those vectors of dynamicism has been that sort of steady inevitable shift to streaming and on demand as more services move to deliver their content in a way that we all know consumers want. That creates increasing competitive pressure for us that we've got to respond to. We also see free services as a form of strong competition. Free is very powerful from a consumer perspective. So it's not surprising that some free services are growing in engagement. But I think Ted said it well earlier in the call, not all hours are created equal. And we have a different profit model from other services, a strong profit model. So we're going to compete to win more moments of truth for sure, but especially compete to win those most profitable moments. Back to your specific question, it's worth remembering there's about 80% of total TV view share that neither Netflix or YouTube are winning right now. We think that represents a huge opportunity for which we are competing aggressively and we aim to grow our share.

The vast majority of our money and attention is focused on that 80%.

Thank you. Next question from Justin Patterson of KeyBank. Could you please talk about your generative AI initiatives? Where do you think gen AI will be most impactful over time, revenue or expense efficiency?

Well, let me start with GenAI. We remain convinced that AI represents an incredible opportunity to help creators make films and series better, not just cheaper. They're AI-powered creator tools. So this is real people doing real work with better tools. Our creators are already seeing the benefits in production through previsualization and shot planning work, and certainly visual effects. It used to be that only big budget projects would have access to advanced visual effects like de-aging. Remember last quarter we talked about Pedro Paramo? Well, that's just no longer the case. And, you know, this year we had El Atonado. It's a very big hit show for us from Argentina. And in that production, we leveraged virtual production and AI-powered VFX. And there was a shot in the show that the creators wanted to show a building collapsing in Buenos Aires. So our iLine team partnered with their creative team using AI-powered tools. They were able to achieve an amazing result with remarkable speed. And in fact, that VFX sequence was completed 10 times faster then it could have been completed with traditional VFX tools and workflows. And also, the cost of it just wouldn't have been feasible for a show in that budget. So that sequence actually is the very first Gen AI final footage to appear on screen in a Netflix original series or film. So the creators were thrilled with the result. We were thrilled with the result. And more importantly, the audience was thrilled with the result. So I think these tools are helping creators expand the possibilities of storytelling on screen. And that is endlessly exciting.

And maybe to cover a few of the other areas, the member experience is a place where we feel like there's tons of opportunity to leverage these new generative technologies to improve the experience. We've been in the personalization and recommendation business for two decades, but yet we see a tremendous room and opportunity to make it even better by leveraging some of the more newer generative techniques. We're also rolling out, have piloted right now a conversational experience that allows our members to basically have a natural language discussion with our user interface saying, I want to watch a film from the 80s that's a dark psychological thriller, get some results back, maybe iterate through those in a way that you just couldn't have done in our previous experiences. So that's super exciting. And we see that all of the work that we do there essentially is a force multiplier to that large content investment that we're making. If we do a better job there, that means every dollar that we spend means more value back to our members by connecting them with the titles that they're truly going to love. Advertising is another really great area. It's a high hurdle to create a brand forward spot in a creative universe of one of the titles that we're currently carrying. But it's very compelling for both watchers and for those brands. And we think these generative techniques can decrease that hurdle iteratively over time and enable us to do that in more and more spots. There's a bunch of places where we think we've got an advantage in terms of data and scale where we can leverage these new generative techniques to deliver just more benefits for our members and for our creative community.

Yeah. If you don't mind me coming back for one second, I just rolled off iLine. As if everyone knows what iLine is, I probably should clarify that iLine is our production innovation group inside of our VFX house at Scanline. And they're doing a lot of this work with our creators. So I just realized that I just threw that out there as if everyone knew. Yeah.

Thanks for clarifying, Ted. Let's see, our next question comes from Brian Pitts of BMO Capital Markets. With your evolving gaming ambitions, including partnerships with Grand Theft Auto and the recently announced Roblox agreement, can you talk to near-term monetization opportunities within gaming?

Sure. We look at the near-term monetization opportunity with games very similar to how we've looked at other new content categories. You can think in scripted or film or on and on. And that's essentially if we deliver more value in our offering, we get increased user acquisition, we get increased retention, we get increased willingness to pay. So it drives all of the core fundamentals of our business. We've seen those positive effects, albeit in a small way relative to the size of our overall business when it comes to members playing games on the service. We already have those positive proof points. And we're going to ramp our investment in this area, which is currently quite small compared to our overall content investment. as we ramp the size of those positive effects. So we want to remain disciplined in not investing too far ahead of demonstrating that we know how to translate that investment into value for our members. We've seen good progress, as you know, with licensed games like GTA. We've seen good progress with games we developed like Squid Game Unleashed. So you'll see more from us in both of those categories, as well as a whole new set of interactive experiences that we think that we're either in a unique or differential position to deliver. So we're super excited to roll those out over the next year. and then we remain open to the core question remain open evolving our monetization model but we have got to get to a lot more scale before that becomes a really materially relevant question so we're going to do that work first and it's probably worth restating the Tam for this market is very very large we remain convicted about our strategic opportunity and excited to make more progress

Thanks, Greg. We'll take our last question from Jessica Reef-Ehrlich of Bank of America Securities. Given your healthy balance sheet and what appears to be a coming wave of M&A in media globally, are there certain types of assets that would strengthen your moat, i.e., what is your view of owning successful IP or studio assets as they come to market?

I'll take that one, Spencer. Thanks, Jessica. We agree. Continued consolidation of studio and network assets is likely, but at least with respect to consolidation within legacy media, we don't think it materially changes the competitive landscape. As you also know, we've historically been more builders than buyers, and we continue to see big runway for growth without fundamentally changing that playbook. You heard a lot of that today. So we look at a lot of things. We apply a framework or a lens to those opportunities when we look at, is it a big opportunity? Does it strengthen our entertainment offerings? Does it strengthen our capabilities? Does it accelerate our strategy? And we look at all of that relative to the opportunity cost of distraction or other alternatives. You know, we've been pretty clear in the past that we also have no interest in owning legacy media networks. So that also kind of reduces the funnel for us. But, you know, in general, we believe we can and will be choosy. We've got a great business. We're predominantly focused on growing that organically, investing aggressively and responsibly into that growth. and returning excess cash to shareholders through share or purchase. And I think you'll see us continue on that path.

Great. Thanks, Spence. And that will wrap up our Q2 earnings call. So we thank you all for taking the time to join us, and we look forward to seeing you all next quarter. Thank you.