Netflix reported its quarterly earnings on Tuesday and revenue was $11.51 billion, slightly below Bloomberg’s forecast of $11.52 billion. Earnings per share were $5.87, missing an estimate of $6.94. (All this is by Yahoo! Finance). It’s not catastrophic, but it’s not great either. The price of the company’s shares. fell 5.6%.
But HeyHow about all that AI?
In their letter to shareholders, and then again on their earnings call, Netflix co-CEOs Ted Sarandos and Greg Peters touted the upcoming implementation of generative AI as an exciting new development in content generation, user experience and advertising. All the talk about AI made him feel like he was 2023 again.
To illustrate how much AI seems to be on the minds of CEOs, at 26 minutes and 34 seconds into earnings callPeters gives an answer in which he recites what appears to be an ad hoc list of six challenges that Netflix faces as a company, starting with the creation of television and movies around the world. Implementing AI is the second element you mention.
The letter to shareholders kicked off the topic of AI with what is actually a pretty big truth bomb: “For many years now, machine learning and AI have been driving our stock recommendations, as well as production and promotion technology.” That’s more true than you think. Back in 2008, Netflix found a really fun way to advertise its use of machine learning: through asking the public to find out why some people like it Napoleon dynamite and others don’twith mathematics.
A lot has changed since those days, and now Netflix says it’s bringing AI features to Netflix whenever it can. For example, the results letter says that a beta test is underway that adds a “conversational search” feature, which helps people “discover the perfect title for that moment.” The goal here seems easy enough to imagine without speculating too much. I imagine saying “What movie can I watch with my mom on her 50th birthday?” on a Roku remote and get a list of recommendations.
On the technical side, Netflix says there’s an effort underway to use AI to “localize” (which basically means “translate”) promotional assets into other languages and regions, which sounds like it could theoretically allow for relevant but obscure and foreign movies and TV shows that I’d love, even without artwork and summaries available in my language. Theoretically anyway.
But above all, Netflix says it will “empower creators with a broad set of GenAI tools to help them achieve their visions.” For example, the letter boasts that AI rejuvenation was used in Happy Gilmore 2and that the producers of The billionaires bunker Used generative AI tools for concept art.
But how does Netflix view Sora 2, the video generator that plunged the Internet into copyright hell upon its release last month? Sarandos, for his part, isn’t telegraphing some kind of rapid decline on Netflix, and he’s quick to add that Sora 2 doesn’t currently intimidate him. According to Sarandos, “it’s likely to have a much bigger impact on UGC creators in the near term. In other words, AI content replaces the viewing of existing user-generated content. That’s starting to make sense.”
It is worth noting that Sarandos is already trying convince influencers to leave YouTube. If you’re a YouTuber who hasn’t yet struck a deal with Netflix and are worried about Sora 2 coming to lunch, Sarandos’s suggestion that your business model is more vulnerable than his could be part of an effort to win you over.
But Sarandos says AI “doesn’t automatically make you a great storyteller if you’re not.” For once, a tech CEO talking about AI doesn’t sound like he’s sharpening his layoff axe. “We’re confident that AI will help us and our creative partners tell stories better, faster, and in new ways,” Sarandos said, adding, “We’re all in on it.”
