Netflix Inc (NFLX) 2003 Q2 法說會逐字稿

Good day, everyone, and welcome to today's NetFlix's Second Quarter Results Conference Call. Just a reminder that today's call will be recorded.

大家好，歡迎參加今天的 Netflix 第二季業績電話會議。只是提醒一下，今天的通話將會被錄音。

At this time, for opening remarks and introductions, I would like to turn the call over to the Chief Financial Officer for NetFlix, Mr. Barry McCarthy. Please go ahead, sir.

現在，我想將會議轉給 NetFlix 財務長 Barry McCarthy 先生進行開場發言和介紹。請繼續，先生。

Welcome, everyone, and thanks for participating in today's call. A rebroadcast of the call will be available at the IR section of our website after 5 p.m. Pacific Time today. A copy of this afternoon's earnings release is also posted on our website. The release includes financial guidance for Q3 and Q4 of this year. We plan to comment on our guidance during this call.

歡迎大家，感謝您參加今天的電話會議。下午 5 點後，我們網站的 IR 部分將重播此電話會議。今天太平洋時間。今天下午的收益發布副本也發佈在我們的網站上。此版本包括今年第三季和第四季的財務指引。我們計劃在這次電話會議上對我們的指導意見發表評論。

The lawyers would like me to remind you that actual results may differ materially from these forward-looking statements due to risks and uncertainties related to the business. A detailed discussion of same is contained in our filings with the SEC, including our annual report, filed with the Commission on March 31st, 2003.

律師希望我提醒您，由於與業務相關的風險和不確定性，實際結果可能與這些前瞻性陳述有重大差異。對此的詳細討論包含在我們向 SEC 提交的文件中，包括我們於 2003 年 3 月 31 日向委員會提交的年度報告。

And now Reed will share his perspective on the recent quarter, and I'll comment on the numbers, after which we'll open the phone to questions.

現在，里德將分享他對最近一個季度的看法，我將對這些數字發表評論，然後我們將透過電話提問。

Thanks, Barry. Last year, we committed to you to achieve five million subscribers, $1B in revenue, and $100M to $200M in free cash flow in the 2007 to 2009 timeframe. Over the last year, despite turbulence in consumer confidence, turbulence in our stock price, and turbulence in the competitive environment, we have made relentless progress quarter after quarter towards our five million subscriber goal. Q2 was consistent with this relentless progress. In Q2, we achieved record revenues of $63M, up 74% versus the prior year. In Q2, we generated an additional $4.3M of free cash flow and now have $116M of cash and cash equivalents on our balance sheet. In Q2, we achieved our first GAAP profitable quarter, with net income of $3.3M as compared with net loss of $13.1M last year. In Q2, we grew our subscriber base to 1.147 million subscribers, up 71% versus the prior year. In Q2, our subscriber base in the San Jose/Oakland/San Francisco area reached 5% of all households and shows no sign of slowing down. In Q2, we sustained the sub 6% churn level that we achieved in Q1 for the first time. In Q2, we shipped to our subscribers over one million DVD movies every week from 20 metropolitan distribution centers with no material down time or mishap. In Q2, we made relentless progress towards our long-term goals.

謝謝，巴里。去年，我們向您承諾在 2007 年至 2009 年期間實現 500 萬訂閱者、10 億美元的收入以及 1 億至 2 億美元的自由現金流。去年，儘管消費者信心動盪、股價動盪、競爭環境動盪，但我們在實現 500 萬用戶目標的過程中，每季都取得了不懈的進展。第二季與這種不懈的進步是一致的。第二季度，我們實現了創紀錄的 6,300 萬美元收入，比上年增長 74%。第二季度，我們額外產生了 430 萬美元的自由現金流，現在資產負債表上有 1.16 億美元的現金和現金等價物。第二季度，我們實現了第一個 GAAP 獲利季度，淨利潤為 330 萬美元，而去年的淨虧損為 1,310 萬美元。第二季度，我們的訂閱用戶數量增加至 1,14.7 萬，比上年增長 71%。第二季度，我們在聖荷西/奧克蘭/舊金山地區的用戶數量達到了所有家庭的 5%，並且沒有任何放緩的跡象。在第二季度，我們首次維持了第一季低於 6% 的客戶流失率。第二季度，我們每週從 20 個大都會配送中心向訂閱者運送超過 100 萬部 DVD 電影，沒有發生重大停機或事故。第二季度，我們在實現長期目標方面取得了不懈的進展。

Let me now tell you how we achieved our record performance, and what you can expect from us in the future, as we continue to lead the market for subscription movie rentals, a market we invented. Our core strategy has been and continues to be an unwavering focus on improving the consumer experience. We opened three new metropolitan distribution centers, bringing up our free overnight delivery to 66% of our subscribers and 44% of domestic households. We added over 1,000 new titles to our store, and now we offer over 15,000 titles for our subscribers to choose from. We launched the NetFlix First Program, where outstanding documentary content that might have otherwise languished will now get effective distribution through the efficiencies of the NetFlix platform. We invested strongly in replenishing our catalogue content, since our rapid growth and improving Website have increased demand for the good titles that do not happen to be new. The result of these service improvements is record customer satisfaction, our lowest churn rate ever, and more positive word-of-mouth. ``PC Magazine'' recently compared Blockbuster's online service, WalMart.com's rental service, and our service. Blockbuster's service earned a paltry two of five stars. WalMart.com's a respectable three of five stars, and NetFlix received a rare, maximum possible five out of five stars. The many years of work that we have invested in building our service is paying off. Consumers prefer NetFlix.

現在讓我告訴您我們如何實現創紀錄的業績，以及您對我們未來的期望，因為我們將繼續引領訂閱電影租賃市場（我們發明的市場）。我們的核心策略一直並將繼續堅定不移地致力於改善消費者體驗。我們開設了三個新的大都會配送中心，為 66% 的訂戶和 44% 的家庭家庭提供免費隔夜配送服務。我們在商店中新增了 1,000 多種新圖書，現在我們提供 15,000 多種書籍供訂閱者選擇。我們推出了 Netflix 優先計劃，原本可能會陷入困境的優秀紀錄片內容現在將透過 Netflix 平台的效率有效傳播。我們在補充目錄內容方面投入了大量資金，因為我們的快速成長和改進的網站增加了對並非新內容的好書的需求。這些服務改進的結果是創紀錄的客戶滿意度、有史以來最低的客戶流失率以及更積極的口碑。 《PC Magazine》最近對 Blockbuster 的線上服務、WalMart.com 的租賃服務和我們的服務進行了比較。百視達的服務只獲得了五顆星中的微不足道的兩顆星。 WalMart.com 獲得了令人尊敬的三顆星（滿分五顆星），而 Netflix 則獲得了罕見的最高五顆星（滿分五顆星）。我們多年來為建設服務而投入的工作正在得到回報。消費者更喜歡 Netflix。

Not only has our service improvements reduced churn, but they have also helped subscriber acquisition. Q2 was our fifth consecutive public quarter where we performed strongly in subscriber acquisition. Three quarters ago, WalMart.com and Blockbuster launched their competitive services. As in prior quarters, competition did not slow our growth. In fact, we benefited from the increased awareness that competition provided. Not only did we achieve our growth goal, but we grew at substantially less cost than we expected. For the fourth consecutive quarter, subscriber acquisition cost declined. What drove this near record-low cost? The primary contribution was from the steady improvements in our service, driving increased word-of-mouth as friends tell even more friends about NetFlix. In Q2, word-of-mouth was our fastest-growing channel of acquisition. Word-of-mouth, together with online acquisition, now accounts for over 80% of new trial subscribers.

我們的服務改進不僅減少了客戶流失，而且還有助於吸引用戶。第二季度是我們連續第五個公開季度，我們在用戶獲取方面表現強勁。三季前，沃爾瑪和百視達推出了具有競爭力的服務。與前幾季一樣，競爭並沒有減緩我們的成長。事實上，我們受益於競爭所帶來的意識的提高。我們不僅實現了成長目標，而且成長成本也大大低於我們的預期。用戶獲取成本連續第四個季度下降。是什麼推動了成本接近歷史最低水準？主要貢獻來自於我們服務的穩定改進，隨著朋友向更多朋友介紹 Netflix，我們的口碑也隨之提高。在第二季度，口碑是我們成長最快的取得管道。口碑加上線上取得目前佔新試用訂閱者的 80% 以上。

In terms of studio relations, we acquire content in two ways. We lease the DVDs from the studios in a revenue sharing arrangement, or we purchase the DVDs outright from the studios. Given the two methods of content acquisition, we will move back and forth between purchasing and revenue sharing, depending on how each studio prefers to support us. Our job as management is to ensure that free cash flow stays positive and that our gross margins and inventory availability maximize subscriber lifetime value.

在工作室關係方面，我們透過兩種方式獲取內容。我們透過收益分享安排向工作室租賃 DVD，或直接從工作室購買 DVD。鑑於兩種內容獲取方法，我們將在購買和收入分享之間來回切換，這取決於每個工作室願意如何支持我們。作為管理層，我們的工作是確保自由現金流保持正值，並確保我們的毛利率和庫存可用性最大化訂戶終身價值。

In Q2, we reported lower gross margins, as we forecast, positive free cash flow, as we forecast, and higher subscriber lifetime value.

在第二季度，我們報告了毛利率較低（正如我們預測的那樣）、正自由現金流（正如我們預測的那樣）以及更高的用戶生命週期價值。

During Q2, the United States Patent Office granted one of our patent applications, covering subscriber rental. We are currently studying our options on if and when to begin enforcement of our newly granted rights. The Patent Office grants thousands of patents each year, but few are ever successful enforced due to the time and money involved. I should know. In the mid 1990s, I led the successful enforcement of a major patent in the software development field against Sun Microsystems and others. Such enforcement is not for the faint of heart, but the upside, the ability to protect your invention, is considerable. I encourage you, as investors, to view this possibility as plausible upside but it is uncertain and will take years to become clear. Our primary strategy is to win in the marketplace, with a superior service, and we are executing on that strategy effectively.

第二季度，美國專利局批准了我們的一項專利申請，涉及訂戶租賃。我們目前正在研究是否以及何時開始執行我們新授予的權利的選擇。專利局每年授予數千項專利，但由於涉及時間和金錢，很少有專利能夠成功實施。我應該知道。 1990 年代中期，我領導針對 Sun Microsystems 和其他公司成功執行了軟體開發領域的一項重大專利。這種強制措施不適合膽小的人，但其好處，即保護您的發明的能力，是相當可觀的。作為投資者，我鼓勵您將這種可能性視為合理的上行空間，但它是不確定的，並且需要數年時間才能變得清晰。我們的主要策略是透過優質的服務贏得市場，並且我們正在有效地執行該策略。

In summary, we continue to make great progress on our march towards becoming a $1B revenue company. Thank you for your support in this mission. I'll now turn it over to Barry, and then we'll both take questions.

總之，我們在成為一家營收 10 億美元的公司的道路上繼續取得巨大進展。感謝您對此任務的支持。我現在把它交給巴里，然後我們都回答問題。

Thanks, Reed. Our performance this quarter was strong. We met or exceeded our updated guidance. Revenues and gross margin were at the high end of our range. Churn remained low, slightly better than last quarter's low water mark, and of symbolic importance, perhaps, we posted our first quarter with positive GAAP net income. With today's earnings release, we issued our quarterly guidance for the remainder of 2003. We've also report results to reflect our retroactive adoption of FAS 123 in the recent quarter. For the full year, we narrowed our revenue guidance and raised the high end of our guidance for non-GAAP net income by about 20%. We've also issued our first guidance for GAAP net income. You'll find our guidance beginning on page four of today's earnings release.

謝謝，里德。我們本季的表現強勁。我們達到或超過了我們的最新指導。收入和毛利率處於我們範圍的高端。客戶流失率仍然很低，略好於上個季度的低水位，也許具有像徵意義的是，我們發布了第一季的 GAAP 淨利潤為正值。在今天的收益發布中，我們發布了 2003 年剩餘時間的季度指引。我們也報告了結果，以反映我們在最近一個季度追溯採用的 FAS 123。對於全年，我們縮小了收入指引，並將非 GAAP 淨利潤指引的上限提高了約 20%。我們也發布了第一份 GAAP 淨利潤指引。您會在今天的收益發布的第四頁開始找到我們的指導。

Total revenues for the quarter grew 74% year-over-year and by 14% sequentially. That was down from 23% sequential growth in the prior quarter. In past years, we've grown revenues rapidly in the first quarter. Last year, Q1 revenue growth was fueled by the surge in new subscriber trials following the Christmas holiday season. After this seasonal life, growth slowed in last year's second quarter. This pattern repeated itself this year. Growth for this year's second quarter was at the high end of our guidance. On a GAAP basis, we posted net income in the quarter of $3.3M, reversing our net loss in the prior quarter of $2.4M. Second quarter results include stock option expense, resulting from our decision to early adopt FAS 123. This accounting change was immaterial to the current quarter's results. The stock comp charge we booked in the quarter under FAS 123 was almost identical to the charge we would have booked under the Intrinsic Value method of accounting under ABD 25.

該季度總營收年增 74%，季增 14%。這低於上一季 23% 的環比成長率。在過去的幾年裡，我們第一季的營收成長很快。去年，聖誕假期後新用戶試用激增推動了第一季營收成長。經過這種季節性的生活，去年第二季的成長放緩。這種模式今年又重演了。今年第二季的成長處於我們指引的高端。以 GAAP 計算，我們本季淨利為 330 萬美元，扭轉了上一季 240 萬美元的淨虧損。第二季業績包括股票選擇權費用，這是我們決定提前採用 FAS 123 所產生的。這項會計變更對本季的業績並不重要。我們在本季根據 FAS 123 登記的股票補償費用幾乎與我們根據 ABD 25 的內在價值會計方法登記的費用相同。

Last quarter, I said we planned to generate positive non-GAAP net income this quarter, and in the quarters which follow. That's still our plan. By way of reminder, non-GAAP income is GAAP net income before stock compensation expense. That's the same definition used by First Call, which tracks and reports sell side estimates for both GAAP and non-GAAP EPS. Well, what about expectations for GAAP net income?

上個季度，我說我們計劃在本季度以及接下來的幾個季度實現正的非公認會計準則淨利潤。這仍然是我們的計劃。需要提醒的是，非 GAAP 收入是扣除股票補償費用之前的 GAAP 淨利。這與 First Call 使用的定義相同，該公司追蹤並報告賣方對 GAAP 和非 GAAP 每股盈餘的估計。那麼，對 GAAP 淨利的預期又如何呢？

During the next quarters, we'll be on the cusp of profitability -- could be positive, or it could be negative. I expect stock option expense to increase by at least $1M next quarter, marketing expense to increase as a percent of revenue, as our new trial subscriber growth accelerates. The income statement is stressed in periods of accelerating subscriber growth, as marketing expense grows as a percent of revenue. Marketing expense grows because all the costs of acquiring a subscriber are expensed when a subscriber begins their free trial period.

在接下來的幾個季度中，我們將處於盈利的風口浪尖——可能是積極的，也可能是消極的。我預計下個季度股票選擇權費用將增加至少 100 萬美元，隨著我們的新試用用戶成長加速，行銷費用佔收入的百分比將增加。在用戶加速成長時期，損益表受到壓力，因為行銷費用佔收入的百分比不斷增長。行銷費用會增加，因為當訂閱者開始免費試用期時，所有獲取訂閱者的成本都會被支出。

Gross margin for the quarter was 44.2%. This was in the range of our revised guidance of 43% to 45%, and down from 46.1% in the prior quarter. Disc usage per average paid subscriber was the same as the prior quarter and didn't contribute to the change in margin. Lower margins resulted from higher content costs in the quarter. As Reed mentioned in his remarks, we invested heavily in back catalogue and new release content in the current quarter. In prior periods, like the fourth quarter of 2002, and the first quarter of 2002, we also invested heavily in back catalogue content. In hindsight, we can say that these investments in providing a better NetFlix user experience were productive, we're confident that the economics of our purchases in the recent quarter will also be attractive over the useful life of this inventory.

該季度毛利率為 44.2%。這在我們修訂後的指導值 43% 至 45% 範圍內，低於上一季的 46.1%。平均付費用戶的光碟使用量與上一季相同，並未對利潤率變化產生影響。本季內容成本上升導致利潤率下降。正如里德在演講中提到的，我們在本季度對過往目錄和新發佈內容​​進行了大量投資。在先前的時期，例如 2002 年第四季和 2002 年第一季度，我們也對過往目錄內容進行了大量投資。事後看來，我們可以說，這些在提供更好的 Netflix 用戶體驗方面的投資是富有成效的，我們相信，我們在最近一個季度購買的經濟性在該庫存的使用壽命內也將具有吸引力。

Average monthly churn for the quarter declined to 5.6% from 6.7% in the prior year and 5.8% in the prior quarter. While this decline in churn from the first quarter is encouraging, I suggest you think about it as statistical noise related somewhat to the timing of new trial starts. Among paying subscribers, churn rates remained at the same low level we've registered in the prior quarter, and that's the important news in this quarter's churn number.

該季度的平均月度客戶流失率從去年同期的 6.7% 和上一季的 5.8% 下降至 5.6%。雖然第一季客戶流失率的下降令人鼓舞，但我建議您將其視為與新試驗開始時間相關的統計噪音。在付費用戶中，流失率仍維持在上一季的較低水平，這是本季流失率的重要消息。

As Reed said earlier, subscriber acquisition cost decline to $30.35 in Q2, better than our guidance for the quarter. The primary contributing factor to this better-than-expected performance was rapid growth in free word-of-mouth subscribers. Subscriber acquisition cost has declined sequentially in each of the last four quarters. Despite that decline, we expect acquisition cost to increase in the next two quarters, for two reasons. Changes in our acquisition source mix, and the cost of advertising testing. We expect SAC to be in the range of $31 to $34 in Q3 and $32 to $35 in Q4.

正如 Reed 早些時候所說，第二季訂戶獲取成本下降至 30.35 美元，好於我們對本季的指導。業績好於預期的主要原因是免費口碑訂閱用戶的快速成長。過去四個季度，訂戶獲取成本連續下降。儘管出現下降，但我們預計未來兩季的收購成本將會增加，原因有二。我們的收購來源組合以及廣告測試成本的變化。我們預計第三季 SAC 價格將在 31 至 34 美元之間，第四季將在 32 至 35 美元之間。

For the seventh sequential quarter, free cash flow was positive. We generated $4.3M of free cash flow while growing revenues 74%. Although positive, free cash flow declined 21% from $5.5M in the prior quarter. Why? 90 days ago, I told you that we would increase our inventory spending to improve the NetFlix user experience and drive additional improvements in churn. That's what we did in the current quarter. We increased inventory buying and we shifted the mix away from revenue-sharing DVDs in favor of purchased DVDs. The increased buying, and particularly the increased buying of non-revenue sharing DVDs, caused a decline in free cash flow in Q2. Over the past two quarters, the non-rev share mix of acquired DVDs has doubled, from 29% in Q1 to 60% in Q2. Historically, purchased DVDs have accounted for 30% to 45% of total DVDs acquired, quite a bit lower than the current quarter. What you can expect from us next quarter in terms of capex spending on DVD inventory is a decline from Q2 levels. Q2 spending was roughly 27% of revenue. I expect Q3 spending to fall to the range of 18% to 21% of revenues, as back catalogue buying declines from last quarter's levels.

連續第七個季度的自由現金流為正。我們產生了 430 萬美元的自由現金流，同時收入成長了 74%。儘管自由現金流為正，但較上一季的 550 萬美元下降了 21%。為什麼？ 90 天前，我告訴過您，我們將增加庫存支出，以改善 Netflix 用戶體驗並進一步改善客戶流失率。這就是我們在本季所做的。我們增加了庫存購買，並將產品組合從收益分享 DVD 轉向購買 DVD。購買量的增加，尤其是非收入共享 DVD 的購買量的增加，導致第二季自由現金流下降。過去兩個季度，購買的 DVD 的非收入份額翻了一番，從第一季的 29% 增加到第二季度的 60%。從歷史上看，購買的 DVD 佔 DVD 總購買量的 30% 至 45%，比本季低很多。您可以預期我們下個季度的 DVD 庫存資本支出將較第二季水準下降。第二季支出約佔收入的 27%。我預計第三季支出將下降至營收的 18% 至 21%，因為舊目錄購買量較上季水準下降。

So, in summary, the business performed strongly in Q2 compared with our question. We remain on, or ahead, of pace to reach our financial plan for the full year, and our goal of $1B of revenue and 5% market share in 2009 or sooner.

因此，總而言之，與我們的問題相比，該業務在第二季度表現強勁。我們將繼續或領先地實現全年財務計劃，以及 2009 年或更早實現 10 億美元收入和 5% 市場份額的目標。

At this point, I'll turn the call back over to the operator so we can open the phones to answer your questions.

此時，我會將電話轉回接線員，以便我們可以打開電話回答您的問題。

Thank you very much, gentlemen. [Operator Instructions]. And gentlemen, our first question today will come from Gordon Hodge of Thomas Weisel Partners.

非常感謝你們，先生們。 [操作員說明]。先生們，我們今天的第一個問題將來自 Thomas Weisel Partners 的 Gordon Hodge。

Great, just a couple of questions, one on the churn comment. I think, Barry, you might have said that we should look at it as statistical noise, that it's coming down-- I mean, obviously, it's coming down, consistent with the way it came down in the first quarter. I mean, is that-- what did you mean by ``statistical noise,'' I guess, is the question? And then also, if you have a number, I know from time to time, you have a number for us on the percentage of subscribers that have actually-- that are returning subscribers that may have churned off in the past, that are coming back on to the service. And then I'm curious on subscriber acquisition costs -- just if you're seeing any evidence of competition in the channel that you're pursuing? It would look like you don't, but just curious if you see anything out there that we're missing somehow. Thanks.

太好了，只有幾個問題，其中一個是關於流失評論的。我想，巴里，你可能會說，我們應該將其視為統計噪音，它正在下降——我的意思是，顯然，它正在下降，與第一季的下降方式一致。我的意思是，你所說的「統計噪音」是什麼意思，我想，這就是問題所在？然後，如果你有一個數字，我知道，你有時會為我們提供一個關於實際訂閱者的百分比的數字，這些訂閱者可能是過去可能流失的回頭客，現在又回來了轉到服務。然後我對訂戶獲取成本很好奇——如果您在您所追求的頻道中看到任何競爭的證據？看起來你沒有，但只是好奇你是否看到了我們遺漏的任何東西。謝謝。

Hi, Gordon. My comment on churn was meant to reinforce the macro trend, which was the low water mark that we reached towards last quarter and sustained this quarter, and a 20 basis point swing, I view, as being largely immaterial.

嗨，戈登。我對客戶流失的評論是為了強化宏觀趨勢，即我們上個季度達到並在本季度持續的低水位，我認為 20 個基點的波動在很大程度上是無關緊要的。

OK. But- and you consider this a lower water mark, just--

好的。但是——你認為這是一個較低的水位線，只是——

Well, we have a lower water mark in our guidance, right?

好吧，我們的指導中的水位線較低，對吧？

Yeah.

是的。

So I think it's possible for us to do better. I think we're doing great. If we sustain churn below 6%, we're in great shape.

所以我認為我們可以做得更好。我認為我們做得很好。如果我們將客戶流失率維持在 6% 以下，我們就處於良好狀態。

OK.

好的。

The second part of your question, I think, related to returning subscribers, what percent of folks churn off, come back. That's remained consistent, at-- in the 8% to 10% range.

我認為，你問題的第二部分與回訪訂閱者有關，即流失的訂閱者中有多少人又回來了。這個數字一直保持在 8% 到 10% 的範圍內。

OK.

好的。

And then I think the third part of your question related to SAC.

然後我認為你問題的第三部分與 SAC 有關。

Yep.

是的。

Sorry, can you repeat?

抱歉，您能再說一次嗎？

Yeah, I was just curious if you're seeing any signs of competition in the channels that you market? For instance, is there any competition to put inserts in DVD boxes, which I haven't seen anybody, but anyway, is there? And then obviously you do a lot of pay-for-performance online advertising, and I'm curious if you're seeing, you know, any changes in the competitive environment for key words, et cetera?

是的，我只是好奇您是否在您行銷的管道中看到任何競爭的跡象？例如，是否有任何在 DVD 盒中放入插頁的競爭，我沒有見過任何人，但無論如何，有嗎？顯然，你們做了很多按效果付費的網路廣告，我很好奇你們是否看到關鍵字競爭環境等發生任何變化？

I think we're feeling good about the competitive environment, Gord. We raised our guidance in December of last year for the fourth quarter, and we raised our guidance for the full year this year, as you know, and then in the most recent-- initially, revenues, and in the current quarter, raised the high end of our earnings estimate, about 20%. So from a competitive standpoint, we feel like the business has sustained positive momentum and we benefited from the increased awareness created in the category.

我認為我們對競爭環境感覺良好，戈德。我們在去年 12 月提高了第四季度的指導，如您所知，我們提高了今年全年的指導，然後在最近的最初，收入和本季度提高了我們的盈利預測上限為 20% 左右。因此，從競爭的角度來看，我們認為該業務保持了積極的勢頭，並且我們受益於該類別中認知度的提高。

Terrific. Thank you.

了不起。謝謝。

And we go next to Safah Rashtchy of Piper Jaffray.

我們旁邊是 Piper Jaffray 的 Safah Rashtchy。

Good afternoon, Reed and Barry. Congratulations on a another solid quarter here. First, let's just pick up on Gordon's question on churn. I think I understand where you're coming from - I just want to confirm this. It appears that you are happy below 6%, as long as you can manage the churn rate within that range, given what else you can change and the other levers that you have in margins, et cetera. So my question is, is churn now somewhat manageable and you will adjust it up or down to maximize lifetime value, or is there still a distinct downward move that you're trying to get it to, with these DVD acquisitions and so forth? And I have a follow-up, but let's get that done first.

下午好，里德和巴里。恭喜您又取得了穩定的季度業績。首先，讓我們來回答戈登關於客戶流失的問題。我想我明白你的想法——我只是想確認這一點。只要您能夠將客戶流失率控制在該範圍內，考慮到您還可以更改哪些內容以及您在利潤方面擁有的其他槓桿等，您似乎對低於 6% 感到滿意。所以我的問題是，現在客戶流失率是否在某種程度上是可控的，您將向上或向下調整它以最大化終身價值，或者您是否仍然試圖透過這些DVD 收購等方式使其出現明顯的下降？我有一個後續行動，但讓我們先完成它。

Sure, Safah, it's Reed here. You'll notice from our guidance for this quarter, Q3, that it's 5.3% to 5.8%, so we're comfortable that the general direction is still heading down. The statistical comment is that within .1 or .2 of churn points, that's a little bit just noise. So, we want to put a little temper on the progress we've made from 5.8 to 5.6, that, you know, in very small numbers, it can be noise. But the general direction is continuing to be positive and you'll notice from our guidance, which is a much tighter range-- our guidance in the past had been from 5 to 6.25, so we're gaining confidence that we can manage it and the general direction is in the right direction.

當然，薩法赫，我是里德。您將從我們本季（第三季）的指導中註意到，該數字為 5.3% 至 5.8%，因此我們對整體方向仍在下降感到滿意。統計數據表明，在 0.1 或 0.2 的流失點內，這只是噪音。因此，我們想對從 5.8 到 5.6 所取得的進展進行一點調整，你知道，在極少數情況下，這可能是噪音。但總體方向仍然是積極的，你會從我們的指導中註意到，這是一個更窄的範圍——我們過去的指導是從 5 到 6.25，所以我們越來越有信心我們可以管理它，並且大方向是對的。

So you still expect it to go down, including for the longer-tenured customers?

所以你仍然預期它會下降，包括長期客戶？

Well, the longer tenured customers have stayed with a very consistent and low churn, so there hasn't been any real change there. We are confident that we can manage churn into the range that we've given, the 5.3% to 5.8%.

嗯，使用期限較長的客戶一直保持著非常穩定且較低的流失率，因此沒有任何真正的變化。我們有信心能夠將客戶流失率控制在我們給出的範圍內，即 5.3% 至 5.8%。

OK, so the follow-up I had had to do with the DVD purchases - it obviously appeared that this quarter was when you decided to invest on the inventory [inaudible] and so forth, and the next couple of quarters, you'll focus a lot more on the customer acquisition. What should we expect in the future quarters, not just this year, in terms of the level of spending that you will need to do to maintain your back catalogue?

好的，所以我的後續行動與 DVD 購買有關 - 顯然，本季度是您決定投資庫存 [聽不清楚] 等等的時候，接下來的幾個季度，您將重點關注更多關於客戶獲取的內容。就維護過往目錄所需的支出水準而言，我們應該對未來幾季（而不僅僅是今年）有何預期？

Well, the key thing, Safah, that we manage to is staying free cash flow positive, so we see that as an important constraint, and managing the gross margin, and the gross margin is exactly where we wanted it to be, relative to customer satisfaction. Obviously, when we revenue share versus purchase discs, there are different accounting treatments, one flowing to the balance sheet, and different cash flow properties. But the fundamental thing that we manage to is the gross margin and the customer satisfaction, and we balance those to get the highest possible customer lifetime value.

好吧，薩法赫，我們設法做到的關鍵是保持自由現金流為正，因此我們認為這是一個重要的限制，並管理毛利率，而毛利率正是我們想要的，相對於客戶滿意。顯然，當我們分享收入與購買光碟時，會有不同的會計處理，一種流向資產負債表，以及不同的現金流量屬性。但我們設法實現的根本目標是毛利率和客戶滿意度，我們平衡這些以獲得盡可能高的客戶終身價值。

Great, thank you.

太好了謝謝。

Safah, it's Barry. Just to reiterate the guidance in my comments, from a modeling perspective, if you were in the 18% to 21% of revenue range in the third quarter, and I would say, in the fourth quarter, then we would be comfortable with that, and on that basis, you would see a decline in spending, absolute decline in spending, from second quarter levels.

薩法赫，我是巴里。只是重申我的評論中的指導，從建模的角度來看，如果第三季度收入的 18% 到 21% 範圍內，我會說，第四季度，那麼我們會對此感到滿意，在此基礎上，你會看到支出比第二季水準下降，支出絕對下降。

Great. Thanks.

偉大的。謝謝。

And we go next to Dennis McAlpine of McAlpine Associates.

接下來是 McAlpine Associates 的丹尼斯·麥卡爾平 (Dennis McAlpine)。

Following up on that same general thought, the- obviously, you spent a lot on acquiring DVDs in the second quarter, and it will be going down. Normally, if that's the case, your margin should go back up a bit, because your amortization would go down. If you're talking about margins going down, is the implication then your turn-around in DVDs will pick up, or why are you expecting the margin-- gross profit margins to go down?

遵循同樣的普遍想法，很明顯，你在第二季花了很多錢購買 DVD，而且它會下降。通常，如果是這種情況，您的保證金應該會稍微回升，因為您的攤銷會下降。如果您談論的是利潤率下降，這是否意味著您的 DVD 業務週轉將會加快，或者您為什麼預計利潤率（毛利率）會下降？

Hi, Dennis, it's Barry. We expecting seasonally, in Q3, and Q4, to see an uptick in average usage, above the levels we saw in the current quarter.

嗨，丹尼斯，我是巴里。我們預計，在第三季和第四季，平均使用量將出現季節性上升，高於本季的水平。

To what sort of level?

達到什麼樣的水平？

We haven't given guidance on that, other than with respect to the gross margin targets for the business.

除了業務的毛利率目標之外，我們尚未就此提供指導。

And the ones that the-- in the second quarter, as I remember, the first quarter was 5.5 or 5.75, something like that?

我記得，在第二季度，第一季是 5.5 或 5.75 之類的？

Yeah, it was 5.75 in the first and second quarter, and our gross margin guidance for the upcoming quarter is 42 to 44.

是的，第一季和第二季的毛利率為 5.75，我們下一季的毛利率指引為 42 至 44。

Thank you.

謝謝。

And we'll move on to Simon Wahlberg [ph] of Sampson Partners.

我們將轉向 Sampson Partners 的西蒙·沃爾伯格 (Simon Wahlberg)。

Hi, thanks for taking the call. Can you discuss any fears of a potential price war, specifically with Wal-Mart? How you can guys can address it? I mean, if Wal-Mart decides one day to start cutting costs, are you going to start matching them, and you know, just give us the landscape of how that's going to work. Thank you.

您好，感謝您接聽電話。您能否討論一下對潛在價格戰的擔憂，特別是與沃爾瑪的價格戰？你們如何解決這個問題？我的意思是，如果沃爾瑪決定有一天開始削減成本，你是否會開始匹配它們，你知道，只需向我們介紹它將如何運作。謝謝。

Sure, Simon, it's Reed here. I don't think that we're likely to see NetFlix reacting. Wal-Mart can cut their price further if they wish. In their ISP business, where they compete with AOL and MSN, they don't have a 10% or 20% or 30% discount to AOL or MSN, but they have a 60% discount to MSN and AOL. And it hasn't made a difference. Very few subscribers choose the Wal-Mart Connect ISP service, which I think illustrates, on an online situation, the futility of simply doing those lower prices without the brand marketing. Obviously a United Online, being NetZero and Juno, at those prices, has built a real business, but that's because of their marketing prowess, et cetera. So I don't see price as instrumental; I see it much more of the marketing prowess, the brand. Given that, we're very comfortable in our ability to compete at our current price points, and we have no plans to change those.

當然，西蒙，我是里德。我認為我們不太可能看到 Netflix 做出反應。如果沃爾瑪願意的話，他們可以進一步降價。在他們的ISP業務中，他們與AOL和MSN競爭，他們沒有給AOL或MSN 10%、20%或30%的折扣，但他們給MSN和AOL 60%的折扣。但這並沒有產生什麼影響。很少有訂戶選擇 Wal-Mart Connect ISP 服務，我認為這說明，在線上情況下，如果不進行品牌行銷，僅僅提供較低的價格是徒勞無功的。顯然，聯合在線（NetZero 和 Juno）以這樣的價格已經建立了真正的業務，但這是因為他們的營銷能力等等。所以我不認為價格是有幫助的；我更多地看到的是行銷能力和品牌。有鑑於此，我們對以當前價格點進行競爭的能力感到非常滿意，並且我們沒有計劃改變這些。

Thank you.

謝謝。

Simon, I would add that price is a component of the value proposition, but rapid delivery is also important, and it's also important that you help people find great movies to watch online and have them when they want them to rent.

西蒙，我想補充一點，價格是價值主張的一個組成部分，但快速交付也很重要，而且幫助人們找到在線觀看的精彩電影並在他們想要租借時獲得它們也很重要。

Just a quick follow-up question, not specifically towards that -- last year, we saw, over the Christmas holiday season, a massive dropping of the DVD prices in places like Best Buy and Wal-Mart, just to bring people in the store, almost to the point where it didn't pay to rent the movie, it paid to buy the movie. How are you going to be able to combat that this year if the Best Buys and Circuit Cities of the world try the same marketing ploys and sell the ``Harry Potters'' for $7.99 or $8.99? And that's all I have. Thank you.

只是一個快速的後續問題，並不是專門針對這個問題 - 去年，我們在聖誕節假期期間看到，百思買和沃爾瑪等地方的 DVD 價格大幅下降，只是為了吸引人們到店裡，幾乎到了租電影不花錢，買電影花錢的地步。如果世界上的百思買和電路城嘗試同樣的行銷策略，以 7.99 美元或 8.99 美元的價格出售《哈利波特》，今年你將如何應對這個問題？這就是我所擁有的一切。謝謝。

Well, I'll let Reed answer that question, but I just want to point that during the fourth quarter last year, while that was happening, we raised our guidance, so it clearly didn't impact the business on a historical basis.

好吧，我會讓里德回答這個問題，但我只想指出，在去年第四季度，當這種情況發生時，我們提高了我們的指導，因此它顯然沒有對歷史基礎上的業務產生影響。

I think Barry's answer there-- which is the more fuel there is in the DVD market, from all of the avenues, the more it helps us grow, and as Barry said, both in Q4 and Q1, we did very well, so we hope that Best Buy and Wal-Mart will do that again this Christmas.

我認為巴里的答案是——DVD 市場上的燃料越多，來自所有途徑的燃料就越多，它就越能幫助我們成長，正如巴里所說，在第四季度和第一季度，我們都做得很好，所以我們希望百思買和沃爾瑪今年聖誕節能再次這樣做。

And we'll move on to Charles Grieg [ph] of Atlas Capital.

我們將轉向 Atlas Capital 的查爾斯·格里格 (Charles Grieg)。

Thank you. Quick question for you with regard to the disc usage. You said disc usage sequentially was flat?

謝謝。關於光碟使用的快速問題。您說磁碟使用量連續持平？

I did, yes.

我做到了，是的。

And is that around the 5.7 range?

是在 5.7 左右嗎？

Yes.

是的。

And then the final question I had is, you've talked about obtaining five million subs. Could you talk a little bit about the market for those five million subs, and specifically, I would assume a handful or a large percentage of your subscribers are coming from the retail renting channel and that spend north of $20 a month and obviously can get a much better value proposition from going to NetFlix, and I'm just curious, how big do you think the market is for renters spending more than $20 a month, and then where would the balance of the five million renters come from?

我的最後一個問題是，你談到了獲得 500 萬訂閱者。您能談談這 500 萬訂閱者的市場嗎？具體來說，我假設您的訂閱者中有一小部分或很大一部分來自零售租賃渠道，他們每月花費超過 20 美元，顯然可以獲得Netflix 的價值主張要好得多，我只是很好奇，你認為每月花費超過20 美元的租客的市場有多大，那麼這500 萬租客的餘額從何而來？

Sure, it's Reed here. I mean, we really have three types of renters. We have renters, that as you refer to, they might be watching eight or nine movies a month, and they love NetFlix because it's such a good value, but we also have convenience renters -- these are your more Amazon-type customers, and what they love is the free home delivery, the no late fees, the no due dates, the flexibility. But they pretty much have middle-of-the-road taste and middle-of-the-road consumption. And then we have selection renters, and they're excited by the 12,000 movies that we carry that a video store does not, and those might be Baliwood movies from India, they might be documentaries from PBS, they might be 75 years of Academy Award winners, but they're driven to NetFlix for the vast selection. So we do get renters from all three, which is why your traditional percent of the market that's $20 above would only cover the value renters.

當然，里德就在這裡。我的意思是，我們確實有三種類型的租戶。我們有租戶，正如你所提到的，他們每個月可能會看八到九部電影，他們喜歡Netflix，因為它物有所值，但我們也有便利的租戶——這些是你更多的亞馬遜類型的客戶，並且他們喜歡的是免費送貨上門、無滯納金、無截止日期、靈活性。但他們幾乎有中庸的品味和中庸的消費。然後我們有精選的租客，他們對我們提供的12,000 部電影感到興奮，而音像店沒有這些電影，這些可能是來自印度的Baliwood 電影，它們可能是PBS 的紀錄片，它們可能是75 年的奧斯卡金像獎獲勝者，但他們被驅使到 Netflix 觀看大量的選擇。因此，我們確實從這三個方面都有租戶，這就是為什麼高於 20 美元的傳統市場百分比只能涵蓋價值租戶。

Also, in terms of the five million subscribers, we did hit the 5% household penetration mark in the San Jose/Oakland area, and while San Jose and Oakland are more Internet-oriented than some of the country, from a movie point of view, they're undifferentiated. They're pretty much like middle America. So it's our first and most specific proof point that getting to 5% household penetration in Kansas City, in Detroit, in Tampa, in Boston, is feasible, and when we do that, we'll be at five million subscribers.

此外，就 500 萬訂戶而言，我們在聖荷西/奧克蘭地區確實達到了 5% 的家庭滲透率大關，而從電影的角度來看，聖荷西和奧克蘭比全國某些地區更注重互聯網，他們是無差別的。他們很像美國中部。因此，這是我們第一個也是最具體的證據，證明堪薩斯城、底特律、坦帕、波士頓的家庭普及率達到5% 是可行的，當我們做到這一點時，我們的訂戶數量將達到500萬。

Have you mentioned at all what percentage of the market, from the value channel, is actually spending $20 or more a month in the traditional retail rental channel?

您是否提到過，從價值管道來看，實際每月在傳統零售租賃管道上花費 20 美元或更多的市場比例是多少？

Most- anecdotally, most of the revenue that Blockbuster, Hollywood, and the independents get is from heavy renters, so the number of people is debatable, but most of the revenue comes from heavy renters, and so since the domestic home video rental market is about $10B and since, at five million subscribers, we'll be running just a little north of a $1B in revenue, we're comfortable that that 10% of the total market is a very achievable figure.

最有趣的是，百視達、好萊塢和獨立電影公司獲得的大部分收入都來自重度租賃者，因此人數有爭議，但大部分收入來自重度租賃者，因此由於國內家庭錄影租賃市場大約10B 美元，由於擁有500 萬訂閱者，我們的收入將略高於10 億美元，因此我們很高興，總市場的10% 是一個非常可實現的數字。

OK, thank you.

好的謝謝。

And next, from Manchester Management, we go to Morgan Frank.

接下來，我們從曼徹斯特管理公司轉向摩根弗蘭克。

Hi, guys, just going through the release here and maybe it's here and I can't find it, but what was your revenue per sub this quarter, and can you give us any comments on what that might be in the couple of quarters coming up?

嗨，夥計們，剛剛瀏覽了這裡的發布，也許它就在這裡，但我找不到它，但是你們本季度每個子的收入是多少，您能給我們任何關於未來幾個季度可能會發生什麼的評論嗎？向上？

Hi, Morgan, Barry. We didn't actually disclose it. It came up last call as well. As I recollect, it was $19.98 last quarter and I think it dropped ten cents in the current quarter. I believe the ASP was $19.88, something like that.

嗨，摩根，巴里。我們實際上並沒有透露它。最後一次通話也出現了。據我記得，上個季度的價格為 19.98 美元，本季下降了 10 美分。我記得平均售價是 19.88 美元，差不多吧。

OK, and is that-- is that just sort of noise, bouncing around, or--

好的，那是——只是一種噪音，彈跳著，或者——

Yeah.

是的。

And so we can expect it to be sort of in a similar range next quarter?

那麼我們可以預期下個季度它會處於類似的範圍內嗎？

Yes.

是的。

OK, great. Thanks very much.

太好了。非常感謝。

Mr. Frank, anything further sir?

弗蘭克先生，還有什麼嗎？

No, thank you.

不，謝謝。

OK. And we'll take a follow-up question from Dennis McAlpine.

好的。我們將回答丹尼斯·麥卡爾平的後續問題。

Yeah, would you talk for a minute about the amortization of the DVDs? Is there a carryover effect from those purchases in the second quarter that will go into the third quarter? How do you see that playing out over the next several quarters?

是的，您能談談 DVD 的攤提嗎？第二季的採購是否會對第三季產生結轉效應？您如何看待未來幾季的情況？

The DVDs are amortized on an accelerated basis, and that's some of the months. So it's that-- 100% of the DVDs are amortized in the first 12 months, roughly 76% of the cost of a DVD is written off in the first six months, so to Reed's point, from an accounting basis, the economics of purchase versus rental are unfavorable with respect to purchase early in the life of DVD, and of course that reverses after-- certainly after the six-month mark. To your point earlier, it becomes a profit accelerant to the extent that those DVDs remain utilized.

DVD 是按加速攤銷的，這只是其中的幾個月。所以，100% 的 DVD 在前 12 個月內攤銷，大約 76% 的 DVD 成本在前 6 個月內沖銷，所以按照里德的觀點，從會計基礎來看，購買的經濟性與租賃相比，在DVD 生命週期的早期購買是不利的，當然，在六個月後，情況就會逆轉。正如您之前所說，只要這些 DVD 繼續被使用，它就會成為利潤促進劑。

Is the-- will the purchases or the bulk of the purchases made towards the end of the quarter, or do you just take the same amount for the quarter, regardless of when they're done in that quarter?

採購或大部分採購是在本季度末進行的，還是只在本季度採購相同數量的產品，而不管它們在該季度何時完成？

The purchases, Dennis, are spread throughout the quarter fairly evenly, and it's calculated monthly, so whenever they show up in the month, you get one month's depreciation.

丹尼斯，購買量相當均勻地分佈在整個季度，並且按月計算，因此每當它們出現在該月時，您都會得到一個月的折舊。

I'm sorry, Dennis, just to be clear, so if they showed up on the last day of the month, we take a full month's depreciation. If they show on the first day of the month, we take a full month's depreciation.

很抱歉，丹尼斯，請澄清一下，如果它們在該月的最後一天出現，我們將收取整整一個月的折舊。如果它們在該月的第一天顯示，我們將採用整月的折舊。

And what are your plans for opening new distribution centers for the third and fourth quarter?

您在第三季和第四季開設新的配送中心的計畫是什麼？

We've got-- Dennis, this is Reed here, I'm just doing it from memory here, two or three more going up over the next three months, maybe six months.

我們有──丹尼斯，這是里德，我只是憑記憶做的，在接下來的三個月，也許六個月內還會有兩到三個。

Thank you.

謝謝。

Our goal is to get to 60% coverage.

我們的目標是達到 60% 的覆蓋率。

Thank you.

謝謝。

And we go back to Gordon Hodge for a follow-up question.

我們回到戈登·霍奇來詢問後續問題。

Yes, on disc usage, when do you worry about the level that that hits, and is that something you've got some controls on? And then another question, just on-- I know you've given us the Bay Area percentage, but I think you've typically also given us San Francisco percentage -- I'm wondering if you have that. I think it was 6% the last time we talked. Thanks.

是的，在光碟使用方面，您什麼時候擔心達到的級別，您對此有一些控制嗎？然後是另一個問題——我知道你已經給了我們灣區的百分比，但我想你通常也給了我們舊金山的百分比——我想知道你是否有這個。我想我們上次談話時是 6%。謝謝。

Yes, Gordon, as you recall, the household penetration of subscribers, divided by all households, is over 6% in the city of San Francisco, and it's 5% on the Oakland/San Jose/San Francisco Bay Area as a whole.

是的，戈登，正如您所記得的那樣，舊金山市的訂戶家庭滲透率（除以所有家庭​​）超過 6%，而奧克蘭/聖何塞/舊金山灣區整體的比例為 5%。

Barry, with respect to the first part of your question, how do we track it, and might it be a concern. Of course it would be a concern if the inventory utilization on purchased content dropped significantly, because the depreciation is a fixed charge, and we would see margin erosion, and our objective is to manage the business within the range of 42% to 44%, that we've identified. So with that in mind, we manage the inventory both with respect to rev share titles and non-rev share titles at the title level, and so with respect to, let's say, purchased title, if it is out of stock because subscribers keep a queue on their site, we know exactly with respect to that title what the backlog is, which informs us about the quantity of DVDs to buy.

巴里，關於你問題的第一部分，我們如何追蹤它，這可能是一個問題。當然，如果購買內容的庫存利用率大幅下降，那將是一個問題，因為折舊是一項固定費用，我們會看到利潤率受到侵蝕，而我們的目標是將業務管理在42%至44%的範圍內，我們已經確定了。因此，考慮到這一點，我們在標題層級管理有關收益共享標題和非收益共享標題的庫存，因此，對於購買的標題（如果由於訂閱者保留而缺貨）在他們的網站上排隊時，我們確切地知道該標題的積壓情況，這告訴我們要購買的DVD 數量。

Yep.

是的。

To make-- bring that title back into a merchandisable state, to satisfy the unmet demand, and when we-- when Ted Sarandos, who runs the content group decides how many copies of a specific title to buy, he does so with an average lifetime turn for N number of copies of that title in mind.

為了使遊戲回到可銷售狀態，以滿足未滿足的需求，當我們——當運營內容組的特德·薩蘭多斯（Ted Sarandos）決定購買特定遊戲的多少副本時，他會以平均水平來這樣做一生輪轉N份該書名。

Yep.

是的。

And then we absolutely look back and track every month for every title what the utilization looks like for that purchased content.

然後我們絕對會每月回顧並追蹤每個標題的購買內容的使用率。

And Gordon, in terms of the usage per month, it's fairly stable, and that's why we've been able to manage the gross margins and forecast them accurately a quarter in advance, because we've got very good historicals in that. And the more we rely on purchased content, then the more that we're insulated from a gross margin point of view in changes in usage.

戈登，就每月的使用量而言，相當穩定，這就是為什麼我們能夠管理毛利率並提前一個季度準確預測毛利率，因為我們在這方面有非常好的歷史記錄。我們越依賴購買的內容，就越不受使用變動的毛利率的影響。

Yeah, I guess that's-- yeah, that's right, if you're buying them, it doesn't matter as much.

是的，我想那是——是的，沒錯，如果你買它們，那就沒那麼重要了。

And while I've got you, just one last question -- just, Reed, if you can give us any comments on sort of-- you've been incredibly focused since raising a lot of money at the IPO, haven't strayed into any other areas, and I think that's actually commendable, but have you given any more thought to offshoots, like international or games or can you comment on that? Thanks.

雖然我已經問到你了，但最後一個問題——里德，如果你能給我們任何評論的話——自從在 IPO 籌集了大量資金以來，你一直非常專注，沒有偏離進入任何其他領域，我認為這實際上是值得稱讚的，但是您是否更多地考慮過分支，例如國際或遊戲，或者您可以對此發表評論嗎？謝謝。

We're thinking of getting into investment banking.

我們正在考慮進入投資銀行業。

Oh, terrific.

噢，太棒了。

No, Gordon, we continue to look and study the markets for video games, for international, for downloading, for a range of extensions. It's part of disciplined management process to be surveying the territory, but at this point, we haven't made any decisions.

不，戈登，我們繼續尋找和研究視頻遊戲、國際、下載和一系列擴展的市場。勘察領土是嚴格管理流程的一部分，但目前我們尚未做出任何決定。

Great. Thanks.

偉大的。謝謝。

And we're back now to Safah Rashtchy.

現在我們回到 Safah Rashtchy。

Yeah, just a few traditional follow-ups here. I was going to ask you about the seasonality in the summer months. It seemed to me that you have-- you have started to see some seasonality showing up, kind of catching up with the organic growth that you are seeing, that disc usage was down a little bit, or wasn't up as you expected. What do you expect in the next-- not just, I guess, this year, but going forward, in summer months, and I don't mean just for the disc usage, but also the rate of sign-ups that you might do? To what degree that might alter your marketing spend online, putting aside the big push you always have in the fourth quarter, but within the summer, I'm just concerned as to how you would be adjusting to that seasonality?

是的，這裡只是一些傳統的後續行動。我本來想問你夏季的季節性。在我看來，你已經開始看到一些季節性的出現，有點趕上你所看到的有機增長，光碟使用量略有下降，或者沒有達到你的預期。你對接下來的期望是什麼——我想不僅是今年，而且是在夏季的幾個月裡，我的意思不僅僅是光碟的使用量，還有你可能做的註冊率？拋開第四季度一直以來的大力推動，這可能會在多大程度上改變您的線上行銷支出，但在夏季，我只是擔心您將如何適應這種季節性？

Well, we're fortunate -- it's Reed here, Safah -- to be able to look back at prior quarters to understand the seasonality and it's, you know, there. Q2 is generally our weakest quarter from a subscriber acquisition point of view, and then it builds, going towards being highest in Q4 and Q1, so that's been the cycle over the last several years, and that cycle has gotten smoother and less cyclical each year. But of course, each year in December, a lot of DVD players are sold, so we'll see some effect from that going forward. But I think you will see seasonality become less and less of a phenomena in terms of subscriber acquisition.

好吧，我們很幸運 - 里德在這裡，薩法 - 能夠回顧之前的季度來了解季節性，你知道，它就在那裡。從用戶獲取的角度來看，第二季度通常是我們最弱的季度，然後它會逐漸增強，並在第四季度和第一季度達到最高水平，所以這就是過去幾年的周期，而且這個週期每年都變得更加平滑和週期性更少。當然，每年 12 月都會售出大量 DVD 播放機，因此我們將看到未來的一些影響。但我認為你會發現季節性在訂閱用戶獲取方面變得越來越不明顯。

In terms of movie consumption and usage, it's really quite modest in its seasonality that we see, and that's why, for example, if you look at Blockbuster's quarters, they're also not very seasonal compared to, say, Wal-Mart's or other major retailers bases. Video consumption, or movie consumption, relatively speaking, is much steadier on a quarter to quarter basis.

就電影消費和使用而言，我們看到的季節性確實相當溫和，這就是為什麼，例如，如果你看看百視達的季度，與沃爾瑪或其他公司相比，它們也不是很季節性。主要零售商基地。相對而言，視訊消費或電影消費逐季度穩定得多。

To follow-up on Reed's comment about less seasonality, Safah, the existence proof for his comment, observation, of less seasonality in the business would be the observation that new trial subscribers in the fourth quarter of last year were, I think, something in the neighborhood of 26% or 27% of total new trials for the year, as compared with roughly 40% in 2001. And we'd expect that trend to continue.

為了跟進里德關於季節性減少的評論，薩法赫，他的評論和觀察的存在證據是業務季節性減少的觀察結果，我認為去年第四季度的新試用訂戶是佔今年新試驗總數的26% 或27%，而2001 年約為40%。我們預計這一趨勢將持續下去。

I see. Great. And by the way, Reed, I wouldn't look into investment banking. I'm sure it would be [dull] for you two guys.

我懂了。偉大的。順便說一句，里德，我不會研究投資銀行業務。我確信這對你們兩個來說會很[無聊]。

Thanks for the advice.

感謝您的建議。

And we'll go next to Mike Novak of Frontier Capital.

接下來我們將邀請 Frontier Capital 的 Mike Novak。

Hi, a couple of questions, please. First, can you talk a little bit about your distribution network, how that compares to Wal-Mart, and I'm sure you've tested their service, but what's the average time of receiving a disc from your various markets from when you mail one back versus your service, and then I have a couple of follow-ups, please.

你好，請教幾個問題。首先，您能談談您的分銷網絡嗎？與沃爾瑪相比如何？我相信您已經測試過他們的服務，但是從您郵寄到各個市場的光盤平均需要多長時間？一個回复與您的服務，然後我有一些後續行動，請。

Well we, of course, you know, do watch and study Wal-Mart's service. It depends on where you are from the country, but I think the important thing is not so much what we think but it's what independent sources think, and as I referred to in my comments, ``PC Magazine'' did a pretty thorough evaluation of the services, rating Blockbuster's two starts, Wal-Mart's three stars, and ours five stars. And one of the major differences was the consistency of the overnight delivery that we offer.

當然，我們確實觀察和研究沃爾瑪的服務。這取決於你來自哪個國家，但我認為重要的不是我們的想法，而是獨立消息來源的想法，正如我在評論中提到的，“PC 雜誌”做了相當徹底的評估在服務方面，百視達的評級為兩顆星，沃爾瑪的評級為三顆星，我們的評級為五顆星。主要區別之一是我們提供的隔夜交貨的一致性。

OK. Secondly, where do you expect gross margins to trough?

好的。其次，您預計毛利率在哪裡觸底？

Well, our guidance is 42 to 44.

嗯，我們的指導是 42 到 44。

But I mean, if I look out two or three years, is 42 sort of going to be the trough, and then it builds from there, assuming you don't enter new businesses?

但我的意思是，如果我展望兩三年，42 歲是否會成為低谷，然後從那裡開始，假設你不進入新業務？

We haven't given specific guidance, but that's a reasonable expectation, I think.

我們沒有給出具體的指導，但我認為這是一個合理的期望。

OK. And then could you talk a little bit about what you would expect out of your disc capex over the intermediate term, again, two to three years?

好的。然後您能否談談您對中期（兩到三年）磁碟資本支出的期望？

We haven't given long-term guidance for the business, so I'm not prepared to comment on that. We'll give full-year guidance for '04 in the Q1 reporting period, after, of course, we have the benefit of seeing the lift in the holiday season.

我們還沒有對該業務給出長期指導，所以我不准備對此發表評論。我們將在第一季報告期間給予 04 年的全年指引，當然，之後我們將受益於假期期間的成長。

I guess where I'm trying to go is I'm trying to understand the cash flow generation capabilities of the business, maybe two to three years out, without giving specifics -- could you give us some general guidance on what you think?

我想我想要去的是我試著了解企業的現金流產生能力，也許兩到三年後，沒有給出具體細節——你能給我們一些你的想法的一般指導嗎？

Then I think something in the mid to high teens, probably. I don't see an inflection point where it's, like there is in marketing, where it drops significantly from 23% down to 14%, 15% of revenue, and there's nothing about the nature of the business that leads me to believe that it will go the opposite direction.

然後我想可能是十幾歲左右的事情。我沒有看到它的拐點，就像行銷領域那樣，它佔收入的比例從 23% 大幅下降到 14%、15%，而且業務的本質也沒有讓我相信它會發生這種情況。會朝相反的方向走。

OK, and then lastly, what's the size of your NOL?

好的，最後，您的 NOL 大小是多少？

Oh, it's in the range of $85M, $90M.

噢，在 8500 萬美元、9000 萬美元之間。

OK, thank you.

好的謝謝。

Sure.

當然。

Anything further, Mr. Novak? We'll move on now to Ryan Tibideau [ph] of Maple Leaf Partners.

還有什麼嗎，諾瓦克先生？我們現在請來 Maple Leaf Partners 的 Ryan Tibideau [ph]。

Hi, guys.

嗨，大家好。

Hi, Ryan.

嗨，瑞安。

How are you? I was wondering if you could comment on the-- I know you were talking about three different categories of subscribers that you have. I was wondering if you could maybe, you know, possibly what percentage does each of those categories make up of, you know, quarterly or yearly revenue, and as well as, you know, talking about the churn rates in those three categories?

你好嗎？我想知道您是否可以對此發表評論——我知道您正在談論您擁有的三種不同類別的訂閱者。我想知道您是否可以，您知道，每個類別在季度或年度收入中所佔的百分比是多少，以及您知道的，談論這三個類別的流失率？

I don't have-- Ryan, it's Reed here -- the churn rate separated, but it's about 40% value and 30% each for selection and convenience.

我沒有 - Ryan，我是 Reed - 分開的流失率，但為了選擇和方便，價值大約為 40%，各 30%。

Sorry, can you repeat that again?

抱歉，您能再說一次嗎？

Sure -- 40% value, 30% convenience, 30% selection.

當然－40% 價值，30% 便利，30% 選擇。

OK.

好的。

The way we would tell is by asking people, you know, ``What do you tell your friends about NetFlix?'' and then there's-- you can usually see, someone will tell them, ``Well, they've got these incredible independent films,'' and that's a selection renter. If they talk about what a bargain it is, then that's a value renter. And then if they talk about the free home delivery and no late fees, no due dates, then we can class it as a convenience renter.

我們的判斷方式是詢問人們，“你會向你的朋友介紹 Netflix 的哪些內容？”然後，你通常會看到，有人會告訴他們，“嗯，他們有這些”令人難以置信的獨立電影” ，這是一個選擇租用者。如果他們談論這是多麼便宜，那麼這就是一個價值租客。然後，如果他們談論免費送貨上門、無滯納金、無到期日，那麼我們可以將其歸類為便利租賃者。

And what did you say the usage for those three categories was, on average?

您所說的這三個類別的平均使用情況是多少？

I don't have that, either usage or retention.

我沒有這個，無論是使用還是保留。

I'm sorry-- OK, you don't have that?

抱歉——好吧，你沒有那個嗎？

Correct.

正確的。

I thought you said that the value category was something in, like eight to nine movies a month, I thought I heard you say.

我以為你說過價值類別是這樣的，例如每月八到九部電影，我想我聽到你說的話。

You did, in describing to give you an example of, you know, what they talk about, but I don't have the statistics of that 40% broken out, so that's a way to get a feel for the category, because those are people who rent more than five and see it as a bargain in terms of their rentals per month.

你確實在描述中給你一個例子，你知道，他們談論的內容，但我沒有這 40% 的統計數據，所以這是一種了解該類別的方法，因為這些是租用五件以上的人認為每月租金很便宜。

OK, is there a maximum amount of videos that one can rent in a given 30-day period?

好的，在 30 天內可以租借的影片數量是否有上限？

There is no maximum. In practice, you know--

沒有上限。在實踐中，你知道——

But logistically, what is the max?

但從邏輯上講，最大值是多少？

Yeah, we've had people rent 20 movies in a month.

是的，我們已經有人在一個月內租借了 20 部電影。

OK.

好的。

So I know that's possible.

所以我知道這是可能的。

Is there like an average high plane on the people that do rent at that level? Is there-- like 10 to 12, would that be a realistic assumption on a high level, or--

在這個水平上租房的人是否有像普通的高級飛機一樣？有沒有——比如 10 到 12，這在高水平上是一個現實的假設嗎？或者——

It all depends on what people you want to put in that category. You know, it's sort of self-referential to say what's the average of people who rent more than 10? That doesn't-- so what we manage the-- think of it a little, like a coffee shop or something. Some people go in and come out, some people come in and hang out during the day, and nominally, you know, you might not want them to hang out, but in fact, the coffee shop, they continue to improve the comfort of hanging out, because they know on the overall economics, it improves it. Similarly, we don't obsess about, you know, the few people that rent a lot of movies, because our economics are driven by the average economics, which, as Barry mentioned, was quite favorable between Q1 and Q2, and you know, the key brand experience is the freedom to rent as many as you want.

這完全取決於您想將哪些人歸入該類別。你知道，說租房超過 10 間的人的平均是多少，這有點自我指涉？這並不像我們管理的那樣，就像咖啡店或其他地方一樣。有些人進去又出來，有些人白天進來閒逛，名義上，你知道，你可能不希望他們閒逛，但實際上，咖啡店，他們不斷提高閒逛的舒適度出來，因為他們了解整體經濟，這會改善它。同樣，我們不會沉迷於租借大量電影的少數人，因為我們的經濟是由平均經濟驅動的，正如巴里提到的，第一季度和第二季度之間相當有利，你知道，關鍵的品牌體驗是可以自由出租，想租多少就租多少。

Well, I guess what I'm really trying to get at is, you know, if, say, the average is 5.75 on an average disc usage, you know, what number of subscribers are above and below that number?

好吧，我想我真正想要了解的是，如果光碟平均使用量的平均值為 5.75，那麼高於和低於該數字的訂閱者數量是多少？

Oh, it's pretty bell-curved.

哦，它是漂亮的鐘形曲線。

OK, OK. OK, the only other question I had was on the marketing expense. If you could talk a little bit about, you know, the reasons for the large decrease this quarter, and I know you-- there was an increase in the third and fourth quarter, and I wondered if you could talk about that on an absolute dollar basis, what approximately that would be, or on a percent of revenue basis is fine.

好的好的。好吧，我唯一的另一個問題是行銷費用。如果您能談談本季大幅下降的原因，我知道第三季和第四季出現成長，我想知道您是否可以從絕對角度談談這一點以美元為基礎，大概是多少，或者以收入的百分比為基礎都可以。

Sure, on a percent of revenue basis, I think it goes up to about 18% in Q3, from 15. On an absolute basis, I'd have to pencil out the math quickly here. It's probably about a $2M. And what it represents is different mixes of walk-on customers, and customers that we pay for. And you can probably appreciate if you're paying for customers, the total cost is very sensitive to that mix, and our word-of-mouth customers have continued to grow very rapidly. That is, those that we don't pay for, other than the cost of a free trial, and that's what's generated the improvement up to date. And Barry, do you have anything more specific on Q3 and Q4, of what-- the additional marketing costs?

當然，以佔收入的百分比為基礎，我認為第三季度這一比例將從 15% 上升到 18% 左右。在絕對基礎上，我必須在這裡快速寫出數學公式。大概是200萬美元左右。它代表的是臨時客戶和我們付費客戶的不同組合。如果您為客戶付費，您可能會意識到，總成本對這種組合非常敏感，而且我們的口碑客戶持續快速成長。也就是說，除了免費試用的費用之外，我們不支付費用，而這正是迄今為止產生改進的原因。巴里，您對第三季和第四季的額外行銷成本有更具體的了解嗎？

You know, it's really, as I mentioned on the call, a function of mix, and if paid acquisition, from certain online sources, who have the capacity to drive a large number of subs are particularly productive, since we incent them to be productive, if we're-- math is down maybe at the high end of the guidance and if those things don't come to pass, we'll be at the low end of the guidance.

你知道，正如我在電話中提到的，這確實是一種混合功能，如果從某些在線來源付費獲取，那些有能力驅動大量訂閱者的人特別有生產力，因為我們激勵他們提高生產力，如果我們——數學下降，可能處於指導的高端，如果這些事情沒有發生，我們將處於指導的低端。

We will be doing a little bit of TV testing in late Q3 and in Q4. That's, you know, immaterial to the total, but you know, could it be--

我們將在第三季末和第四季進行一些電視測試。你知道，這對整體而言並不重要，但你知道，可能是——

Contributing factor.

促進因素。

So, was there a point during Q2 where, you know, the word-of-mouth was adding more subs than you thought it would, and that's [inaudible] then you trimmed back the marketing spend, or was that planned from the beginning? Just trying to get a feel for fluctuation.

那麼，在第二季度是否有一個時間點，你知道，口碑增加的訂閱人數比你想像的要多，然後你就削減了行銷支出，或者這是從一開始就計劃好的？只是想感受一下波動。

Yeah, well, throughout the quarter, beginning with our guidance on the 17th, we experienced lower customer acquisition costs than we expected, right, so on June 9th, we reduced our guidance from 32 to 36 to 31-33, and here we are now at 30-45, so it's fair to say that we continued to see strong momentum in the rapid growth of word-of-mouth.

是的，嗯，整個季度，從我們17 日的指導開始，我們的客戶獲取成本比我們預期的要低，對吧，所以在6 月9 日，我們將指導從32 減少到36，再減少到31-33，我們在這裡現在是30-45，所以可以公平地說，我們繼續看到口碑快速增長的強勁勢頭。

OK, so--

好吧，那麼——

And as we mentioned in the fourth quarter, frankly, every time the market gets stirred up about competition, trade publications and popular magazines write articles about Goliath pounding NetFlix, and our subscriber growth pumps up.

正如我們在第四季度提到的，坦白說，每當市場因競爭而激烈時，行業出版物和流行雜誌就會撰寫有關歌利亞衝擊 Netflix 的文章，我們的訂閱者成長就會加快。

OK. All right, thank you very much.

好的。好的，非常感謝。

Yeah, thank you.

是的，謝謝。

And we'll take our next question from Tom Baird [ph] of Serios Capital [ph].

我們將接受 Serios Capital [ph] 的 Tom Baird [ph] 提出的下一個問題。

Hi, guys, just a couple of questions on a couple of the other cost lines. On fulfillment, you had a little bit of leverage sequentially. Is that something we should kind of model out as a percent of revs, or to be kind of fulfillment costs per disc shipped -- did that vary much quarter to quarter or year-over-year?

大家好，有幾個關於其他成本線的問題。在履行時，你依序擁有了一點槓桿作用。我們是否應該將其建模為轉速的百分比，或者將其作為每張光碟發貨的履行成本進行建模 - 每個季度或每年的變化是否很大？

Well, fulfillment as a percent of revenue, Q over Q, remains pretty constant. There's maybe another half of percent, 1% of opportunity in the fulfillment line, something like that, and then probably we've seen most of the scale of economies that we're going to see out of the fulfillment line.

嗯，履行度佔收入的百分比（Q 比 Q）保持相當穩定。在履行線中可能還有另外一半、1%的機會，類似的東西，然後我們可能已經看到了我們將在履行線之外看到的大部分經濟規模。

OK, so another 50 to 100 basis points over, Barry, like a couple of years or something?

好吧，巴里，再多 50 到 100 個基點，像是幾年之類的？

No, I think we'll-- if we're going to see it, we're going to realize it over the next couple of quarters, and then I think it's-- we certainly have grabbed most of the low-hanging fruit, right? In '01, we were running about 18% of revenues, and a year ago, we were running about 13.3, so we've come down almost 200 basis points in fulfillment in the last 12 months, so I think maybe at the outside, there's another 100 basis points.

不，我認為我們會 - 如果我們要看到它，我們將在接下來的幾個季度內實現它，然後我認為 - 我們肯定已經抓住了大部分容易實現的目標， 正確的？ 01 年，我們的收入佔收入的18% 左右，而一年前，我們的收入約為13.3%，所以在過去12 個月裡，我們的履行率下降了近200 個基點，所以我認為也許在外部，還有另外 100 個基點。

OK. Great. And then on tech development, that was down in absolute dollars sequentially. Is that-- it looks like that may be kind of running at this low $4M on an absolute number per quarter. Is that a pretty good number to think about, going forward, or as you ramp up, you know, continue to ramp gross, should that number, you know, go up commensurate with revenues, or how should we think about that?

好的。偉大的。然後在技術開發方面，絕對美元連續下降。是不是——看起來每季的絕對數字可能是 400 萬美元。展望未來，這個數字是不是一個值得考慮的好數字，或者當你繼續增加總收入時，這個數字是否應該與收入相稱，或者我們應該如何考慮這個問題？

I think we're going to see it on an absolute basis grow gradually, but not as rapidly as revenues, so it'll continue to scale-- decline as a percent of revenue. But we continue to find opportunities for better merchandising on the site, enhancements in Cinematch [ph] algorithms, merchandising of content, redesigning of databases to enable us to scale the business without buying additional disc arrays, those kinds of things, with better software and development, as a result of our ongoing investment in tech and dev.

我認為我們將看到它在絕對基礎上逐漸增長，但不像收入那麼快，所以它會繼續擴大——佔收入的百分比下降。但我們繼續尋找在網站上進行更好的推銷的機會、Cinematch [ph]演算法的增強、內容的推銷、資料庫的重新設計，使我們能夠在不購買額外的光碟陣列的情況下擴展業務，諸如此類的事情，透過更好的軟體和發展，是我們對技術和開發持續投資的結果。

OK, great. And just two more quick ones. The percent of-- I don't know if you mentioned this or not, I might have missed it, but the percentage of trial subscribers that became pay, I think, has historically run about 90%. Was that what you saw this quarter?

太好了。還有兩個更快的。我不知道你是否提到過這一點，我可能沒有註意到，但我認為，付費試用訂閱者的比例歷來約為 90%。這是您本季看到的情況嗎？

Roughly, Tom, yeah.

大概吧，湯姆，是的。

OK. All right, great. And then last thing, just on the-- wanted to clarify -- I think you said that option expense hitting the P&L would be up about $1M sequentially in the third quarter?

好的。好吧，太好了。最後一件事，只是想澄清一下，我想你說過，影響損益表的選擇權費用將在第三季連續增加約 100 萬美元？

Correct.

正確的。

And then in the fourth quarter?

那麼第四季呢？

Roughly flat.

大致平坦。

Flat with the third?

與第三平？

Correct.

正確的。

OK. And then in terms of what is-- anything, Barry, you can do to kind of just help us out in terms of what that means for fully diluted shares, if we model those out for the next couple of quarters?

好的。然後，巴里，如果我們對未來幾季的情況進行建模，你可以做些什麼來幫助我們了解這對完全稀釋的股票意味著什麼？

Flat.

平坦的。

Flat. OK. All right, great. Thank you.

平坦的。好的。好吧，太好了。謝謝。

Thank you, Tom.

謝謝你，湯姆。

And gentlemen, it does appear we have time for one further question today. We'll go back to Charles Grieg of Atlas Capital.

先生們，看來今天我們確實有時間再問一個問題。我們將回到阿特拉斯資本的查爾斯·格里格。

Actually, my question has been answered. Thank you very much.

其實我的問題已經得到解答了。非常感謝。

And gentlemen, we have no further questions today. Mr. Hastings, I'd like to turn the conference back to you for any concluding comments.

先生們，今天我們沒有其他問題了。黑斯廷斯先生，我想將會議轉回給您，請您發表結論性意見。

Thanks to all of you for joining us for this call. We made tremendous progress, hitting the 5% mark in the San Jose/Oakland/San Francisco Bay Area, and we look forward to getting to that 5% household penetration mark across the entire United States. Thank you.

感謝大家參加我們的這次電話會議。我們取得了巨大進步，在聖荷西/奧克蘭/舊金山灣區達到了 5% 的目標，我們期待在整個美國達到 5% 的家庭滲透率目標。謝謝。

And that will conclude today's NetFlix Conference Call. We thank you all for joining us, and have a great day.

今天的 Netflix 電話會議到此結束。我們感謝大家加入我們，祝您有美好的一天。