Congratulations, email opener, you’ve successfully accessed the second iteration of Text TMT, the weekly newsletter focused on all things technology, media and telecom, from the former editors of Next TV.

This free edition includes our weekly “Next Text” column, the loose, slightly disciplined, somewhat on-topic weekend text exchange between myself and the always effervescent David Bloom. We chase that with four news stories, including one focused on a certain $20 billion telco acquisition. Here’s what we’ve got lined up. You scroll and read now!

Table of Contents

• Next Text: Why does Netflix, which just added 5 mi …

• DirecTV lost 10% of its bar and restaurant clients …

• Has the RSN apocalypse reached the Dodgers and Lak …

• Fall(ing) flat? With its season premiere schedule …

• Verizon and Frontier tell the FCC their $20 billio …

Next Text: Why does Netflix, which just added 5 million more subscribers, not want to talk about subscriber growth anymore?

We also delve into Google TV’s home-automation plans, Amazon Prime Video’s surging usage, and some highly hypocritical political donations from Comcast

By Daniel Frankel and David Bloom

DANIEL FRANKEL: Greetings, David. Active week for our L.A. ball clubs, with the Dodgers smashing their way into the World Series, UCLA football showing a pulse in the Big Ten for the first time under the under-stated coaching of DeShaun Foster … and self-satisfied USC coach Lincoln Riley and the Trojans finding new ways to blow close games, this time in Maryland. (UCLA winning made the latter personally harder for me this weekend.) I am, however, pretty stoked that the Lakers might actually have a shooter (but everyone needs to get on the same page with that “K” in Knecht). Getting down to brass tacks, I want to talk about Netflix first.

Regardless of how the local sportsball is going, the mood is always pretty elevated up north in Los Gatos, where Netflix celebrated another 5 million customer additions worldwide in the third quarter, and another 15% spike in quarterly revenue. It struck me as I listened Thursday to the responses to equity analysts from co-CEOs Ted Sarandos and Greg Peters that this could be the penultimate occasion during which Netflix earnings are remotely interesting. Starting with the Q1 report next year, management is going to stop talking about useful things like subscriber growth and ARPU, and focus on “engagement” — time spent on the platform is the only true way to measure customer happiness, Sarandos insisted.

For many of us, I suspect, subscriber growth is the star of the show. I know that next year when I tune into the Ted and Greg Show, I’m anticipating squishy benchmarks that are hard to get my head around. Like that ridiculous “demand” quantifying that Parrot Analytics has tried to sell us for years. (Note: I might just be too dumb to understand it.) But who knows? I do know this: In a volatile world, where Netflix can’t always control elements like new addressable homes to sell subscriptions to, taking the customer growth metric out of the narrative avoids another April 19, 2022 — the day Netflix reported just 200,000 lost subscribers worldwide in a quarter featuring Russia’s invasion of Ukraine and other global calamity … and then watched its stock tumble 25%. Netflix is also going to stop publishing average revenue per user — which is nearly $17 a subscriber in the streaming giant’s most mature market, the U.S. and Canada, according to MoffettNathanson. Sarandos insisted Thursday that “engagement” is the only way to measure how customers are feeling about their subscriptions. I don’t know — lots of people signing up says that to me.

I also thought Sarando's’ takedown of the theatrical business model was interesting. Asked by analyst Rich Greenfield if movies still need the exposure of a theatrical release window to be successful, he said, “We are in the subscription entertainment business, and you can see from our results, it’s a pretty good business.” Sarandos also noted that all of Netflix’s top films have at least 100 million views. “We believe not making [customers] wait for months to watch the film everyone is talking about adds to that value,” he added.

DAVID BLOOM: I, for one, am grateful to see the imminent demise of Wall Street's fixation on subscriber adds, as I wrote about here. Wanna juice subscriber adds? Kick up a $1.99 tier. But you won’t make more money, which is kinda the goal. Netflix now has $40 billion in annual revenue, and $8 billion in free cash flow. Engagement (now two hours a day on average) matters more, especially on the ad-supported tier. And if Netflix wants to make even more money, it can always increase prices, as Disney+ did this week and Max and Peacock did recently. This quarter brings Squid Game 2 and two Christmas Day NFL games to Netflix, so it should keep making buckets o’ dough. The Street is figuring it out; Netflix shares were up 10% on Friday. 

And a further note on theatrical economics: Hollywood wants to keep sending films to theaters as they have for 110 years. To justify that, executives maintain the best way to make a movie a culture-girdling “event” is to spend $100 million marketing a theatrical release. God, I’d hope that works, though it doesn’t, consistently. Is it possible a more focused approach is cheaper and more effective? Take a $200 million Netflix movie with 100 million “views.” Multiply that by the average ticket price of around $9.50, and every one of Sarandos’ “top films” is effectively the equivalent of a billion-dollar theatrical release, a certified home run. Plus, Netflix realizes way more profit, because customers get another big film right away instead of churning out, the gross revenue isn’t split with theaters, and you don’t have that nine-figure marketing spend.