How Wall Street Misread Netflix | Simeon McMillan, Founder of Accrued Interest

Tim Rowe, Host of State of Streaming 0:45

We've all heard the panic around Netflix's recent engagement numbers, but what if their revenue growth tells the true story, one that actually rivals YouTube step for step? And what does Fox's potential takeover of Roku really mean for the future of your TV's home screen? Welcome back to the podcast today. I'm joined by Simeon McMillan from the Accrued Interest Podcast and Substack. We're breaking down the real math behind the YouTube versus Netflix heavyweight battle for attention and taking a look at why Wall Street so often misreads streaming metrics. And we're going to discuss what legacy media mergers mean for the future of television. Be sure to hit subscribe so you never miss an episode. Now, onto the conversation.

Netflix Metrics Panic And Big Questions

Tim Rowe, Host of State of Streaming 1:30

In 2008, you began your career as an investment banking analyst within the Technology, Media, and Telecom Group at Goldman Sachs. After that, you joined the middle market investment firm Sterling Partners as an investment associate within their private equity fund before going on to lead the operations, revenue, and finance functions for sports properties such as the UEFA Champions League, Liga MX, and both the Mexican and the US men's national teams. You've held similar roles in various regional and national American media companies, and today you separate signal from noise with the accrued interest substack and podcast by the same name. Simeon, welcome to the show. Thanks for having me, Tim. It's my pleasure. We've got four topics

Meet Simeon McMillan

Tim Rowe, Host of State of Streaming 2:28

on the board here. They're all hot topics, and they're all things that I know you are very well versed in. The first is what YouTube teaches us about Netflix. You've covered this recently on your Substack. What is it that YouTube teaches us about Netflix? Not really an organic connection there, but you draw an interesting line. What is it?

Simeon McMillan, Principal of Accrued Interest 2:53

Sure. I think it's a great question to dive in, Tim, to kick things off. So for all your listeners and viewers, again, just want to iterate thank you so much for having me. I'm excited to share my thoughts and for you to share my content on the page. And you can find all of the long form versions of everything I'm discussing here at www.accrudeint.com. I'm sure that Tim will put the details in the notes. But we will. There'll be a link close by. Absolutely. So regarding YouTube, I recently launched a paid version of my Substack to really go deep in the weeds on some of the more thorny questions. I still have plenty of free content out there for you guys to consume, but one of my pieces from this week was taking a step back and I pulled out the financials

YouTube As Netflix’s True Peer

Simeon McMillan, Principal of Accrued Interest 3:38

that YouTube discloses on Google's earnings call. We're not talking about AI today, and we're not talking about CapEx or chips. There's enough podcasts for that. But we're talking about YouTube. And the big caveat I want to give to everyone is that Google does not disclose the revenue from YouTube subscriptions as a separate line item. So we have a snapshot of YouTube's ad revenue, but it slightly understates the revenue. So before anyone kills me in the comments, I just want to call that out. But my grand thesis that I want people to point out is that YouTube, I believe, is a sort of super entertainment company. I think YouTube app is almost like an all-in-one entertainment app. And I think both in terms of scale, and by scale I mean geographic scale, I mean also in terms of sheer revenue, YouTube is the only comparable, it's the only company in the weight class that Netflix compares to. And I point that. Oh, I like that weight class. Yeah. A little, a little boxy analogy. So I call that out because I feel, well, for years, when people talked about Netflix, they never talked about YouTube. And to be fair, I think up until maybe a year or two ago, people didn't really see YouTube as a true competitor to television film when it's really competing for everyone's attention. So I think it's the most dominant force out there that we haven't discussed. But with all the MA we've been having going on in 2026 and 2025, particularly with the Warner Brothers and Paramount connection, people are looking at YouTube for the force that it is. And I think it tells us more about Netflix. Now, there are concerns about Netflix engagement. I'm sure you've heard it. People talk about it. Why? A little bit of panic. A little bit of panic, you could say. And I won't get to that topic later, but what I did in my Google deep dive, what I said, let's just strip away the noise and let's compare YouTube's revenue to Netflix revenue. And what I was surprised to see is that the two of them are remarkably similar in size. I want to say that that Netflix in any given quarter, their revenue is anywhere between 5 to 15% within striking distance of YouTube. But if you actually line up the growth rates of the two companies side by side, I think a lot of Netflix panic is overstated because Netflix and YouTube have been growing their revenue at a very similar pace over the last couple of years. I think the other point that I just wanted to throw out there and we can just let it marinate for a bit, is that I think that consumers aren't used to really analyzing a media company operating at the global scale that Netflix does. Because all the conversations we typically have about Netflix, vis-a-vis, Warner Brothers, Disney, whoever else it might be, we're really talking about the North American business. Netflix is the only major streamer that actually has an international footprint. That gets lost. It totally gets lost and it changes the conversations. So I also wanted to point out Netflix growth in viewership hours, which we'll get to in a second, but let's say it's between one to three percent on any given year. It's been that way for the last three years. Okay. When you're operating at a global scale where you already have over 90 billion minutes of TV viewing, it's just not realistic to expect viewing to grow at 10% year over year. It's only 24 hours a day. There's only about so many people.

Tim Rowe, Host of State of Streaming 7:07

There's a finite amount of time.

Simeon McMillan, Principal of Accrued Interest 7:09

Exactly, exactly. So YouTube is my example where I say, hey, YouTube is growing at about low double digit, call it 10 to 12% year over year, and nobody complains. That they don't have any hit shows, they don't have any hit movies. We don't complain about whether or not people are touching it enough. They actually have it's kind of been the knock. It's been the knock. And I also think why I learned from YouTube is that we can debate all day the disclosures, whether or not Netflix metrics are up or down, whether or not they have enough metrics or too few. But YouTube doesn't show any of that. YouTube shows shockingly little detail, yet it keeps on chugging along and taking share and growing dollars. So I urge everyone, before you freak out or not about Netflix, for every quarter, pull up YouTube's revenue and compare it to Netflix. And the pace of the business is a lot more similar than you might realize.

Tim Rowe, Host of State of Streaming 8:06

How do you think about the YouTube views metric? Does that does that equate in the math?

Simeon McMillan, Principal of Accrued Interest 8:11

I don't think it equates in the math just because, well, for the simple reason that we all know the games people can play with measurement, particularly on digital. For better or for worse, there's no one uniform viewing metric. Nielsen has tried. We all know the complaints that people have. Ever complains their viewership is not calibrated correctly or is understated. Those complaints have been a tale as as old as time. With YouTube views, I think what's important is the scale. It gives you a sense of just how many people are engaging with it. And a quick point I just want to make that I think YouTube has done well in training us to think about it. Okay,

Views, Hours, And Monetization Reality

Simeon McMillan, Principal of Accrued Interest 8:50

is that when you're operating at a global scale, when you're truly entertainment powerhouse, your views are not your revenue, excuse me, is not driven by views. This is not pay per click. Okay. What both these companies are doing, regardless of the views, whether the views are for 30 seconds, a minute, five minutes, or if you watch the whole podcast, not every hour of the day is created equally when it comes to monetizing content, just as not every click is equally profitable for YouTube or someone else. So I think YouTube is a good view on hey, we can have a lot of growth and is healthy to measure that. But what matters is how much revenue you can squeeze out of every programming hour. And on that metric, I think Netflix is in the class of its own. In the last, I want to say six or seven quarters, they've outgrown YouTube in almost every quarter over the last two years. And that's despite YouTube taking share. So you can either see that as wow, YouTube has a lot of runway ahead of them. If they can monetize revenue per hour in the same way as Netflix, they have a bright, bright future, but it also lets you, you know, give Netflix a little slack. They're actually doing a lot better than you realize.

Tim Rowe, Host of State of Streaming 10:04

Putting on your sales, putting on your ad ops hat for a second, how do you think about those two sales conversations? Really different ad products, right? When we when we get down and we're tactical about why a media buyer looks at YouTube, why a media buyer looks at Netflix. How would you how would you think through or how would you coach a team, maybe, maybe a team of media buyers even to think about that in application?

Simeon McMillan, Principal of Accrued Interest 10:31

Sure. So here's where I think, well, one of the many ways you could argue that the two fates, the paths of of YouTube and Netflix, are becoming more and more intertwined. And that started a couple of years ago, as your viewers and listeners know, when Netflix announced for the first time that they would be introducing advertising.

How Advertisers Buy YouTube Vs Netflix

Simeon McMillan, Principal of Accrued Interest 10:48

Okay. So I just said before in the beginning that YouTube does not disclose their subscription revenue because they share with other Google services. But just apples to, you know, oranges, YouTube has pure ad revenue. And Netflix is mostly, I want to say about there maybe 50, 50 some odd billion of total revenue, about 3 billion of that is advertising, where Netflix would be more like um SVOD, subscription video on demand viewing. What I would say is that the buyer that comes to Netflix, I think, for ads specifically, I think is looking for a replacement for television, a replacement for dollars that frankly would have gone to linear. Whereas today, a lot of the YouTube buyers are coming out of the digital bucket, and that's probably money that would go to other digital services. But over time, those two are going to converge as both companies are having more and more content and more and more formats that are similar to each other. But for now, Netflix, and by the way, Netflix isn't even selling ads in all their jurisdictions. They still have a lot of jurisdictions to turn on that they haven't even yet. Their ad load at Netflix is lower on a per hour basis, substantially lower than we have on Linear. So I think you're talking about two different buyers, but they're converging faster than many of us would have believed five years ago.

Tim Rowe, Host of State of Streaming 12:14

And something that we've seen our friends at Jounce Research, they they've provided insights around environments having fewer ads being perceived by advertisers to be more premium and thus being perceived by consumers to be more premium as well, fewer ads. I'm okay with that. And ultimately that all leading to a higher conversion rate. So environments that have fewer ads, more likely to convert, thus more valuable. Very interesting to see how this flywheel will play out, especially at global scale. So, okay, we've got a heavyweight battle for attention. It's YouTube versus Netflix, and then everyone else. Why is the Netflix engagement panic wrong?

Simeon McMillan, Principal of Accrued Interest 12:57

So in my Netflix piece, I did a uh a deep dive on earnings that came out about two weeks ago. And first off, I gave a little bit of history. I my brand is called Accrued Interest because I really try to bring a historical perspective. I've been following media for almost 20 years now to say, hey, where have we seen this before? And one thing I put in in the article on my website, towards the middle, is that Netflix, believe it or not, shows that they share, excuse me, more streaming metrics than any other media company out there. And I

Why Netflix Engagement Fears Miss

Simeon McMillan, Principal of Accrued Interest 13:31

think the first thing the panic exposed was it exposed who is actually reading what Netflix discloses versus who is reacting to the news, and your viewers might have heard this, that Netflix was pulling back the cadence of one of their viewing reports from twice a year to one time a year. Well, what I would say, I point out quickly, so Netflix weekly, weekly on their website, no paywall or anything, they publish the top 10 lists weekly for 90 different countries. Okay. So if you want to do all the work, you can go in there and God bless you, and you could untangle that ball of yarn. But another historical fact, and and this, I almost left the article with this. The view report that Netflix pulled back on was never meant for investors. This is the funniest thing, but I remember a couple of years ago we had the writer strike in Hollywood, where writers and actors and everyone was demanding more transparency for Netflix because, and I understand their frustration, the royalty checks for a lot of the workers and the writers was quite low, a lot lower than linear. And they couldn't understand why. So Netflix as an olive branch to the unions came out with this new report that they've only been doing since 2023. And they said, okay, we're going to give you the information you want in this format, along with all these other ones. So I just thought this was, you know, a damned if you do, damned if you don't. I can understand why management teams don't want to give more and more and more because people forget where we actually came from. And I think the other reason why the panic was a little overstated was because, and I talk about this in the article, is that if we do look at what Netflix has shared, they have been growing their viewership hours at roughly the same pace over the last three years. So a lot of the talk right now of, hey, it's, you know, is it slowing? Is it one or two percent? That sounds like a low number. But again, we're going off of a base of over 90 billion. Okay. So I think this pace has been representative of what they're able to do. And what I also get into the piece, and this is for those who want to get into the accounting, where Netflix really shines, is that for years we worried that Netflix was burning money, chasing after content, giving huge bags of money to these creators to make hit shows. Some of them worked out, like their deal with Shonda Rhimes, who has the Bridgerton universe and other shows, and some of them not so much. And they've pulled back on those on those superstar deals. But during this entire time, year after year after year, Netflix has been able to pull more and more dollars for every dollar of content spend that they have in their arsenal. So I think that for a long time now, engagement hours has never been the metric to track for Netflix. And especially now going forward, as Netflix gets into more formats, different day parts, podcasts, shorts, all different things. Looking at pure time when the mix is changing, it's not the way to do it.

Tim Rowe, Host of State of Streaming 16:42

So when we see Netflix going out and spending 700 million on two NFL games, we shouldn't be looking at the price that they're paying.

Simeon McMillan, Principal of Accrued Interest 16:55

I I think the price is important, and don't get me wrong, because rising sports cars are a real barrier to entry. It's a real thing that all the media companies are dealing with. But to your point, yes, Netflix has been the most surgical of them all. I think that Netflix, for example, should be credited with not going after a full NFL package. They haven't been doing any of these Hail Marys or these desperation attacks. Netflix has been very surgical. They've been going after certain live events and they haven't gotten themselves bogged down

NFL Games As An Ad Market Signal

Simeon McMillan, Principal of Accrued Interest 17:26

in any super long-term agreements that they can't get out of. And NFL games are the most valuable television ad inventory in all of America. It's been that way for a while and probably will be for the foreseeable future. When you're adding NFL games in particular to your schedule, whether you are Netflix or whether you're Amazon, no one complains about how much money Amazon's spending. Okay. You are telling the advertiser world we are open for business. We are open to take all the TV dollars that before we weren't quite ready to take. And lastly, I would say with the NFL spending, it's also a signal to the rest of the media industry that, hey, we got the anchor tenant in NFL, which has been the anchor programming that multiple networks, the broadcast networks, have built their schedule around for decades. Netflix is saying we have what it takes to build a schedule around. Come give us other sports. You see, boxing, combat sports, WWE, wrestling, whatever it is. If you could do NFL well, you can do anything. And that's where we are right now.

Tim Rowe, Host of State of Streaming 18:31

World Cup is up for grabs. FIFA wants 4 billion. You've got to lock up 2030 and 2034. They're saying, does not having a CTV device, does not having hardware hurt Netflix at all? Or do they have enough scale as an app that they can live on as an app forever and ever?

Simeon McMillan, Principal of Accrued Interest 18:50

So I I personally think that not having hardware is not an impediment for Netflix. People, again, may or may not remember this, but for years there was talk of whether or not Netflix might be interested in acquiring Roku, which your um smart listeners would know that a long time ago it was once a part of Netflix that the that they sort of spun out. But the short answer of why I think hardware is not impediment for them is that without

Does Netflix Need Hardware

Simeon McMillan, Principal of Accrued Interest 19:21

any revenue share, without any cutbacks, without any special freebies, you've had Netflix been a huge percentage of the streaming that goes through Roku devices as well as other connected TV devices. That's inventory that Roku and the other CTV partners can't effectively monetize. But they have no choice but to deal with that because there's no way a CTV or any streaming stick or dongle, whatever, there's no way you can get around not having Netflix inside your thing. So I think that Netflix has done a good job making sure that their software is compatible with all the devices. There's not a single device where it's not. I do think, and we can get to it later, and and people can go on my website and see I did a three-part series where I was deconstructing the Fox Roku combination. And I argued that. Yeah, let's talk about it. Sure, we can dive right into it. The the analogy that I jumped into for part two of my series was I said that Fox acquiring Roku is like acquiring a choke point in the passageway of the streaming viewership. So for apps that are not Netflix or not Disney Plus, if you're one of the many other apps that is not part of someone's diet, your placement on the menu, your ability to get discovery on the Roku home screen or the Samsung home screen or or TCL or any of the other connected TV apps, it varies. You know, because there's so many apps out there, sometimes running promo, sometimes they're not. I think the big boys are are secure. But with Fox acquiring Roku,

Fox-Roku And The Streaming Chokepoint

Simeon McMillan, Principal of Accrued Interest 20:58

Fox, who doesn't have a sprawling media operation, because as your listeners know, they sold that at the peak of Peak TV to uh to Disney, which is still straddled with that. That's a topic for another day. But different day. Different day, a long one. But but but a topic we could do a whole episode. We need a whole episode on that, yes. Well, Fox is gonna have they have a lot more say in how they can nudge people to look at certain services and others. Now, I'm not suggesting, and I don't think it's fair to Fox to say that Fox is gonna put their thumb on his scale and shut off access to Disney Plus or seriously disadvantaged and the other streamers. I think Fox, who in my articles, I praise them for being maybe the most strategic of all the legacy media players because they knew when to fold their hand or sell out at the top, and they took all that money and they came back, and now they're buying back in at a time when you have fast services are expanding and you have the true transition as you see total TV viewing time going, it's crossing over 50% into streaming for the first time. I think I think Fox has a lot of potential there. It might not be obvious until the deal closes because there's still a lot of kinks to be worked out, but I think that is a deal to certainly look out for.

Tim Rowe, Host of State of Streaming 22:12

We've seen recently how important the home screen is. We had VP of viewer product from Roku, Preston Smalley had just been on the podcast right before the news broke, talking about the first home screen redesign in 10 years. So that really put us on to how important the home screen is. And then actually, our partners at Looper Insights they released their quarterly research where they look at all of the connected TV devices and they observed some really interesting changes. After the most recent Apple TV home screen updates. And you can see on the screen here, we've got an image from the from the P S here graphic where Peacock benefited to the tune of

The Home Screen As Discovery Power

Tim Rowe, Host of State of Streaming 22:56

$1.8 million in in share of voice, essentially, just from that one update to be going to zero. So the home screen, more important than ever, Simeon, from your perspective, how important is the home screen to streaming? Is it as much of a factor as we view it in terms of being a portal? YouTube obviously has a footprint into the home screen conversation. I know when I can't find something to watch, YouTube becomes my de facto home screen.

Simeon McMillan, Principal of Accrued Interest 23:26

Yes.

Tim Rowe, Host of State of Streaming 23:26

So is that something that you're thinking about? Something that's come up in your research at all?

Simeon McMillan, Principal of Accrued Interest 23:30

So the importance of the home screen, it cannot be emphasized enough. I think it also is incredibly important for um show discovery, for content discovery. I think that viewers have been trained, partly by the streaming services, to not think of the shows as being nascent to a brand. Most of them. HBO still lets you know you're watching HBO. There's no mistake there. They sure do. There's no mistake there. You know where you're. You know exactly. But for a lot of other ones, a lot of the shows are made by rival studios or studios or by someone else. So it's it's not crazy for people to not know where it is. I also think another reason why the home screen is more important, and this is something I've covered on my site a lot and the implications, is that I mentioned before, over 50% of TV viewing has been crossing over into streaming. For linear, it's under under 45% with about 20% split between cable and broadcast. Well, as more viewership goes to streaming, during the pandemic, we saw a trend where more digital streaming was going on the big screen and not mobile. For years, I think that streaming was seen as a mobile first or mobile only phenomenon. So just based on habit, if more and more people are watching your streaming show, whatever it may be, on the biggest television screen in their house, well, they're gonna need a place to navigate to it. And I think as you have, you know, young people are super savvy. They can figure stuff out. I have a toddler who knows the logo, so all the streaming services. He even he even he even noticed when uh when HBO Max changed his logo, actually.

Tim Rowe, Host of State of Streaming 25:11

Great job, HBO Max. And and you know, he's gonna have a lot to keep up with. That's a pretty frequent logo change.

Simeon McMillan, Principal of Accrued Interest 25:17

100%. And so I I think for a lot of people that they look at the home screen, and for them, picking between Disney Plus, YouTube, Amazon is like back in the day of people used to flip between ABC, CBS, and NBC. So in a world of discovery, in a world where rights are moving, another consequence of all the mergers you're seeing, as well as a lot of the legacy companies saying to the shareholders, look, we're not gonna light money on fire trying to compete with Netflix. They got it. We're gonna try to win another way. You're seeing a lot of companies cross-license their shows to different streaming services in ways you haven't before. HBO, I'll just pick on them for example, just to make a brief point. HBO for a long time did not sell any of their shows, allowed any of their shows to be shown on other streaming services. And then I believe a couple of years ago, they started with a handful of shows and they've been slowly adding more and more. And I don't have to tell your viewers, we've seen the well-known phenomenon of lots of linear networks selling their back catalog of shows to Netflix and them experiencing a viewership boost. We saw people discovered suits for the first time on Netflix. And and before that, your viewers would know Friends, Parks and Recreation, you name it, Cobra Kai. I just rewatched Breaking Bad. Exactly, exactly. Stars has um a little universe of the show called Power and Spinoffs. They just announced yesterday that the power universe, the 50 Cent Shows, is coming to Netflix in the fall. So, yes, home screen placement, discoverability, just anything that can lessen the friction to the user is going to be very important, arguably as important as advertising going forward.

Tim Rowe, Host of State of Streaming 27:05

Love it. All right, take us home with a closing thought here. Does the Paramount WB deal, does that ever close? I asked this of a few guests last week. I gave them the unfair advantage that later that afternoon, yes, it was announced that they punt it to 2027. I don't know. This feels feels shaky. What do you think?

Simeon McMillan, Principal of Accrued Interest 27:24

It feels very shaky. I I want to tell your viewers, I stuck my neck out. Actually, last Christmas in Christmas time, I put out an article saying why Paramount Skydance is not going to win Warner Brothers. And I went through all the things I thought was wrong with the deal. They ended up overpaying and they won. And then I came out with another piece in March, which ended up for a while being my most rate piece ever, called Dead on Arrival: Eight Reasons Why Paramount Warner Brothers will ultimately fail

Will Paramount And Warner Bros Close

Simeon McMillan, Principal of Accrued Interest 27:53

or ultimately not work. So my answer to you is I think that the deal will close, but I think Paramount is going to have to do concessions. They got cocky and they didn't think they would have to make any concession. So they'll probably have to shave off some assets. I don't know which ones. They'll probably have to, you know, make some changes. And that is complicated because with all the debt that they took on, they really need all the cash flow they can get to service this. So I'm not going to uh handicap whether odds that this falls apart spectacularly or not. If you have the betting markets for that, but I think that Paramount will be forced to give up some Warner Brothers assets. What those are and who else wants to buy them? Well, that that's that's a question for another day.

Tim Rowe, Host of State of Streaming 28:36

Could it be, I'm just speculating here, could it be some of the international assets? Could it be Netflix does get part of this deal from the international portfolios of both of those companies, or is that not in play? I don't I'm out over my skis here.

Simeon McMillan, Principal of Accrued Interest 28:50

Sure. I think not necessarily international, because again, one of the weaknesses, I think, of the Paramount Warner Brothers merger was that both of those companies actually had a fairly non-existent international footprint. I argued in some past articles that by combining those two companies, they're gonna fire a lot of people. Don't get me wrong, there are savings from the loss of jobs, which we never want to celebrate. But there were, I thought, very little savings in terms of incremental audience because there's so much overlap, and neither of those services have much of a platform outside the U.S. Before the deal was even announced. HBO Max still had not rolled out across Western Europe, the UK, and other places, where I think is crazy. So could Netflix pick off something that gets discarded? Maybe. I think some of the cable channels, candy, might be some of the assets that Paramount has to let go first. And those were also the assets that Netflix didn't want. In Netflix's original bid, they were going to spin off the cable channels anyway. I think they really meant it when they said they wanted the IP category. But look, there's NBC Universal out there, there's Amazon, there's other media companies. By the time your viewers watch this, I'll have another article up. There'll be a free preview, but it'll be mostly behind a paywall, where I argue and get ready for this, not tomorrow, but in a couple of years, maybe in 2029, you can see Netflix making a run at Universal Studios and some of their IB. Much cleaner.

Tim Rowe, Host of State of Streaming 30:18

This is why you've got to subscribe. This is why you've got to go subscribe to Simeon Substack so that you don't miss any of these updates. We'll link to it so it's easy to find. Simeon, thank you so much for being here. Thanks for having me, Tim. Look forward to the next time. And if you found this episode to be helpful, please share with a colleague or a client. Start a conversation yourself today. And we'll see y'all next time.