Iran War Will Cost Every Household $50,000

Summary

Prof G Markets: “Iran War Will Cost Every Household $50,000”

Date: April 21, 2026
Hosts: Ed Elson (EE), Scott Galloway (SG)
Guests: Justin Wolfers (JW), Professor of Economics & Public Policy, University of Michigan; Rich Greenfield (RG), Co-founder and TMT Analyst at LightShed Partners

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Overview

This episode dives deep into the mounting geopolitical crisis surrounding the US-Iran conflict, examining the market and economic fallout — particularly focusing on the White House’s proposed $1.5 trillion defense budget and its translation into household costs. The second half pivots to the latest in streaming wars, with analysis of Netflix’s financial performance and strategy, as well as workforce cuts at Disney. The show closes with reflection on AI optimism by income group, tying it to larger economic inequality.

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Key Discussion Points

1. US-Iran Ceasefire Breakdown & Market Implications

[02:03–06:08]

• Ceasefire Deadline Looms: Ed recaps events—major indices fell as tensions escalate ahead of the US-Iran ceasefire deadline; oil prices have risen but are still below $100/barrel.
• Recent Escalations:
  • Iran initially agreed to reopen the Strait of Hormuz after an Israel-Hezbollah ceasefire, but then reversed after the US refused to lift its own blockade.
  • A US Navy attack on an Iranian cargo ship led Iran to threaten retaliation.
• Market Reactions: These events drove sharp market volatility, with oil and stocks moving rapidly.

Quote [04:34, JW]:

“None of us can make anything of anything. So I want the audience to feel really good about themselves if they feel lightly confused right now... We have no idea what the truth is.”

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2. Erosion of Trust & the End of 'Deals'

[06:09–10:33]

• Analogy with NAFTA: Wolfers draws parallels between broken US trade agreements (like NAFTA) and current Middle East diplomacy.
• Breakdown of Credible Agreements:
  • “We've lost the ability to contract over time… If we never do what we say we're going to do, we can't form agreements over time.” [08:32, JW]
• Deals Are Now Meaningless:
  • The term “deal” is now just PR, not an actual binding commitment.

Quote [10:33, JW]:

“Let’s agree to never use the word ‘deal’ again. What the President calls a deal is not. What he has at the moment is press releases.”

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3. Strategic Consequences: Blockades and Interdependencies

[11:21–15:02]

• Iran’s Leverage Over the Strait:

  • For the first time, Iran proved its control over a vital oil chokepoint, exposing US weakness.

• Policy Irony:

  • The US has gone from blockading allies (via trade) to blockading Iran militarily.
  • JW: “He blockaded the American people because he loved them… Now he’s imposing a blockade much more severe. It’s no longer a 30% tariff, it’s now a ‘we’ll bomb you to smithereens tariff’, but it’s still a big tariff.” [13:01, JW]

• Interdependence Lesson:

  • Recent trade and conflict episodes underline global interdependence; attempts at decoupling reveal new vulnerabilities.

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4. Massive Defense Budget—Every Household Pays

[15:04–17:29]

• Budget Increase:
  • The US defense budget proposal jumps from $900 billion to $1.5 trillion—a $600 billion yearly increase.
• Household Cost Calculation:
  • 120 million American households → $5,000 extra per year, $50,000 per household over a decade.
• Tax Reality:
  • “If you spend $50,000 per household, you have to tax $50,000 per household. That is just accounting.” [17:46, JW]
• Policy Implications:
  • Wolfers emphasizes the scale: “The President has decided…to spend over the next decade an extra $50,000 per household.” [17:29, JW]

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5. Market Outlook: Elevated Oil, Prolonged Danger

[18:38–21:19]

• Risk Premiums Up:
  • Oil future contracts for 2027–2029 have risen and are expected to stay high—markets do not believe “four to six weeks” of war was realistic.
• Lingering Uncertainty:
  • “The world is more dangerous and will remain more dangerous for years.” [19:39, JW]
• Advice to Investors:
  • Wolfers suggests markets must now price in a ‘risk premium’ for years due to unpredictable global escalation.
• Memorable Line:
  • “If 2025 is the year of the unprovoked trade war and 2026 is the year of an unprepared war…think about what 2027, 2028 hold.” [20:39, JW]

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6. Streaming Wars Update: Netflix & Disney

[24:55–35:24]

Netflix Earnings Reaction

• Strong Q1, Poor Guidance:
  • Netflix revenue up 16%, net income up 83%, but weak Q2 guidance and Reed Hastings’ exit spooked Wall Street (stock down 10%).
• Investor Fear:
  • “When you put up a good quarter and you don’t raise the full year, you sort of signal the second quarter’s going to be a little slower. What does everyone assume? They go, well, 16, 14, 12, 10 and then eight.” [26:07, RG]
• Reed Hastings’ Departure:
  • Greenfield believes Hastings wouldn’t leave if the company was in trouble; sees it as a sign of long-term confidence, not distress.

Netflix’s Long-Term Strategy

• Focus on Time Spent:
  • “They are sub 10% of time spent on televisions... The goal, honestly, is to capture more time spent.” [28:57, RG]
• Expanding Offerings:
  • New kids’ platform, vertical video, gaming; seeking to harness the mobile market traditionally dominated by TikTok, Instagram, etc.
• Franchises:
  • Reference to “K Pop Demon Hunters” as an emerging global property, akin to “Stranger Things”.

Disney Update

• Modest Layoffs:
  • New CEO Josh D’Amaro removes 1,000 jobs, significant for Marvel Studios.
• Structural Challenges Ahead:
  • Greenfield: “Does Disney need to be in the linear TV business?...Is it signaling a willingness to sort of rewrite the strategic future of Disney?” [35:24, RG]

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7. AI & Wealth Inequality

[37:37–end]

• AI Attitudes by Income:
  • Poll: Only those earning $200,000+ are predominantly optimistic on AI; lower income groups are more fearful.
• Implications:
  • “AI stands to make rich people very rich and keep poor people probably poor.” [38:37, EE]
• Recent Wealth Gains:
  • Since 2022, top 1% added $15 trillion; bottom 40% saw no gains, but rising costs (e.g., electricity driven by AI data centers).

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Notable Quotes & Timestamps

| Timestamp | Speaker | Quote | |-----------|-----------|------------------------------------------------------------------------------------------------------------------------| | 04:34 | JW | “None of us can make anything of anything. So I want the audience to feel really good about themselves if they feel lightly confused right now.” | | 08:32 | JW | “If we never do what we say we’re going to do, we can’t form agreements over time… the range of plausible outcomes narrows.” | | 10:33 | JW | “Let’s agree to never use the word ‘deal’ again. What the President calls a deal is not. What he has at the moment is press releases.” | | 13:01 | JW | “He blockaded the American people because he loved them… Now he’s imposing a blockade much more severe. It’s no longer a 30% tariff, it’s now a ‘we’ll bomb you to smithereens tariff’, but it’s still a big tariff.” | | 15:04 | JW | “The United States had a military budget last year of roughly $900 billion. The president has just proposed … $1.5 trillion.” | | 17:46 | JW | “If you spend $50,000 per household, you have to tax $50,000 per household. That is just accounting.” | | 19:39 | JW | “The world is more dangerous and will remain more dangerous for years.” | | 20:39 | JW | “If 2025 is the year of the unprovoked trade war and 2026 is the year of an unprepared war…think about what 2027, 2028 hold.” | | 26:07 | RG | “When you put up a good quarter and you don’t raise the full year, you sort of signal the second quarter’s going to be a little slower… They just start assuming the worst.” | | 28:57 | RG | “The goal, honestly, is to capture more time spent… That is, I think, the golden goose for these companies.” | | 38:37 | EE | “AI stands to make rich people very rich and keep poor people probably poor. This isn’t really conjecture. This is based on what we already know.” |

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Segment Timestamps

• [02:03–21:19] – US-Iran crisis deep dive & defense budget analysis (with Justin Wolfers)
• [24:55–37:31] – Streaming wars: Netflix/Disney breakdown (with Rich Greenfield)
• [37:37–end] – AI and income inequality, closing reflections (Ed Elson)

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Takeaways

• The US-Iran situation is fluid, full of misinformation, and has created real, long-term global economic costs for American households.
• Trust in international deals has eroded dramatically, fueling persistent market risk.
• The US defense budget spike will cost each household roughly $50,000 over the coming decade if trends persist.
• Netflix, despite strong current numbers, faces market concern over guidance and strategic direction; their new focus is time spent, especially on mobile.
• Disney is facing big strategic questions as layoffs begin under its new CEO.
• For AI, public optimism closely tracks with income, further highlighting the wealth inequality AI is exacerbating.

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The hosts close with a call for listeners to consider the broader implications of current economic, tech, and geopolitical trends—not just for markets, but for society at large.

Transcript

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[Ed Elson]

Today's number 4.5. That's how many gallons of alcohol the average Romanian male drinks each year. That's roughly 70% more than the average American, but it's 70% less than cash. Patel

[Rich Greenfield]

Money markets matter.

[Justin Wolfers]

If money is evil, then that building is hell. Show goes on the Sell Sell.

[Ed Elson]

Welcome to Profit G Markets. I'm Ed el. It is April 21st. Let's check in on yesterday's market vitals. The major indices fell as relations between Iran and the US Remained strained ahead of the ceasefire deadline. Oil prices rose but still remained below $100 a barrel. Shares of Fermi, the AI data center company that we predicted back in October would implode, plunged 20% after several top executives, including the CEO, resigned. And finally, Apple stock dropped roughly 1% after hours on news that Tim Cook is stepping down in September. He will be replaced by Senior Vice President of Hardware Engineering, John Turner. Okay, what's happening? The US Iran cease fire Expires tomorrow and tensions are mounting. Both countries. Delegations are headed to Pakistan to engage in talks ahead of the deadline. President Trump said it's, quote, highly unlikely that the ceasefire would be extended if a deal was not reached before Wednesday. He also said the US Would continue to blockade the Strait of Hormuz until a deal is signed. And the meeting follows an active weekend of fighting. On Friday, Iran announced it would reopen the Strait of Hormuz after Israel and Hezbollah agreed to a ceasefire. Stocks soared to record highs on that news. However, Tehran reversed course after the US Refused to lift its own blockade. Then on Sunday, the US Navy fired on an Iranian cargo ship and Iran threatened retaliation. Oil prices rose yesterday and stocks slipped. So here to give us the update on the war and what it means for us and for the economy, we're speaking with everyone's favorite. Our favorite, Justin Wolfers, professor of Economics and Public Policy at the University of Michigan. So, Justin, the ceasefire might end tomorrow. That's at least the deadline. I mean, there's a lot to get into. But I guess my first question is, does that even matter? Because, you know, this weekend we heard from Trump that Iran violated the ceasefire. Iran said that we violated the ceasefire. We saw this news where we actually did fire at an Iranian cargo ship. So I just can't tell if this is even meaningful at all. What do you make of it? Does this change things for you?

[Justin Wolfers]

Yeah, I think none of us can make anything of anything. So I want the audience to feel really good about themselves if they feel lightly confused right now. Now, there's a reason we've always felt lightly confused about the Middle east, which is it's a long way away. If you miss a day in the news cycle, 17 things happen. Some of the nut woods and the places are very long. It's not central to our lives. Many of us lose track of many Middle east stories. In fact, I've been trying very hard to keep track and not let anything go by. And still I'm confused because we have one extra layer that we don't normally have, which is we have no idea what the truth is. I'm not being funny. Yeah, There was a time when someone said, the following is a red line. You would understand it to be a red line. There was a time when someone said, these are the conditions. You understood it to be the conditions. There was a time when someone said, we've reached an agreement. You would understand that they'd reached an agreement. So none of those things are true right now. And we've seen in Many cases that no one, including markets, knows whether to believe the American president or the Iranian leadership more. That's actually not a joke. Okay, so that makes our lives hard, but no one cares about you and I, Ed. We're just two extraordinarily handsome blokes talking about the world. But I think what makes it harder is how do you resolve this in some sense? Let me describe something completely unrelated that happened to me this week.

[Ed Elson]

Yes.

[Justin Wolfers]

And hopefully we can draw the analogy. And I was talking to a young fella about Mexico. He's talking about how Mexico should behave and what they should expect when nafta, which has been renamed several times, comes up for renegotiation. What should Mexico look for? What should they be worried about? What's going to happen? And at face value, that seems like a very sensible and important question. But a different view is that the President has unilaterally torn up NAFTA now four or five times. Which is another way of saying any time NAFTA develop yields outcomes that are not perceived to be in America's best interests, the President doesn't abide by it, whether it's in Mexico's best interest or not. Another way of saying that is we've lost the ability to contract over time. There is no nafta. There literally can't be a nafta. If I were to say, ed, I'm gonna marry you, which would be beautiful, but I just didn't come home on Tuesday, and then I came back a week later, and then I didn't come home on Thursday, and I didn't cook dinner for you on Friday. Are we married? So there's sort of two types of agreements you can do. There's a Paper, scissors, rock agreement, which is I'll do something and you'll do something, and we'll both do it at same time. Not really Paper, scissors, rock. And it's in both of our best interests, right? For instance, this interview, you said, just, I'll meet you at 4. It's not live, folks. Sorry. But Ed said, I'll meet you at 4pm and I said, okay, I'll meet you at 4pm and we're able to contract intra within time at this time. I'll turn up and you'll turn up. But, Ed, if you developed a rep. If. If you developed a reputation for never turning up on time, I wouldn't have turned up, and vice versa. And so we've lost. Let me bring all this from Mexico and from you and I back to the Middle East. If we never do what we say we're going to do. We can't form agreements over time. We can't say, you give something up today and I'll give something up tomorrow becomes impossible.

[Ed Elson]

Right.

[Justin Wolfers]

And so therefore, the range of plausible outcomes narrows and it takes off the table. Every outcome in which we ask the Iranians to do something good in stage one and we get something good in stage two because they know we will not deliver in stage two. And this is the deep sense in which this is the exact opposite of the art of the deal. You think about all the possible futures that could occur and the President has taken off the table a whole bunch of them. That worries me deeply.

[Ed Elson]

Yeah, I mean, it seems as though we can't really trust anything that's being said. In addition, the deals that are being quote, unquote made don't really turn out to be deals. They break the agreements of those deals and then they say that the deal is off, but then they continue to say that there's a deal and say that there's going to be a deadline for that deal and then talk about extending the deadline and or renegotiating the deal, et cetera, et cetera. And so we're supposed to kind of play this game of, oh, let's follow along with the story. There's gonna be a ceasefire and then they're gonna extend it. But ultimately, as we kind of began, like, none of it really means anything. So the question becomes, for us, how do we actually determine what is real and what isn't? And, I mean, one thing that I do consider to be real, and I'd like to get your views on this, is the fact that the administration has proposed a one and a half trillion dollar defense budget for 2027. Which makes me think, okay, this is all noise. This is all nonsense. Gas prices continue to be elevated. I think they're up more than 30% since the war began. It seems as though this is only going to continue, at least that's my sense. But maybe I'm being pessimistic. What do you think is real? Like, what are some real signals as to what will happen versus fake or meaningless?

[Justin Wolfers]

Great. There's a lot of meat in the questions you just asked. So let me come back to what you said about deals. I have a proposal for you, Ed. Let's agree to never use the word deal again. And I mean that in the interest of honesty. What the President calls a deal is not. I promise I will give up this and you will give up that promise means I'm Going to follow through. What he has at the moment is press releases and what he's capable of delivering is if you do this and I do this and it's in your best interest and it's in my best interest, we can get there, which is basically a small set of possible outcomes. The stuff where that we can get Iran to do the stuff Iran wants to do, and in return, America will do the stuff America wants to do today. That's it, right?

[Ed Elson]

Yeah.

[Justin Wolfers]

You don't even need a deal. You could just send someone a text message and say, hey, have you thought about doing this? So deals are a bad idea. I wanted to take you away from your question, then I promise to come back to it. What has the President achieved over the last week? I actually think he's achieved something. So Iran showed that it has control over the Strait of Hormuz.

[Ed Elson]

Yeah.

[Justin Wolfers]

That's actually very important and a major loss to the United States. When someone reveals a weakness that you had, that's as bad as them creating a weakness. And so if 8 weeks ago Iran didn't understand itself to have leverage,

[Rich Greenfield]

it

[Justin Wolfers]

had never had the opportunity to test it, today it does.

[Ed Elson]

Yeah.

[Justin Wolfers]

So it's as if they'd created an American weakness, as if they'd won it in war.

[Ed Elson]

Right.

[Justin Wolfers]

By the way, we saw the same thing happen in the trade war with rare earth minerals.

[Ed Elson]

I was just gonna say that's exactly what happened there. Yeah, yeah.

[Justin Wolfers]

What if we. It's two data points is too much to draw a law from. But what if we learn that this world is wildly interdependent, more so than most of us appreciate?

[Ed Elson]

Yeah.

[Justin Wolfers]

The moment you try and chop off an arm, all of a sudden you discover interdependencies are not there. Seems to be. At least those two stories tell us that may be a fairly general thing. Okay. The President has also showed that we have the ability to blockade a run. Now, we probably knew that two weeks ago, but we definitely know it today. I want to just enjoy a moment of irony with you, Ed, because you are the person in the world I most want to share this with. In 2025, the President started the trade war, which made it harder for ships or more expensive for ships to enter the United States. And retaliatory tariffs made it harder for ships to exit effectively in 2025. Then the President imposed a small bore blockade on the United States. He blockaded the American people and he did that because he loved them. In 2026, he's imposing a blockade even more severe. It's no longer a 30% tariff. It's now a will bomb you to smithereens tariff, but it's still a big tariff. He's blockading the Iranians, he's blockading the people he hates. Yeah, guy's got one hammer blockade and it turns out you blockade people you love and you blockade people you hate. I have a feeling you're not gonna succeed on both missions. In fact, it could be. My view of the world is a blockade hurts both sides. And so it hurt Americans last year and it's hurting Iranians this year. But even if I'm wrong, if it was helping Americans last year, it's gotta be helping Iranians, or if it's hurting Americans last year, it's hurting Iranians. But it does suggest these are wildly incongruent policies.

[Ed Elson]

Yes.

[Justin Wolfers]

Okay, you asked about one and a half trillion, is that right? Yeah, let's go there. There is over deep feeling from studying history that wars are really, really, really important moments. That we rewire the world in deeply important ways. And it's not as simple as like with a trade war, you throw on a tariff and you take it off and you hope that we can hug it out and all, we're back to normal. I have a sense from history that wars are turning points.

[Ed Elson]

Yes.

[Justin Wolfers]

I don't know what the turning point is with this war, but your question points to one of them. So just to bring everyone up to speed, the United States had a military budget last year of roughly 900 billion. The president has just proposed in his budget 1500 billion, one and a half trillion. So $600 billion more. That's for next year. Normally when we talk about budget numbers, we're talking a ten year period, right? So if the question in your mind is how much more dangerous did the world just get and how much more has the United States made it so other countries feel they have to arm themselves and therefore if we want to maintain military superiority, how much more do we have to spend in this arms ra. And we call it an arms race for a reason. We have an answer from the White House. We need to spend another 600 billion a year. Now you're very good at long division, right?

[Ed Elson]

Ed, you're always with the math questions. Live on it, mate.

[Justin Wolfers]

Long division, come on. Long division is a superpower. I wish someone had told me this in school. We're spending another $600 billion. And I'm going to make it easy for you. I'm going to say there's 120 million American households. How much more are we spending per household.

[Ed Elson]

I can't do this live on air. Justin, you're killing me with these math questions. Do you know the answer? Can you tell us?

[Justin Wolfers]

Well, no, I just did it in my head.

[Ed Elson]

Please tell us.

[Justin Wolfers]

Cause it's easy, ed, at it's $5,000.

[Ed Elson]

5,000.

[Justin Wolfers]

Okay. Because you can just divide both sides by a million.

[Ed Elson]

Right.

[Justin Wolfers]

Right now you got, you know, 600 divided by 12. 600 divided by 120. That's why I chose 120. It's actually 130. So $5,000 per household per year. Okay. And I'm now going to give you the easiest one. If the President keeps this up for a decade, how much does that add up to for a typical household?

[Ed Elson]

50,000.

[Justin Wolfers]

You are so good at this. You should be less self conscious about doing math on air. That's incredible. And I hope your audience understands and appreciates your mathematical acuity.

[Ed Elson]

That's right.

[Justin Wolfers]

So basically, the President has decided that he has made the world so much more dangerous that he needs to spend over the next decade an extra $50,000 per household.

[Ed Elson]

Yeah.

[Justin Wolfers]

By the way, if you spend 50,000 per household, you have to tax 50,000 per household. That is just accounting.

[Ed Elson]

Yeah.

[Justin Wolfers]

So another way of saying this is the President is imposing a $50,000 tax hike because of this adventure. Now, I'm not going to go the next step and say that's bad or wrong. That's a question of personal judgment. If we were freeing 90 million people from a life of oppression, that's a price that might be worth paying. Probably not if you're an America first guy, but you might be a humanitarian first guy. But the point of your question, Ed, and I think it's really significant, is if you believe the President about our future military needs, he's imposing very, very, very large, very meaningful costs on the

[Ed Elson]

American people, which is likely a signal, it seems, that this is going to continue for some time. I mean, whether it's this or something else, something related to this, I mean, it's hard not to assume that we're not approaching the end game here, especially when nothing meaningful happens in these headlines. And I think the next question, although we do have to wrap it up here, is what this impact would be and will be on the economy. The big question for investors seems to be not whether oil prices will be high. They already are high. We already know that. The question is whether they will remain high and remain elevated. And from what I'm hearing, it wouldn't be a bad bet to assume that they will.

[Justin Wolfers]

Right so when the President declared war, the thing that was interesting, he said, we're gonna go in for four to six weeks. But 2027, 2028 and 2029, oil price futures all rose.

[Ed Elson]

Yeah.

[Justin Wolfers]

Now actually last Friday when it looked like peace was about to break out, they fell quite substantially. And so it looked like people really genuinely believed there was something good happening on Friday. Just before I came on air with you, I checked the latest betting markets on Kalshi where you can bet on how long until the Straits reopened and the flow of oil is back to normal. And for sure, no one believes that four to six weeks was ever going to be true, but they're talking about months rather than years. So let me break that down there, that says the direct what's going on in Iran with the Strait of Hormuz is a months long issue. The world though is more dangerous and will remain more dangerous for years. And I think the thing that's really. And so that's why you're going to continue to see oil price futures substantially elevated because there's now a risk we don't know who's going to do what. But there could be a next chapter in this story.

[Ed Elson]

Exactly.

[Justin Wolfers]

And then the final deeply depressing thought I want to leave you with is if 2025 is the year of the unprovoked trade war and 2026 is the year of an unprepared war war, it's time for folks in markets to think about what 2027 holds in 2028. If you extrapolate, then you should be building in a pretty big risk premium. And if you're an optimist, you think, well, the bloke has rolled the dice a couple of times. Surely you'll learn by now and we're going to go back to incredibly competent technocratic economic policy any day now. And I got all my fingers and toes crossed.

[Ed Elson]

Justin Wolfers, professor of Economics and Public Policy at the University of Michigan. Justin, we always love having you. Thank you for joining us.

[Justin Wolfers]

Pleasure, mate.

[Ed Elson]

After the break, an update on the streaming wars. And by the way, we are heading out on tour at the end of May, so for more info and to get your Tickets, head to profgmarketstor.com.

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[Ed Elson]

It was indeed. You surprised me with Virgin Atlantic upper class tickets to London.

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[Ed Elson]

It was pretty incredible. From the moment I entered that upper class cabin, I have to tell you, I felt like a vip. Anything I needed a drink, snack, assistance with the seat.

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Flat seats.

[Ed Elson]

Flat seats. Flat seats, exactly. Had the four course meal, got my champagne. Very delicious. Enjoyed the food and the journey home. The journey home was great. I went to the Virgin Atlantic LHR Clubhouse. That's the Heathrow Clubhouse. Heathrow Clubhouse was awesome. Got myself a coffee, headed over to the meditation pod that they call the Soma Dome. Kind of felt like a sort of spaceship where you relax and think nice thoughts. So I did that for a little bit. Then we went over to the wing which are these acoustically sealed booths where you could do some work. You could even record a podcast. I didn't do that, but maybe I should have. It was a very enjoyable experience.

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[Ed Elson]

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[Ed Elson]

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[Ed Elson]

We're back with Profge Markets. Two of the biggest names in entertainment hit a rough patch last week. Netflix reported relatively strong first quarter earnings. Revenue rose 16% and net income jumped nearly 83%. But those results were overshadowed by weaker than expected second quarter guidance, which sent the stock down 10%. Additionally, co founder and chairman Reed Hastings announced that he will leave the board in June, ending a nearly 30 year run at the company he built. Meanwhile, at Disney, the new CEO Josh D' Amaro has begun laying off roughly 1,000 employees. Marvel Studios was among the hardest hit as nearly its entire visual development team was shown to the exit. So here to help us break all of this down, we are joined by Rich Greenfield, co founder and TMT analyst at LightShed Partners. Rich, good to see you. Thank you for joining us. I want to start here with Netflix earnings seemingly strong quarter when you look at the revenue, when you look at the earnings. But ultimately Wall street hated it. And I can't quite tell if it's the guidance or if it's Reed Hastings leaving or maybe something else. What do you make of it?

[Rich Greenfield]

I think it's a combination of both. I mean, look, they did better than people thought, just a little bit, but they did a little bit better than people thought in Q1. I mean, growing 16% is certainly nothing to sneeze at. That is a very healthy growth rate. Remember, it was just a couple of years ago where growth sort of went sub 10%. That's when they launched Advert. You know, there was sort of this entire panic of like, was growth over for Netflix? And then launched advertising, content started to do really well again and growth surged back into the teens. And I think, Ed, the problem right now is that investors are worried when you put up a good quarter and you don't raise the full year, you sort of signal the second quarter is going to be a little slower. What does everyone assume? They go, well, 16, 14, 12, 10 and then eight. Like they just start assuming the worst. And I think, you know, we've been through this before where investors fear sort of a meaningful revenue slowdown. I think Netflix is very, very focused on maintaining, you know, mid teens ish revenue growth over the long term. And I think, you know, it's still very early in the advertising. I mean, you think about it, this is a 50 billion plus revenue company and advertising is a few billion. So it's still very early days as they ramp up their advertising, not just in the US but in the 12 markets where they have it around the world. And so I think you add in the fears of not raising guidance in a stock that had sort of bounced off the bottom from the whole Warner situation, and then you poured salt in the wound by having Reed Hastings leave the company, which no one expected. And the reality is I find it very hard to believe that Reed Hastings would be leaving if the company was in trouble. And so I feel like this is probably a sign of his confidence in the long term.

[Virgin Atlantic Advertiser]

Right.

[Rich Greenfield]

Whereas I think the street is obviously concerned that, oh my God, is he leaving? Because the growth story is over. And I just, I can't imagine the company that he is synonymous with and built and created a fortune off of. I don't believe he would be, you know, quote unquote, abandoning ship if he wasn't very comfortable in the direction the ship was heading.

[Ed Elson]

What do you think is sort of the long term vision for the company right now? Because it seems like they're at this almost like an inflection point where, I mean, they were looking at Warner Brothers and that seems to be sort of more of a legacy ip, original content play, but at the same time they're experimenting with ads, or more than experimenting, they're really growing it into a real business line at this point. And I even saw recently that they're looking at short form, like a short form video feature. It seems like that there are these two kind of trajectories and perhaps you could even put in talks about getting involved in parks or physical assets in some capacity. I mean, when you look at the business right now, what is the long term trajectory? What are they trying to do at this point?

[Rich Greenfield]

I think it's still relatively simple, ed. They are sub 10% of time spent on televisions. Forget about phones, we'll get to that in a second. But they are sub 10%. YouTube is substantially larger. Obviously. TV in totality is far larger. I mean, yes, Netflix dwarfs Everybody but YouTube in a streaming world. But when you look at it on a total tv, meaning if you were to take ABC and ESPN and Disney plus and Hulu, Disney's still bigger than Netflix in total. So, you know, like, that's why the whole story during the whole WBD acquisition attempt, when people were saying, oh, Netflix is a monopoly, I mean, it's sort of absurd. They're still sub 10% of the market for TV content. And so I think the goal, honestly is to capture more time spent. I mean, I think that is, you look at something like K Pop Demon Hunters. I think Netflix got its first real taste of a true franchise. Yeah, sure, Stranger Things was very successful. I don't mean to diminish the power of that content in any way, but when you look at the K Pop Demon Hunters and how this thing has, even when there isn't a fresh piece of content movie around it, you look at how like McDonald's has Happy Meals around it right now. I mean, everywhere you look, this content is resonating around the world.

[Ed Elson]

Right.

[Rich Greenfield]

You know, I think trying to build more franchises, they obviously understood how important it was and how much value it drove. And so I think that's a big piece of it. But then, look, I think the other piece that you really have to think about in terms of Netflix's future is there's still a relatively lightly used app on. On phones.

[Ed Elson]

Yeah.

[Rich Greenfield]

And you know, most of the viewing is really on TVs, a little bit on laptops, but they are not what you do on your phone. You do TikTok on your phone. You watch clips of prop Professor G markets on Instagram. Right. You're doing that on X. But like, you know, how many times do you turn on and watch a full length? You know, I'm watching Night Agent right now. I'm watching it on my tv, not on my phone. Right. Like, sure, there are certainly examples where there's live sports events that happening and you want to watch it and you're not home and you can watch the fight. You know, you could watch that Mike Tyson fight on your phone for sure. And it works great.

[Ed Elson]

Right.

[Rich Greenfield]

But I think figuring out how to capture more of your time spent on your phone is a huge focus. And so they just launched a new kids platform called Playground, trying to actually create more for kids to do in a safe, controlled way on phones. They're also, you know, investing in, you know, video games. There's no doubt that they see that. And then vertical video. And again, if it's just clips, I mean, Disney's done the same. And I know you mentioned Disney earlier, they've recently launched something called Verts, both in their ESPN app and inside of the Disney app. No real original content that I've seen. It really looks mostly like reformatted and often not even so great reformatted. Cause you're sort of squishing 16 by 9 into vertical. I think, you know, over time it'll be interesting. Is, does Netflix, when they launch this, do they come out with actual original content? Like, are they going into the. You know, we've seen these micro dramas and different types of sort of vertical video native content made for a vertical viewing audience.

[Ed Elson]

Yes.

[Rich Greenfield]

I have no idea if Netflix is going to do that or not, but I think whichever media company tech platform replicates what we've seen on some of these overseas platforms, I think that could be a big unlock. Not to the ultimate subscription business, but I think, you know, time spent on mobile and I think right now time spent on mobile is not any of these major media company streaming companies. Right. Like it is not Disney plus, it is not Netflix. Like the winning on mobile is all of these sort of very specific platforms like TikTok that are made for mobile. And so I want to see these companies compete in mobile content consumption. It hasn't happened yet, but I'd love

[Ed Elson]

to see it 100%. Yeah, it's, it's sort of a question of like, what is the golden goose for these companies? And to your point, they've been treating it as the tv. I think the TV versus phone dichotomy is a good one. But there is a question.

[Rich Greenfield]

It's where you make your money. It's where you make your money. I mean, there's no doubt it's where you make your money. Yeah, but everyone who has Netflix probably has it on their phone.

[Ed Elson]

Yes.

[Rich Greenfield]

They're not using it all that much. How could you increase time spent? And especially now that you're in the right. Once you're in the ad business, more time spent has a direct correlation. It's not like, hey, more time spent builds value so you can raise price. Sure, you don't churn, but now actually view time has a direct correlation to revenue because you can actually drive advertising. And so, I mean, as you know, obviously with what you do all day, whether it's sponsorship or advertising, there's a huge opportunity. And you see Netflix getting more into podcasting. Right. Which also fits well in a vertical environment. You know, they're getting into even a little bit of news. I mean, you saw the Brian Williams pod. You know, it's gonna be called like a weekly podcast, but you know, again, you're inching into new formats and new genres of content and I think the goal is again, time spent.

[Ed Elson]

Yes.

[Rich Greenfield]

I honestly believe this is all they care about is how do they win time spent. And I think that this is a huge part of that push. And sure, longer term, do they want to do more Netflix houses? They've opened up two of them. There's more on the, you know, in terms of destination or location based entertainment, but I don't think that's gonna be the bread and butter for a long time. I think this is still Capture more time on TVs, grow the user base, especially outside the US where there's still a lot of room to grow outside, especially in Asia. And then figure out how you win in mobile. And you know, the initial way they thought was gaming. I wonder if now kids, slash vertical video might be a better answer than mobile games. 100%, which is very competitive.

[Ed Elson]

Yeah, really interesting. Before we let you go, new Disney CEO Josh Damari is about a month into the job. He just laid off a thousand employees. If you had to give him a grade on how he's done so far, maybe it's impossible. But what do you make of his tenure?

[Rich Greenfield]

That's like you laying off two employees, just to be clear on an analogy basis. Right. They did not lay off like, you know, it's not like Meadow. Right. Meta's talking about laying off 10% of the company. This was not a 10% layoff. So they probably could do 10x that pretty easily at Disney and no one would know. I mean, I would feel bad for those employees. But the point is all of these media companies have accumulated far too many employees over the years. That's part of the huge opportunity facing, you know, David Ellison as he acquires Warner Brothers. Right. It's just tons of duplicative employees and lots of middle layers of management. I think for Josh tomorrow, this is a great first step. I mean, it's showing you he's willing to make moves. I think the bigger move that everyone has their eyes on is what is the right structure for Disney? Does Disney need to be in the linear TV business? While at the end of the day Paramount is buying all of Warner Brothers. The big unlock that set off this bidding war was being willing to separate out linear television. Obviously you saw that is what Versant and NBC did. I think a big question is, is Disney's ABC and ESPN long term part of the company or is Josh. You know, again, this is a small layoff in the scheme of things, but is it signaling a willingness to sort of rewrite the strategic future of Disney? And I think he hasn't had his first earnings call. I mean, there's a lot to come over the course of the next several weeks and we'll see. But it's an exciting time to sort of see. When Bob Iger took over, you know, he made a very strong right hand turn from Disney as an animation company to going, hey, we don't have the tooling inside. We've got to go out and buy Pixar. And then of course Marvel and Lucas after that. But there was a big strategic decision in buying Pixar that set off a huge run at Disney over the years. I think we're gonna be all eyes on whether there's something strategic up Josh's sleeve as he starts out or whether it's sort of just continue on with the path that Disney's been on.

[Ed Elson]

All right. Rich Greenfield, co founder and TMT analyst at LightShed Partners. Rich, appreciate your time. Thank you.

[Rich Greenfield]

Thanks for having me. Ed,

[Ed Elson]

Here's a question for you. Who in America is more excited about AI than fearful? Well, a recent poll suggests the answer is quite simple. Rich people. Yes. It turns out when you ask Americans if they think AI will do more harm than good, and you categorize them by income, the only demographic group whose majority believes it will be a net positive for society are people who make more than $200,000 per year. Meanwhile, among people who make less than 100,000, only a third believe it will be a net positive. And then among people who make less than 50,000, only a quarter believe it will be a net positive. In other words, how you feel about AI is almost directly proportional to to how much money you make. If you make a lot of money, you feel good about it, and if you don't, you feel bad. The question is why? Well, to us, the answer is quite obvious, and that is that AI stands to make rich people very rich and keep poor people probably poor. This isn't really conjecture. This is based on what we already know. Since CHAP GPT was released in 2022, the top 1%, which owns half of the entire stock market, has added a collective $15 trillion to their net worth. Meanwhile, the bottom 40% of Americans who don't own stocks haven't seen any of those gains, and their electric bills have risen 17% in part because of the extraordinary energy consumption of data centers. Now, we've talked a lot about the AI industry's popularity problem and how that might or might not have led to the violent attacks on Sam Altman last week. But I would argue that all of this isn't so much about Sam Altman or OpenAI or AI at all. When you get down to it, all of this is about wealth inequality, and the proof is clearly in the polling. I talk more about this in my latest edition of my newsletter, Simply Put, which is out today. You can read it@simply put. Prof.gmedia.com okay, that's it for today. This episode was produced by Claire Miller and Alison Weiss, edited by Joel Patterson, and engineered by Benjamin Spencer. Our video editor is Brad Williams. Our research team is Dan Shalon, Isabella Kinsel, Kristen o' Donoghue and Mia Silverio. And our social producer is Jake McPherson. Thanks for listening to Prof. G Markets from Profge Media. If you liked what you heard, give us a follow. I'm Ed Elson. I will see you tomorrow.

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