$NTDOY: is Nintendo's flywheel actually there? | Accrued Interest

Nintendo's flywheel is not there. That is Simeon McMillan's call, and it is the one that has media longs emailing me. His case: Switch 2 is the best console launch in history and the attach rate still came in well below Switch 1, the Mario Kart bundle flattered even that number, Nintendo Switch Online accounts have been flat for years and almost nobody has noticed, and Nintendo just took its first mid-cycle price increase because memory costs are not coming down. He is not calling for a crash. He is saying you cannot put this one away for two years. I push back hard. Ocarina of Time is going to be a top five selling game in the world and it is a remake, which is the old Buffett line about Disney being an oil well where the oil seeps back in. Simeon's answer is that Disney kept buying new IP to refill the well and Nintendo has not, and that two to three movies a year and a dozen parks would change his mind. Then we flip to the two he is long. Spotify is his highest conviction idea and he opens with a mea culpa: he assumed the labels would hold the margin hostage forever, and missed that the 2024 and 2025 renegotiations made the royalty rate fall as Spotify grows. I read those same deals less charitably, as Spotify winning outright rather than everyone winning together, and I think the next round goes further. We get into why advertising keeps underperforming, why that might be fine, and what marketplace programs actually are once you have worked in radio. On Netflix he is bullish on a stock that has been cut hard, and I ask the obvious question: Netflix trades at half Spotify's multiple with the same growth and the same margin story, so why is Spotify still the top pick. Also, the NFL ratings test. Netflix's Melbourne game did 18.5 million in the US this year against YouTube's 17.3 million globally for Brazil last year, and Netflix needs a login while YouTube was free. This episode is sponsored by Fiscal.ai: https://fiscal.ai/yav. I am a customer and I pay for the API myself. Two things I actually use it for: the fund letter database wired into the API, so when I prep a podcast I get every letter thesis on the name in one pass, and audited financials where every line in the model links straight back to the source. Use my link for 15% off the AI connector. Chapters: (00:00) Intro (01:02) Sponsor: Fiscal.ai (02:35) The quarterly media check-in (03:58) Why Simeon is bearish on Nintendo (08:37) Remakes: is Ocarina of Time the oil well? (11:48) Memory costs and the first mid-cycle price hike (14:30) The attach rate and the Mario Kart bundle (16:47) The bull rebuttals, and subscriber growth that isn't (19:08) Nintendo margins, and whether 40% is real (22:19) Should Nintendo have sold itself? (24:32) IP, movies and parks, with Pokemon as the template (28:09) Spotify: the mea culpa (31:39) The label deals, and who actually won (32:41) Advertising, and payola by another name (36:16) What AI does to Spotify (39:00) 40x earnings: priced for perfection? (42:36) Daniel Ek steps back, and are CEOs overrated (47:08) Netflix as a value stock (53:13) AI generated content and the Netflix moat (59:49) NFL on Netflix vs YouTube (1:02:08) Gun to your head: Spotify or Netflix? (1:05:34) Wrap, and the student tier Simeon McMillan / Accrued Interest: https://www.accruedint.com Links: Yet Another Value Blog - https://www.yetanothervalueblog.com See our legal disclaimer here: https://www.yetanothervalueblog.com/p/legal-and-disclaimer