Netflix (NFLX) has doubled down on its commitment to developing original content, firmly rejecting the industry trend towards mergers and acquisitions. Co-CEO Ted Sarandos, speaking at a UBS media conference, emphasized that Netflix is a “better builder than buyer,” even as competitors explore consolidation.
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While acknowledging past smaller intellectual property acquisitions, such as the Roald Dahl Story Company, Sarandos highlighted Netflix’s success in original programming. He cited the company’s competitive positioning and the so-called “Netflix effect” as evidence of its organic growth strategy. Sarandos pointed to the impressive viewership of the recent Jake Paul-Mike Tyson fight, which attracted 108 million global viewers and even caused temporary technical difficulties, as an example of Netflix’s ability to push boundaries.
Industry Consolidation Driven by Economic Pressures
Sarandos argued that industry consolidation wouldn’t significantly alter the competitive landscape, as the programming remains largely the same. He attributed the current wave of mergers and divestitures to economic pressures on legacy media companies struggling with declining cable subscriptions. This financial strain has led to conversations about consolidation and divestitures, with some already taking action.
Comcast (CMCSA) recently announced plans to spin off most of its cable properties into a new entity, a move aimed at adapting to the cord-cutting trend. For years, linear advertising and affiliate fees fueled legacy media revenues. However, the shift to streaming has eroded these revenue streams, forcing companies to explore new models. Streaming platforms, including Netflix, have further disrupted the industry by introducing their own advertising tiers.
Legacy Media Faces Challenges
The combination of declining linear networks and substantial debt burdens has compelled legacy media giants to implement cost-cutting measures, including widespread layoffs and restructuring. Warner Bros. Discovery (WBD) and Paramount Global (PARA) have seen the value of their cable businesses significantly diminish, highlighting the challenges facing traditional media.
Wall Street analysts speculate that Comcast’s spin-off could lead to further acquisitions of struggling cable properties, potentially benefiting companies like Warner Bros. Discovery. WBD CEO David Zaslav recently suggested that more industry consolidation is likely, particularly under a new political administration perceived as more favorable to dealmaking. Paramount’s planned merger with Skydance Media, expected to close in 2025, further underscores the trend toward consolidation.
Disney Reevaluates Traditional TV Assets
Even Disney (DIS) has considered separating its traditional TV assets, including ABC and cable channels like FX and National Geographic. While CEO Bob Iger has tempered these suggestions, the possibility of a spin-off or asset sale remains. Industry experts believe that consolidation offers significant efficiencies, raising questions about the long-term viability of independent traditional media companies.
Netflix Remains Focused on Growth
In conclusion, while the media landscape undergoes significant transformation through mergers and acquisitions, Netflix remains steadfast in its strategy of building original content. The company’s focus on organic growth, fueled by successful original programming and a strong competitive position, sets it apart in an industry grappling with economic pressures and shifting consumer preferences. Netflix’s commitment to building rather than buying positions it for continued success in the evolving media landscape.
