This Is a Major Problem With the Company

Netflix has a major problem, according to the $281 billion company’s co-CEO, Ted Sarandos. 

“Overall, we’re not growing as fast as I want us to, and we’re working on making that move faster,” Sarandos said at a Bloomberg conference in Los Angeles this week. “We are, though, also doing things that create a lot of headwind to that number.”

Sarandos disclosed that Netflix’s global engagement rose just 2% in its latest reported period, even though revenue continued to grow at double-digit rates in every region. Netflix is the world’s largest streaming service, according to Forbes. 

To rekindle growth, Sarandos told Bloomberg that Netflix is pushing beyond its traditional on-demand mix of scripted films and television and pushing into live entertainment, including sports, wrestling, comedy and major cultural events. He said that the company devotes 5% of its approximately $20 billion annual content budget, about $1 billion, to live programming.

The strategy is not designed to maximize hours watched; live shows account for only about 1% of Netflix viewing. Instead, Sarandos said that they serve a different commercial purpose. They attract new subscribers, give existing customers a reason to stay and create more valuable inventory for advertisers.

Live shows can help Netflix feel less like a library people visit intermittently. They offer a potential way to reduce churn and broaden the business beyond its historical reliance on movies and series. 

Other aspects of Netflix’s strategy to grow quickly

Netflix is also widening its theatrical ambitions and promoting movies with major built-in audiences. 

Sarandos said Greta Gerwig’s Narnia: The Magician’s Nephew will receive a wide theatrical release in 2027 before arriving on Netflix, followed later that year by the animated Charlie and the Chocolate Factory. 

According to Deadline, Netflix has planned longer periods of time that movies will be exclusively showing in theaters before they become available on the streaming platform. Netflix plans to exclusively show Narnia in theaters for 50 days and Charlie for 47 days, substantially longer than the limited runs traditionally associated with Netflix originals. 

Sarandos said the sequel to KPop Demon Hunters will get an even larger rollout. He told Deadline that audiences should expect a “very broad” theatrical debut for the follow-up, which he said would be a “big, broad, global” release.

Netflix appears to see four-quadrant movies, or films capable of attracting children, parents, younger adults and older viewers, as especially suited to the big screen. KPop Demon Hunters falls under that category, Sarandos told Variety last month. 

He added that Netflix released more than 30 films in theaters last year, tailoring each run by title, city, marketing spend and number of days in theaters. 

AI investments

Netflix is expanding its use of AI to make film and TV production faster and less expensive.

In March, the company acquired InterPositive, an AI filmmaking technology firm founded by Ben Affleck, for $587 million. The technology targets mainly post-production work, such as adjusting color, adding visual effects and reframing shots. It isn’t capable of generating an entire film from scratch. 

On Netflix’s second-quarter earnings call in July, Sarandos said Netflix had used AI on about 300 titles for planning and visual effects.

Netflix has a major problem, according to the $281 billion company’s co-CEO, Ted Sarandos. 

“Overall, we’re not growing as fast as I want us to, and we’re working on making that move faster,” Sarandos said at a Bloomberg conference in Los Angeles this week. “We are, though, also doing things that create a lot of headwind to that number.”

Sarandos disclosed that Netflix’s global engagement rose just 2% in its latest reported period, even though revenue continued to grow at double-digit rates in every region. Netflix is the world’s largest streaming service, according to Forbes.