Things Netflix said it would never do, then did

With its announcement that it plans to buy Warner Bros. Discovery’s studio and streaming businesses, Netflix is doing something it repeatedly said it never would: buying an asset it long insisted it could build itself.

“It’s true that, historically, we have been more builders than buyers,” co-CEO Ted Sarandos said on the company’s last earnings call, when asked about entertainment industry M&A. “And we think we have plenty of runway for growth without fundamentally changing that playbook.”

Sarandos did seem to leave the door open, though, for a big enough opportunity, like one that includes, say, both HBO and a 100-year-plus portfolio of films.

“We focus on profitable growth and reinvesting in our business, both organically and through selective M&A,” he told investors. “And when it comes to M&A opportunities, we look at them — and we look at all of them, and we apply the same framework and lens that we look at when we look to invest in a build: is it a big opportunity?”

This wouldn’t be the first time Netflix has changed its tune, with notorious flip-flops on everything from advertising to password sharing. What’s perhaps more important, though, than a reversal of a corporation’s stated principles is why Netflix is considering such an about-face in the first place.

As Pivotal Research Group Principal and Senior Analyst Jeffrey Wlodarczak wrote today, while the acquisition cements the streaming platform’s dominance in long-form entertainment, it belies a greater underlying tension: Netflix is afraid of competition from short-form content platforms TikTok and YouTube.

“...we believe this very expensive deal highlights NFLX management’s concern that short form entertainment (TikTok, Insta, X, YouTube shorts and Snap) is doing to streaming what streaming has done to traditional TV as (especially younger) consumers spend an increasing amount of time on these free platforms amidst declining attention spans (which is fundamentally negative for long form content),” Wlodarczak wrote, explaining why he lowered his price target to $105 from $160.

YouTube, of course, continues to be the biggest thing on TV, as TV disruptor Netflix itself fears disruption amid flat or weakening user engagement growth.

“While we still think it is early, time spent by consumers is migrating from traditional multichannel TV to streaming and now to social media platforms,” the Pivotal analyst wrote. “Flat to declining engagement, arguably is a precursor to subscriber weakness and difficulty taking price and NFLX is doing an extremely expensive content acquisition deal to at least temporarily offset this, but we believe this trend is likely set in stone.”

Here are some other instances where Netflix said it would never do something it then did — and why.

Netflix embraced ads.

Netflix upset traditional TV in part by giving users a more frictionless viewing experience: they could binge seasons of their favorite shows all at once, without so much as a single ad getting in the way.

Back in 2020, Netflix cofounder Reed Hastings said the company’s subscription-only strategy wasn’t “philosophical” but rather the “best capitalism” at the time. Two years later, after facing subscriber losses and slowing growth, the company changed its stance and launched its first ad-supported tier, giving it access to a new revenue source and more price-conscious consumers.

It cracked down on password sharing.

For a company that made its money from paying subscribers, Netflix had been notoriously loose on policing password sharing, going as far as declaring in 2017 that “love is sharing a password.”

Fast-forward a few years and the love had faded. Netflix began cracking down on password sharing by charging for extra users. Again, the move helped Netflix deal with subscriber losses and juice revenue.

Live TV, games, sports — Netflix moved beyond regular streaming.

Hastings long said that he preferred to excel at streaming rather than losing focus and being mediocre at other products.

"It’s a product clarity thing,” he told Wired a decade ago. “We’re really about streaming — if you add these features then it gets more complicated and sometimes that’s worth it but on the other hand, sometimes you get Microsoft Office.”

These days Netflix has fully embraced that complexity — the “MS Office” approach, so to speak — adding live TV, sports, and gaming as it acknowledges that its competition (and its users) have changed. The hope: features found on rival platforms could counter subscription losses, attract new customers, and increase engagement.

It’s possible, though, that Netflix’s latest reversal is different than the others. Buying part of Warner Bros. Discovery isn’t just doing something it said it wouldn’t do; it’s also doing what the TV giants it once disrupted did: consolidating and doubling down on what it knows.