Netflix says ‘logical to expect further consolidation’

Netflix said in its quarterly letter to investors: “Entertainment has always been a fast changing industry – with new technology and consumer behavior patterns creating new business models. Choice and control are the price of entry in modern entertainment, and that is streaming. It’s what consumers want, and we believe it’s the best way for our industry to stay relevant and growing. As Netflix has shown, it can also be a very healthy business. Since our global launch in 2016, we’ve been able to invest heavily in our slate – with content amortization up almost 3X from $4.8B in 2016 to $14.2B in 2023 – while steadily increasing our operating margins (up more than 5X, from 4% to 21% over the same period) and growing our free cash flow (from negative $3.3B in 2019 to positive $6.9B in 2023). As our competitors adjust to these changes, it’s logical to expect further consolidation, particularly among companies with large and declining linear networks. We’re not interested in acquiring linear assets. Nor do we believe that further M&A among traditional entertainment companies will materially change the competitive environment given all the consolidation that has already happened over the last decade (Viacom/CBS, AT&T/Time Warner, Disney/Fox, Time Warner/Discovery, etc.). But we expect our industry to remain highly competitive given: the franchise strength and programming expertise within traditional entertainment companies; ongoing heavy investment from large tech players like YouTube, Amazon and Apple; and broader competition for people’s time, including gaming and social media.”