“Our business and our business flywheel are working. There is no need for a fundamental shift in the strategy. We do need better execution in the U.S. Our content around the world is largely working,” Netflix Co-CEO Ted Sarandos insisted as analysts lobbed question upon question Tuesday on what the company is doing to address a slowdown in growth.
In other words, strong titles in global territories from Asia Pacific to Latin America are driving engagement, subscriber growth, revenue and profit. “The U.S. is also working, it’s just not growing as fast as it could, or as fast as we’d like. We had some really solid doubles and triples this year, but the other territories count on some of those titles being home runs so that they’ll travel around the world,” he said on a call after quarterly earnings. “We’re focusing on that execution.”
He’ll be leaning for that in large part on new chief content officer Peter Rice to lead that charge.
“Our strategy is unchanged,” he said at another point, focused on originals combined with licensed fare and a growing live business. He somewhat dismissed short-form video and third-party or user-generated content that some Wall Streeters think could help boost engagement as “early-stage initiatives” with limited investment.
He did say to expect more deals like the one with TF1 network in France that brings strong local programming onto the platform.
The co-CEOs’ job the on the video call was to reassure investors – who have bid the stock down over 40% in the last year – that there’s a path to long-term growth. On one hand, the streamer’s bid for Warner Bros., massive job cuts and C-suite changes indicate a recognition that change is needed in a fiercely competitive market. On the other, the CEOs reassured the Street that the solution is, while not easy, rather simple, that it mostly needs to deliver enough “quality and quantity” of programming consistently. That’s the slate, and they said it looks stronger this fall and into next year and that Netflix aims to keep it that way.
Sarandos said the streamer sees overall engagement “as the sum total of actual value that we are delivering to members … And the best evidence that we’ve got that we’re delivering that value is churn.” Netflix in fact leads all of its rivals in customer retention.
“Q3 churn, both globally and in the United States, improved year on year. It’s better than forecast. It’s already industry leading. And the ultimate determinant of whether we are delivering that value is the reaction to price changes” – meaning the streamer’s recent subscription price hikes have gone well.
CFO Spencer Neumann said the focus is firmly on the key metrics of member growth, pricing, and ads. “And we expect to deliver strong revenue growth into 2027 as well with those same three levers. The ad side led to softer-than anticipated revenue guidance for full-year 2026 that dinged the shares today. They fell 6% after the close today.
Theatrical is another area but the strategy there is still a bit confusing. Netflix is planning to release 30 films theatrically this year from small platform releases with long windows, to wide family films. It just started reporting box office with La Bola Negra this past weekend.
“We are a streaming first business. That is our core. But we consider every time we have a new film, the film itself, the audience for the film, and the filmmaker when we’re trying to come up with the release plan,” Sarandos said.
“We start off by looking at the project we have, asking ourselves how do we best serve movie lovers, many of whom are our members, who want to see that movie in a theater, and how do we do it without actually harming the view value on Netflix?”
La Bola Negra opened well in limited release. “We’re really excited about where we sit now, of course, we have one week of public reporting of box office under our belt, and we’re real happy about it. Let’s check in again in about six months,” Sarandos said.