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Welcome to Netflix’s hard pivot. Faced with lagging engagement from its users and signs of audience disinterest in some of its top shows between seasons, Netflix’s next big thing might be… cable television. Live channels, more talk shows (via video podcasts) and creator content and bundles with other streamers (including perhaps Peacock) to recreate the lean-back appeal of watching TV on the couch. “There’s a greater urgency to it now,” Wall Street Journal deputy media editor Jessica Toonkel tells Sean McNulty of Netflix’s move to passive viewing options. Last week, Toonkel, along with her WSJ colleague Ben Fritz, broke the news that Netflix was exploring the possibility of joining YouTube, Apple and Amazon as a service where users can also subscribe to other streaming apps. Even though the company’s revenue is still growing, the flat engagement numbers are troubling even optimists inside Netflix. Shares of Netflix stock have declined more than 40 percent in the last 12 months, leading some to believe another deal might be on the horizon after the company’s failed attempt to acquire Warner Bros. “Some people think investors are worried that Netflix is going to try to do another deal,” Jessica says about the stock price losses. “My read is they’re worried because they thought that Netflix had to do a deal. And that spooked investors — and because Netflix’s guidance for second-quarter operating margins was lighter than investors anticipated, people are starting to wonder, Hey, wait, do we need to be worried? Do they need to buy something? Like, what’s going on?” Certainly, it’s possible Netflix makes a play for another company — perhaps NBCU, now that Comcast will split the film and television studio from its broadband business, or Starz. But Jessica suggests there’s an even better fit for M&A hiding in plain sight: Spotify. “I think it gets them deeper into the podcasting area,” she says while acknowledging the challenges of the music business. “It’s not the easiest deal, and I don’t think [Spotify CEO] Daniel Ek is a seller, but, to me, that is the deal that they should be thinking about.” (Netflix co-CEO Ted Sarandos has served on Spotify’s board since 2016, and the two companies recently paired up in a series of podcasting deals to take on YouTube.) She adds, “If engagement’s their concern, everyone is on Spotify every single day.” 
Netflix wasn’t the only major company in the media spotlight on Monday. This afternoon, California Attorney General Rob Bonta and 10 other state AGs filed a suit to block Paramount’s acquisition of Warner Bros. Discovery. “I think it will be noisy,” says Jessica. “But I have been of this mindset the entire time — I don’t know to what end. I don’t see this blocking the deal.” Listen to today’s bonus episode for more from Sean and Jessica on Netflix and the next steps for Paramount, plus hear Sean’s conversation with Fandango’s Shawn Robbins about the weekend box office, where Disney’s live-action Moana added another flop to the summer tally. |
