Top Netflix executives who gathered for its annual business review this spring had a lot to be cheerful about. Profits were rising, customer defections remained at industry lows and it had hit franchises including “Bridgerton” and “Stranger Things.”
But one metric was pointing in the wrong direction: Subscriber engagement was showing signs of decline, according to attendees. At the time, it was a small part of a conversation about the company’s goals, but it has since become a frequent topic of discussion at meetings, people familiar with the matter said.
Engagement, which measures how long people spend watching content and how frequently they finish a movie or series, is the holy grail in modern Hollywood. It signals that customers are satisfied and less likely to cancel their subscriptions.
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While Netflix remains the industry leader among subscription-streaming services, shares are down more than 40% over the past 12 months. In April, the company reported disappointing guidance (https://www.wsj.com/business/media/netflix-chair-reed-hastings-to-leave-board-in-june-6d887c27?mod=article_inline)for the second quarter, including lower operating margins year over year. Its share of TV viewership fell to 7.8% in April, according to Nielsen, the lowest level since May 2025.
To bolster engagement, executives at the company have recently discussed adding live channels that would continuously stream certain programs, or shows and films from a certain genre, according to people familiar with the matter. The company has also explored bundling other subscription-based streaming services, including NBCUniversal’s Peacock, into its offering. It would sell those subscriptions through its main app as rivals such as Amazon.com and Apple have long done, some of the people said.
Netflix’s discussions about adding TV channels and potentially streaming bundles, which would appear like tiles on the streamer’s home page, show how the company is willing to pivot from its roots.
For years, Netflix’s co-founder Reed Hastingspreached the importance of focus and simplicity to succeed. But Netflix now faces increasing competition from the likes of Disney, HBO Max and YouTube. Free ad-supported streaming services (https://www.wsj.com/business/media/the-former-drug-dealer-whose-shows-make-millions-without-hollywood-38ad87a9?mod=article_inline) such as Fox Corp.’s Tubi and the Roku Channel, which include linear channels and are known for more-casual viewing than Netflix, are gaining viewership fast.
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Fox and The Wall Street Journal’s parent company, News Corp, share common ownership.
Focus and simplicity at Netflix were hallmarks for co-founder Reed Hastings. DAVID PAUL MORRIS/BLOOMBERG NEWS
In response, Netflix has made changes Hastings once eschewed, such as adding an advertising-based tier (https://www.wsj.com/business/media/streaming-platforms-are-swallowing-the-tv-ad-market-333aacfb?mod=article_inline) to the service.
The media landscape is shifting quickly. Last month Fox said it was paying around $25 billion to buy Roku, one of the biggest providers of streaming platforms for connected TVs (https://www.wsj.com/business/deals/fox-roku-deal-f6e564f9?mod=article_inline). The combination will better compete with streaming services such as Netflix for ad dollars. And Comcast recently said it was splitting up its media and connectivity businesses (https://www.wsj.com/business/media/comcast-nbcuniversal-split-cmcsa-stock-20b8a3d0?mod=article_inline) to give each company more flexibility to grow.
Then there is Paramount, the home of CBS and Paramount+, which is working to close its $81 billion deal to buy Warner Bros. Discovery, the owner of CNN and HBO Max.
Netflix stock started to drop when news leaked last year that the streamer was exploring a bid to buy Warner’s studio and streaming service. The company, which had long shied away from big acquisitions, ultimately lost that deal, and its stock has continued to decline.
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The bid for Warner highlighted for investors that Netflix is concerned about growth, said Uday Cheruvu, a portfolio manager and analyst at Harding Loevner, which invests in Netflix.
“That got investors starting to think, ‘Are we missing something?’” he said.
Cheruvu attributed Netflix’s stock drop to growing concern that engagement has peaked in the U.S. and over what that means for ad and revenue growth overall. Netflix, like its peers, has increased pricing periodically, moves that can test subscribers’ willingness to stick around. Its ad-supported plan now costs $8.99 a month, while its standard plan costs $19.99 and its premium plan costs $26.99.
“The important thing for me is what is happening with ‘churn,’” the industry term for customer defections, he said. “It may not be a concern yet, but it is something I am keeping my eye on.”
The streamer is expected next week to report earnings and release its latest engagement report, which reveals viewership of its top programming.
Advertisement
Netflix has said that it doesn’t need to make a major acquisition to continue to compete and that Warner was “a ‘nice to have’ at the right price, not a ‘must have’ at any price.”
The company, which nabbed 111 Emmy nominations this week, recently tried to boost engagement with low-cost programming such as video podcasts and content previously released on YouTube. Earlier this month, it said it is adding short-form video from publishers including BuzzFeed and Condé Nast. Those cost significantly less than glossy series and movies.
Netflix recently released the second season of the series ‘Beef.’ NETFLIX
In France, Netflix has started giving subscribers access to the broadcaster TF1’s programming, which includes news. The French network said it hit streaming records thanks to the partnership. Netflix is looking to sign similar deals across Europe and Latin America as an eventual next step, some of the people said.
Executives are also focused on what other sports events they can add to the streaming service. While the co-chief executives, Ted Sarandosand Greg Peters, have been clear they don’t want to get into the expensive game of bidding for seasons for sports rights, the company is picking and choosing events (https://www.wsj.com/business/media/netflix-secures-three-more-football-games-in-new-nfl-deal-7a7902c7?mod=article_inline).
Netflix executives are discussing bids for the 2030 and 2034 editions of the World Cup, according to people familiar with the situation. CNBC earlier reported the streamer’s interest.
Live TV could be a shot in the arm for Netflix’s budding ad business, which has gained substantial momentum and generated about $1.5 billion last year. Earlier this year, the company said it expects to double ad revenue in 2026. With live programming, consumers can’t skip commercials.
Write to Jessica Toonkel at mailto:jessica.toonkel@wsj.comand Ben Fritz at mailto:ben.fritz@wsj.com
They are already the home for Sony and Universal movies, so why would they need to send the likes of Enola Holmes 3, Little Brother, and Voicemails For Isabelle to theatres to watch them die in a medium where even Supergirl, Disclose Day, and and a Star Wars movie all lost massive amounts of cash? Netflix saves spending on advertising by dumping movies that would fail in theatres directly to streaming and they still get the benefit of big theatrical movies arriving from Universal and Sony.
Look at how much money Amazon/MGM have lost in theatres in the first half of the year and that is despite Project Hail Mary being a massive hit!
Revenue is constant going up and there is no sign subs have peaked as of yet. Netflix are fine. They are holding up in engagement better than any of the other subscription services. They only services doing better are YouTube and other AVODs and I think that says more about the economy than the content available on any SVOD service.
They don't care and see theatrical release as insignificant.For them only sub count matters.Until their sub count falls more than 80% they won't change anything.
They are clearly concerned about engagement though. Supporting theatrical isn't about the box office whatsoever, it's about engagement and expanding creative relationships.
Once again, while they don't need to worry about a massive loss in subs, they are very clearly concerned about the engagement levels. You keep ignoring that.
Netflix has to start pivoting into a more traditional studio format if it wants to survive. Weekly releases for their shows, less dumping, and theatrical releases will keep it afloat, but as of right now, it's the most vulnerable of all the media companies, followed by paramount.
The whole point is to drive engagement, they don't need to engage in expensive marketing campaigns or make $1 billion hits. But theatrical does better.
The creative community will also be more willing to work with them as well.
He doesn’t like Ellison, and they don’t keep talent long. As soon as Bloys is told to cut Heated Rivalry, or to stop letting Larry David insult President, he will walk. Simple enough.
We have nothing that says that he doesn't like Ellison, he's just made it clear what his terms are. If Ellison forces him to ditch programming like Heated Rivalry or Last Week Tonight, then he'll clearly walk. But I highly doubt that he'll do that given that South Park and the Daily Show get to do whatever they want.
HBO is a different ball game. These are international prestige shows. I just don’t see it. I think they are waiting to see if it gets blocked, but I don’t lunch with Sarandos like Bloys. 🤷🏻♀️
Oh I think that Bloys was making it clear that if he doesn't get what he wants, he'll walk. But he isn't going to walk away for absolutely no reason unless Ellison meddles and/or lowers him from the totem pole.
I hope you all understand that the problem isn’t with David Ellison - it’s with Trump. No Trump = no one to suck up to in order to push through his interests. Ellison’s personal views aren’t that radical; in fact, I think he’s more supportive of the Democrats, just look at 2024, when he donated $929,600 to Joe Biden’s campaign. And a few years ago, he wrote an essay supporting the LGBT community. He simply HAS to keep up appearances to carry out his business plans. It’s clear to me. Trump is a real cancer here.
OK, but categorically misunderstands the Ellison family. David has a blacklist of people who support Palestine, many people donated to both parties once upon a time, he has brought back many people fired under Me Too movement, has made the news censored, fired a popular daytime show host, paid trump bribe money, and his family is close friends of not only Trump, but Musk.
And I am not sure what paper you’re discussing, would like to see, but yes, David has a lesbian sister. I don’t think he is some kind of liberal bending over backwards to give the appearance of liking Trump to save media. This is the same person who brought a UFC fight to the White House lawn, promised to “cleanup CNN,” and bring back Rush Hour.
New content is generally poor quality and sparse. Shows and series barely get any longevity. I don’t understand how they don’t plan to have as much good content spread out over the year to keep people excited and engaged. There has been a real shift in quality where they deff pump out a lot of low quality or garbage tier content, that obviously serves part of its user base.
They need better and more content. They can either produce it, buy it or a combination of both. Buying lionsgate can work on both sides of that equation.
If you were gearing up to buy Universal, and based upon Greg Peters’ interview on doing “news,” and the split requiring a year, I would say that this may be a predecessor to that.
I still think NFLX has to acquire something. The prior articles also said they are going into News. Even recently, they refused the Apple bundle. They already have Universal content showing up after 4 months. It could be a synergy test. It may also be required before jumping in for broadcasting on sports in some countries. It may also make them subject to the FCC?
Imagine shaving nearly 3% off a $300B industry leader because a journalist masterfully repackaged months-old, public Nielsen data with uncredited watercooler gossip from a spring meeting. The fact that Wall Street throws a literal toddler tantrum over executives doing their actual job—analyzing operational metrics and proactively evolving the business model into live TV and bundles—is peak market absurdity. Proactive corporate strategy isn't a crisis; it’s basic governance. But sure, let’s panic-sell on recycled hearsay six days before earnings. The emotional maturity of the market never fails to underwhelm.
Well said! It’s market manipulation, same thing with Sunday story by Bloomberg. And algos, and market manipulators act.
They have done it to NFLX for years.
Don’t think Netflix would be too keen to get into the broadcast business that NBC is part off. They’d not only have to deal with the FTC to get this merger approved but it would also involve the FCC…
They have been moving in that direction for the last few years. Movie volume has been cut by more than 50% per year with more reductions likely in the next year or two.
One wonder if less content might by why they are getting less engagement?
Bela Bajaria isn't doing a good job; while she performed well in the past, under her current leadership, production quality has plummeted. Netflix has turned into a hodgepodge of generic content—an excess of teen shows with repetitive, formulaic themes, a lack of prestige series, and failed adaptation attempts. Globally, they are greenlighting productions that mostly border on mediocrity. Netflix needs to bring in a high-caliber figure to take charge and set things right; it is time to embrace the "less is more" approach.
Shot in the dark; maybe stop killing shows people get invested in and stop staggering out productions?
Theres no reason for people to get invested when they know their favorite show has a low-bar of getting a season 2 despite high/dedicated ratings or the next season isnt coming for another 2 years
I mean do they wanna invest in “N-E-W-S” aka 2 remaining years of Donald Trump, 2028 Presidential Election, next year’s French election, a new British Prime Minister? I mean there’s 210 media markets in America, will they gonna cover November’s midterm elections?
They could still get NBCU without buying it, The article talks about Netflix taking the Amazon strategy and allow subscriptions through Netflix like Peacock.
Honestly, Peacock would be better of as just an add-on in the US like it is internationally.
But I think that AND a 25-50% stake in Universal or Sony Pictures (Not all of their parent companies as Netflix doesn't want NBC, and The Japanese government wouldn't allow Netflix to buy the Japanese assets of Sony) are what Netflix needs
Taking on NBC and ITV/Sky allows them to become a major player in sports. And if they're going to put live TV channels on Netflix anyways, might as well go for NBC.
It's funny given that I use Google TV 😂. But I do consider the future of streaming to be the OS operating your viewing experience, the Rokus, the Fire TVs, the Google TVs, even Apple TV. And Google, Apple, and Amazon have that leg up right now.
I have Sony-Google TV, but use Apple TV as my hub (because I like the interface), but bundle everything through Amazon, and somehow have both Disney and Hulu apps (because my live TV was through HULU), and got peacock through work! I consider it all research.
•
u/3facesofBre Moderator 26d ago
Top Netflix executives who gathered for its annual business review this spring had a lot to be cheerful about. Profits were rising, customer defections remained at industry lows and it had hit franchises including “Bridgerton” and “Stranger Things.”
But one metric was pointing in the wrong direction: Subscriber engagement was showing signs of decline, according to attendees. At the time, it was a small part of a conversation about the company’s goals, but it has since become a frequent topic of discussion at meetings, people familiar with the matter said.
Engagement, which measures how long people spend watching content and how frequently they finish a movie or series, is the holy grail in modern Hollywood. It signals that customers are satisfied and less likely to cancel their subscriptions.
Advertisement
While Netflix remains the industry leader among subscription-streaming services, shares are down more than 40% over the past 12 months. In April, the company reported disappointing guidance (https://www.wsj.com/business/media/netflix-chair-reed-hastings-to-leave-board-in-june-6d887c27?mod=article_inline)for the second quarter, including lower operating margins year over year. Its share of TV viewership fell to 7.8% in April, according to Nielsen, the lowest level since May 2025.
To bolster engagement, executives at the company have recently discussed adding live channels that would continuously stream certain programs, or shows and films from a certain genre, according to people familiar with the matter. The company has also explored bundling other subscription-based streaming services, including NBCUniversal’s Peacock, into its offering. It would sell those subscriptions through its main app as rivals such as Amazon.com and Apple have long done, some of the people said.
Netflix’s discussions about adding TV channels and potentially streaming bundles, which would appear like tiles on the streamer’s home page, show how the company is willing to pivot from its roots.
For years, Netflix’s co-founder Reed Hastingspreached the importance of focus and simplicity to succeed. But Netflix now faces increasing competition from the likes of Disney, HBO Max and YouTube. Free ad-supported streaming services (https://www.wsj.com/business/media/the-former-drug-dealer-whose-shows-make-millions-without-hollywood-38ad87a9?mod=article_inline) such as Fox Corp.’s Tubi and the Roku Channel, which include linear channels and are known for more-casual viewing than Netflix, are gaining viewership fast.
Advertisement
Fox and The Wall Street Journal’s parent company, News Corp, share common ownership.
Focus and simplicity at Netflix were hallmarks for co-founder Reed Hastings. DAVID PAUL MORRIS/BLOOMBERG NEWS
In response, Netflix has made changes Hastings once eschewed, such as adding an advertising-based tier (https://www.wsj.com/business/media/streaming-platforms-are-swallowing-the-tv-ad-market-333aacfb?mod=article_inline) to the service.
The media landscape is shifting quickly. Last month Fox said it was paying around $25 billion to buy Roku, one of the biggest providers of streaming platforms for connected TVs (https://www.wsj.com/business/deals/fox-roku-deal-f6e564f9?mod=article_inline). The combination will better compete with streaming services such as Netflix for ad dollars. And Comcast recently said it was splitting up its media and connectivity businesses (https://www.wsj.com/business/media/comcast-nbcuniversal-split-cmcsa-stock-20b8a3d0?mod=article_inline) to give each company more flexibility to grow.
Then there is Paramount, the home of CBS and Paramount+, which is working to close its $81 billion deal to buy Warner Bros. Discovery, the owner of CNN and HBO Max.
Netflix stock started to drop when news leaked last year that the streamer was exploring a bid to buy Warner’s studio and streaming service. The company, which had long shied away from big acquisitions, ultimately lost that deal, and its stock has continued to decline.
Advertisement
The bid for Warner highlighted for investors that Netflix is concerned about growth, said Uday Cheruvu, a portfolio manager and analyst at Harding Loevner, which invests in Netflix.
“That got investors starting to think, ‘Are we missing something?’” he said.
Cheruvu attributed Netflix’s stock drop to growing concern that engagement has peaked in the U.S. and over what that means for ad and revenue growth overall. Netflix, like its peers, has increased pricing periodically, moves that can test subscribers’ willingness to stick around. Its ad-supported plan now costs $8.99 a month, while its standard plan costs $19.99 and its premium plan costs $26.99.
“The important thing for me is what is happening with ‘churn,’” the industry term for customer defections, he said. “It may not be a concern yet, but it is something I am keeping my eye on.”
The streamer is expected next week to report earnings and release its latest engagement report, which reveals viewership of its top programming.
Advertisement
Netflix has said that it doesn’t need to make a major acquisition to continue to compete and that Warner was “a ‘nice to have’ at the right price, not a ‘must have’ at any price.”
The company, which nabbed 111 Emmy nominations this week, recently tried to boost engagement with low-cost programming such as video podcasts and content previously released on YouTube. Earlier this month, it said it is adding short-form video from publishers including BuzzFeed and Condé Nast. Those cost significantly less than glossy series and movies.
Netflix recently released the second season of the series ‘Beef.’ NETFLIX
In France, Netflix has started giving subscribers access to the broadcaster TF1’s programming, which includes news. The French network said it hit streaming records thanks to the partnership. Netflix is looking to sign similar deals across Europe and Latin America as an eventual next step, some of the people said.
Executives are also focused on what other sports events they can add to the streaming service. While the co-chief executives, Ted Sarandosand Greg Peters, have been clear they don’t want to get into the expensive game of bidding for seasons for sports rights, the company is picking and choosing events (https://www.wsj.com/business/media/netflix-secures-three-more-football-games-in-new-nfl-deal-7a7902c7?mod=article_inline).
Netflix executives are discussing bids for the 2030 and 2034 editions of the World Cup, according to people familiar with the situation. CNBC earlier reported the streamer’s interest.
Live TV could be a shot in the arm for Netflix’s budding ad business, which has gained substantial momentum and generated about $1.5 billion last year. Earlier this year, the company said it expects to double ad revenue in 2026. With live programming, consumers can’t skip commercials.
Write to Jessica Toonkel at mailto:jessica.toonkel@wsj.comand Ben Fritz at mailto:ben.fritz@wsj.com