Netflix bosses cool merger talk and say free channels can wait

Netflix’s top brass used the company’s second-quarter earnings interview to swat back a fresh round of deal chatter, from possible media acquisitions to a Peacock tie-up and free streaming channels.

Co-CEOs Ted Sarandos and Greg Peters addressed Wall Street analysts after Netflix reported mixed second-quarter results and forecast a modest cooling in third-quarter growth. According to Deadline, the update sent Netflix shares down nearly 9% in after-hours trading.

Sarandos was asked about Lionsgate and NBCUniversal, both seen as possible players in the current media consolidation push. He told analysts Netflix still has several routes to grow, including producing, licensing and partnering, and said the company keeps looking for the best use of its resources.

Then came the line aimed straight at the M&A rumor mill: “We’re primarily builders, not buyers,” Sarandos said, adding that Netflix has a “very high bar” for any major acquisition.

Deal talk still hangs over Netflix

The question comes after Netflix’s pursuit of Warner Bros. Discovery became a major test of how far the streaming giant might go in buying its way to growth. Deadline reported that Netflix later abandoned that bid, with Paramount taking the prize while Netflix collected a $2.8 billion breakup fee.

Netflix’s stock has also been under pressure. Deadline reported that shares have fallen more than 40% over the past year and did not bounce back after the Warner Bros. Discovery outcome.

That has left investors asking whether Netflix could look elsewhere as rivals bulk up or seek new partners. Sarandos’ answer was meant to lower the temperature: Netflix may buy if the bar is met, but he said its record shows big acquisitions are not its usual playbook.

Peters points to TF1 partnership

Peters was also pressed on Netflix’s partnership with French broadcaster TF1, which he helped steer and which went live in France last month. He said the early performance has pleased the company, while cautioning that the arrangement is still new.

According to Peters, Netflix members have long shown they want a broader entertainment offering. He said the TF1 deal is one more way for the company to expand what subscribers can watch.

Peters said Netflix, with a global footprint of 330 million households, believes it can help producers and services get more value from their programming by putting it in front of larger audiences.

Asked whether similar deals could follow, including amid reports about Peacock potentially seeking a partnership with Netflix, Peters did not announce anything. He said Netflix would consider additional agreements if they worked for members, partners and Netflix itself.

Netflix is not known for relying heavily on bundles, though it is included in Comcast’s Xfinity StreamSaver package.

No quick jump into FAST channels

Peters also addressed speculation that Netflix could launch FAST channels, a free, ad-supported streaming model already used by many competitors. Recent reports have suggested Netflix could use third-party programming or its own library to create such channels, potentially helping advertising revenue and subscriber growth.

Peters said a free product could make sense in some markets, but Netflix would have to weigh the risk of pulling customers away from paid plans. He said the company would also need the right product, clear differences from paid tiers and a scaled advertising business in any country where it tried the model.

Netflix only recently expanded its ad tier beyond its original 12 markets, according to Deadline, and Peters said that business still needs time to develop.

His bottom line was plain: Netflix will keep looking at free options, but Peters said there are “no near term plans” to launch one.

This story draws on original reporting from Deadline.