Ted Sarandos told investors Thursday that, despite Netflix’s $83 billion bid for Warner Bros. losing out to Paramount, the bidding war was an exercise in investment discipline for the streamer.
“We really built our M&A muscle,” the Netflix CEO said. “We tested our investment discipline, and when the cost of this deal grew beyond the net value to our business and to our shareholders, we were willing to put emotion and ego aside and walk away.”
“Doing it at this level, I think, sets up our teams to understand that that’s the expectation of them day to day,” he added.
The Netflix CEO reiterated his line that the bid would have been a nice to have, but not a need to have for the streamer.
Sarandos noted that Netflix has largely been builders not buyers, so the deal was a learning moment for the streamer in how they could execute a deal of this size. Though Netflix lost out on WB, they did walk away with a $2.8 billion break-up fee, which helped boost its earnings growth for the latest quarter.
“As you can see from our Q1 results, we did not lose focus,” he said. “We were very encouraged by the team’s ability to stay focused on our core business while exploring this opportunity as well.”
The streamer’s profit grew 82% to $5.23 billion, or $1.23 per share, in its first quarter as revenue climbed 16% to $12.3 billion, driven by growth in subscribers and ads revenue, as well as higher pricing. Netflix, which no longer discloses its subscribers on a quarterly basis, last disclosed a total of 325 million globally.
“We met a bunch of great people in WBD during this process, so if there’s any emotion in all of this, it was the disappointment of not getting to work with those folks,” Sarandos added.
The Netflix CEO clarified though that the streamer came away from the bidding war with no change to its capital allocation philosophy. Sarandos noted that M&A deals remain a tool to help Netflix achieve its goals, but the streamer approaches it with discipline and discernment.
Netflix has since acquired Ben Affleck’s AI production startup InterPositive in a deal valued at up to $600 million. As the company looks toward continued growth, Netflix executives stay committed to delivering more entertainment, enhancing its technology in areas like generative AI and vertical video and improving monetization through pricing and its ads business.
