By Jakub Rochlitz
In the first week of earnings season, several tech companies will report alongside Wall Street’s big banks. One of them is Netflix, which began the year with a long fight against Paramount for a merger with the famous Warner Bros. studio — a fight it ultimately lost. But why might this eventually be good news for investors? How is AI affecting your favorite series, and what can be expected from the quarterly results?
The most important news of recent months for Netflix was the termination of merger talks with Warner Bros. Discovery. The deal, which would have fundamentally reshaped the streaming business, ultimately fell through. For investors, however, this is rather good news. Netflix retains its independence and agility, avoiding a complex integration and the burden of massive Hollywood assets and studios. Additionally, it received a $2.8 billion breakup fee from Paramount for terminating the negotiations. The stock responded by rising more than 40 percent.
Pricing, AI, and the Ad-Supported Tier
Netflix is currently more expensive than Disney+ or Amazon Prime. Netflix defends this price leadership with a broader content offering and brand strength, but after a wave of 10 to 15 percent price hikes across regions last year, it will have to be careful with further increases to avoid deterring customers.
Meanwhile, artificial intelligence is quietly penetrating every part of the streaming business. Netflix uses it for routine functions ranging from app personalization and ad targeting optimization to the actual production of movies and series. An example is last year’s film Rivals 2, where producers used AI for the digital de-aging of actors. Management openly states that it is betting on AI across the entire platform. Only the results will show whether this investment is beginning to manifest in costs and efficiency.
The ad-supported subscription, launched in November 2022, remains a small but rapidly growing part of the company. After a series of price hikes for premium tiers, the advertising layer serves as a natural safety net. Users who do not want to pay more for a monthly subscription are switching to the cheaper ad-supported variant, bringing Netflix a new source of revenue. The development of this segment will be among the most watched figures in the quarterly report.
The first results after the collapse of the Warner Bros. merger are a symbolic test for Netflix. Can it convince the market that it does not need a major acquisition for its growth and that its model — content, advertising, and pricing power — will hold up even in an economically unpredictable environment? We will find out the answer on Thursday after the market closes.
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