Netflix Is Not Interested in ‘Linear Assets,’ Says More Mergers and Acquisitions Won’t Help

Netflix is not interested in acquiring “linear assets.” The streaming giant declared as much during its 2023 fourth quarter letter to shareholders on Tuesday.

In addition to announcing that the company will not be acquiring linear networks, Netflix noted that it does not believe the recent trend of mergers and acquisitions in the marketplace will “materially” change the current competitive environment. The shareholder letter called out 2019’s Viacom and CBS merger, AT&T’s 2018 acquisition of Time Warner, Disney’s 2019 acquisition of 21st Century Fox and 2022’s merger between Time Warner and Discovery by name.

“As our competitors adjust to these changes, it’s logical to expect further consolidation, particularly among companies with large and declining linear networks,” the shareholder letter reads.

Instead of the strength of these merged companies, Netflix noted that the fiercest competition in the industry moving forward will come down to “franchise strength and programming expertise” within traditional entertainment giants. The company also pointed to heavy investments from tech companies such as YouTube, Amazon and Apple as another competitive factor as well as the larger overall competition for people’s time. To that end, Netflix highlighted the rise in video games as well as the power of social media apps such as Instagram and TikTok.

To back its bet on franchises and programming, Netflix pointed to its own investment in original content over the years. Since the streamer’s global launch in 2016, content amortization is up nearly three times, from $4.8 billion in 2016 to $14.2 billion in 2023. Operating margins have also been steadily increasing as has free cash flow. By the company’s own estimates, operating margins have increased from 4% to 21% during that same time period, and free cash flow has shifted from negative $3.3 billion in 2019 to positive $6.9 billion in 2023.

Though Netflix is not keen around acquiring any linear assets at present, it has benefited, albeit indirectly, from linear. Some of the streamer’s biggest titles, including “You,” “Lucifer,” “Designated Survivor” and “Manifest,” originally aired on either broadcast or cable networks.

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