Netflix: The counterpositioning company
Netflix Q2FY26 earnings analysis
Sources: Netflix Chief on the Future of Hollywood
Let me start with where I stand.
I have no doubt about this management team. None.
Netflix has always been a counter-positioning company. That is the whole story of the business. Ted Sarandos, the co-CEO, laid it out himself in the interview I’ve embedded above on the future of Hollywood.
Watch it first if you can. It covers a lot of ground. His view that AI will not disrupt creativity, that AI is really about consistency, not imagination. They are long human. He talks about Netflix House, the 100,000 square foot spaces for people to hang out. Not a Disneyland. Serve wide range of audience, not niche and many more. It is worth your time, and it captures exactly why I trust this team.
Here is the pattern he described. In the DVD days, the enemy was Blockbuster and its video stores. What did people hate? Late fees. So Netflix became the no-late-fee company. A clean counter-position.
Then streaming arrived and the enemy became traditional TV. What did people hate about TV back then? Advertising, and waiting a week for the next episode. So Netflix launched with no ads and everything at once. Another clean counter-position.
And now watch how it evolves. Sarandos framed Netflix as a choice company. Give people options. Well, one option customers actually wanted was a lower price with ads. So Netflix built the ad tier. Not a reversal. Just the same choice philosophy, extended.
That is why I will not cover Netflix deeply as a company. The thesis is simple. Economies of scale, at true scale.
And let me be precise about what that scale buys, because people get this wrong. Netflix does not get cheaper in price. Price goes up over time. What gets cheaper is the value. The quality you get for every dollar you pay.
At true scale, Netflix spends more on content than anyone, then spreads that spend across the biggest member base in the world. So the cost per member falls even as the catalog grows. That shows up where it matters most: cost per hour of entertainment.
Bill Ackman has laid this out plainly. On a per-hour-of-entertainment basis, Netflix is the cheapest option out there. Management said the same thing this quarter. A US subscriber pays the least per hour of viewing of any comparable streaming service. In some cases a competitor costs twice as much per hour.
That is the moat. Most content, biggest audience, lowest cost per hour of joy delivered. Nobody else can match the math.
So this note is not a deep-dive on the business. It is a read on the quarter, the worries, and the price.
Let me walk through what actually happened, what the sell-side is worried about, and whether the price makes sense.
