Netflix: A Faustian Bargain?

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Netflix, that purveyor of flickering shadows and manufactured dramas, finds itself in a curious predicament. A record year – 325 million subscribers, a sum that would have delighted even the most ambitious Roman emperor – yet the market, that fickle beast, has responded with a decidedly unsympathetic shrug. The stock has surrendered a considerable portion of its value, a decline of 41% from its recent zenith. One might almost suspect a deliberate act of sabotage, a whisper campaign orchestrated by the cable companies themselves, though such thoughts are best left to the more imaginative among us.

The company now contemplates a union with Warner Bros. Discovery, a proposition as audacious as it is potentially ruinous. Eighty-two billion dollars, they say. A sum that could, with a bit of judicious spending, fund a small nation, or perhaps a particularly lavish production of Faust. The regulators, naturally, are sniffing around, concerned about the concentration of power. They fear a monopoly, as if the real danger isn’t the sheer banality of much of the content itself. One wonders if they’ve ever attempted to navigate the streaming menus on a Sunday evening.

The stock, currently trading at a price-to-earnings ratio of 31.1, represents a level of affordability not seen in some time. A discount, even, compared to the Nasdaq-100. A trifle, perhaps, in the grand scheme of things, but enough to pique the interest of a discerning investor. It’s as if the market, weary of relentless optimism, is finally demanding a little…value. Though, of course, value is a subjective concept, particularly when dealing with companies that deal in illusions.

A Year of Shadows and Subscriptions

The numbers, as they always are, tell a story. 325 million subscribers. Amazon Prime and Disney+ trailing behind, like lesser deities in the pantheon of streaming. Netflix has achieved dominance through a combination of relentless content creation and cleverly tiered subscription models. The $7.99 tier, supplemented by advertising, is a stroke of genius, or perhaps a cynical acknowledgement of the public’s dwindling capacity for discretionary spending. Either way, it works. They are now masters of the attention economy, and the price of admission is surprisingly low.

The advertising revenue, while still a modest portion of the overall total, is growing at an impressive rate. Two and a half times over the previous year. They’ve discovered, quite brilliantly, that people will tolerate a few commercials in exchange for access to their nightly dose of escapism. It’s a Faustian bargain, of course, but then, most things are.

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The Warner Bros. acquisition, should it come to pass, would be a transformative event. The rights to The Lord of the Rings, Harry Potter, Friends…a veritable treasure trove of intellectual property. Netflix would become, in effect, untouchable. The Department of Justice, predictably, is expressing concern. They fear the creation of a streaming behemoth. As if the real danger isn’t the homogenization of culture, the relentless pursuit of lowest common denominator entertainment.

A Discounted Opportunity?

The market’s skepticism, I believe, is largely attributable to the uncertainty surrounding the Warner Bros. deal. Eighty-two billion dollars is a substantial sum, and the potential for debt financing is considerable. But let us not be overly pessimistic. Economies of scale will eventually kick in, and the combined entity will likely prove to be a formidable force. It’s a gamble, certainly, but one that I am inclined to take.

Based on the company’s 2025 earnings of $2.53 per share, the current price-to-earnings ratio of 31.1 is the lowest it has been in some time. Wall Street analysts, those oracles of questionable accuracy, predict earnings of $3.12 per share in 2026. This places the forward price-to-earnings ratio at a mere 25.1. A bargain, in my estimation.

This, then, is a rare opportunity to acquire a stock with both short-term and long-term potential. A stock that, despite its current travails, is likely to deliver substantial returns over the next three to five years. Especially if the Warner Bros. deal goes through. One might even say it’s a devilishly good investment. But then, what isn’t, in this age of illusion?

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2026-02-25 14:03