Netflix: A Most Amusing Diversion

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Netflix, one observes, has managed to disrupt the very notion of entertainment – a feat as audacious as it is profitable. To identify a craving in the public soul, and then to satisfy it with a relentless stream of moving pictures, is a triumph of commerce, though one shudders to think what the muses might say. It is, after all, a rather vulgar pursuit, this pandering to the masses, but undeniably effective.

The stock itself has climbed a respectable 79% in the last five years – a performance that, while not quite scandalous, is certainly… agreeable. The question, of course, is not merely where Netflix is, but where it intends to be. A destination, like a reputation, is a most delicate thing.

A Growth Most Splendid

Netflix’s expansion has been, if one dares say, rather splendid. Revenue totaled $25 billion in 2020, and projections suggest $45.1 billion by 2025 – a growth rate of 12.5% compounded annually. A tidy sum, to be sure. Management, with a boldness that borders on the theatrical, anticipates $80 billion by 2030. Predicting the future, naturally, is a fool’s errand, but one can reasonably expect continued expansion, even if at a slightly less frenetic pace.

The introduction of advertising, a concession previously deemed beneath them, proves a most astute maneuver. To embrace the vulgarity of commerce after years of proclaiming its disdain is a lesson many a proud company might heed. Digital ad sales are predicted to more than double by 2025, and the ad-supported tier already boasts 190 million monthly active viewers. It appears the public is quite willing to tolerate a few commercials in exchange for their diversions. A most pragmatic arrangement.

The acquisition of subscribers continues apace, reaching 302 million at last count. As one of their CEOs noted, there remain “hundreds of millions” yet to be captivated. It seems the world is still eager to be entertained, or at least distracted. A comforting thought, in these turbulent times.

The company’s foray into sports, live events, games, and podcasts suggests a desire to be all things to all people. A noble ambition, though one suspects even the most versatile of companies has its limits. The pending deal with Warner Bros. Discovery is, of course, a gamble – a rather large one, at that. Should it come to fruition, it will undoubtedly expand Netflix’s reach, but one must always be wary of overextension. A glittering empire built on sand, after all, is a most precarious thing.

Scale: The Only Decent Ornament

Building a successful streaming service is, one must concede, no easy feat. It requires vast investments in content and technology – a constant drain on resources. But Netflix, as a first mover, has achieved a scale that is unmatched. And it is reaping the rewards. Their operating margin reached 28% in Q3 2025, up from 20% five years prior. The outlook for 2030 is even more impressive: a projected operating income of $30 billion and a margin of 37.5%. Scale, it seems, is the only truly decent ornament.

Should the Warner Bros. Discovery deal close, scale will become even more critical. And, as is always the case with such transactions, management promises synergies. Time, of course, will tell if these promises are fulfilled. Optimism is a charming quality, but one must always temper it with a healthy dose of skepticism.

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Risks and Valuation: A Most Unpleasant Truth

Of course, even the most successful of companies is not immune to risk. Rising content costs, fierce competition from rivals such as Alphabet’s YouTube, Disney+, Amazon Prime Video, and Apple TV – these are all challenges that Netflix must overcome. Each contender possesses the resources to make things… difficult. To believe one can simply dominate the entertainment landscape is a delusion of the most extravagant sort.

And then there is the matter of valuation. Netflix stock is not cheap, trading at a price-to-free cash flow multiple of 43.5. While the company is likely to be larger, with more subscribers, revenue, and earnings in five years, one cannot help but wonder if the stock will outperform the market. It is, after all, a rather high price to pay for a future that is, at best, uncertain. To expect perpetual growth is to ignore the fundamental laws of economics – and the inherent capriciousness of the public.

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2026-01-15 22:22