Netflix’s Bold Strategy: Why the Warner Bros. Deal Walkout and AI-Powered Growth Define Its Future

Netflix Co-CEO Greg Peters on the Warner Bros. Deal Walkout: "We Size the Opportunity Based on Value Back to Our Members"

Netflix’s decision to abandon its $82.7 billion bid for Warner Bros. Discovery in February 2026 marked a strategic pivot for the streaming giant, one that underscored its commitment to prioritizing long-term member value over aggressive expansion. In an interview with TIME published May 17, Netflix co-CEO Greg Peters explained the rationale behind the walkout—a move that came after Paramount Skydance’s higher $111 billion offer—and outlined how Netflix plans to sustain growth through content creation, AI-driven innovation, and disciplined investments in live sports and events.

A Deal That Never Fit the Strategic Vision Netflix initially pursued Warner Bros. Discovery as a potential catalyst for growth, drawn to its vast library of intellectual property, including HBO’s brand and franchises like Batman and The Wizard of Oz. However, Peters emphasized that the company’s decision-making hinges on whether an acquisition delivers measurable value to its 325 million global paid subscribers.

“We thought of Warner as a really exciting opportunity,” Peters told TIME. “But just like in all the other cases, we size the opportunity based on the value back to our members in the business. And when someone’s willing to go with a number that’s bigger than that value to us, we say, ‘Great, good luck, and Godspeed.’”

The termination of the deal—triggering a $2.8 billion fee—was not a sign of weakness. In 2025, Netflix reported $45.2 billion in revenue, a 16% increase from the prior year, and continued to expand its subscriber base. Peters framed the walkout as a disciplined choice, one that aligned with Netflix’s history of rare but strategic acquisitions. “If a similar opportunity came up—where, again, we did the work and we thought it made sense—then it would be our responsibility to go pursue something that we thought was the right thing to do,” he said. “That doesn’t happen often; these are pretty rare occurrences.”

Advertising as a Growth Engine One of Netflix’s most significant shifts in recent years has been the launch of its ad-supported tier in 2022, which Peters described as a “core growth engine.” The move allowed Netflix to offer a lower-priced subscription option while expanding its audience reach. By 2025, the company had fully transitioned to its own ad stack, enabling greater innovation in ad formats—particularly those blending brand narratives with Netflix’s original content.

“Our real core thesis is that we get to bring what is amazing about digital advertising—effectiveness, measurement, targeting, personalization—into the creative space of television,” Peters explained. He highlighted examples like Wendy’s ads integrated into Wednesday, demonstrating how brands could align their messaging with Netflix’s original titles. AI tools, he noted, would further simplify this creative alignment, making it easier to tailor ads to specific shows or genres.

AI and Content Creation: A Strategic Partnership Netflix’s recent acquisition of Ben Affleck’s AI filmmaking company, InterPositive, reflects its broader investment in artificial intelligence to enhance content creation. Unlike speculative uses of AI—such as generating entire films from prompts—Netflix is focusing on integrating AI into the post-production process. This includes tools for shot transformation, wire removal, and even generating missing camera angles based on existing footage.

“It’s not about some person sitting there with a prompt and saying, ‘Give me an amazing two-hour movie,’” Peters clarified. “It’s embedded in the process. Creators, directors, and traditional shooting methods remain central, but AI augments the workflow—like changing a character’s shirt color or recreating a lost shot with fidelity.”

Competing with YouTube and Amazon Netflix is also doubling down on partnerships with high-profile creators, including podcasters, to compete with platforms like YouTube. Peters framed this as an evolution of Netflix’s long-standing strategy of collaborating with top storytellers, now extending to digital-native creators.

“We almost see video podcasts as an extension of the talk show on television,” he said. “We want to give our members the opportunity to see those things on Netflix, and our monetization per hour is better than YouTube’s. So we think we should compete for those top storytellers.”

Live Sports and Events: A Shared Experience Live sports and events remain a key pillar of Netflix’s strategy, with the company investing in high-profile broadcasts like the NFL’s Christmas games, the Canelo Álvarez fight (which drew 41 million global viewers), and the 2026 World Baseball Classic. Peters emphasized that live programming is not just about sports but about creating shared cultural moments—whether through concerts like BTS: The Comeback Live or baseball events like MLB Opening Night.

“We think there’s an opportunity to extend the kind of entertainment we give to our members,” he said. “These are quite big moments where there’s real value in the shared experience.”

Pricing and Member Value Netflix’s approach to pricing reflects its focus on delivering incremental value to subscribers. Rather than assuming a ceiling on what consumers will pay, the company monitors engagement, retention, and churn to determine when to adjust subscription tiers.

“Our job is to add more value to the offering we have to our members,” Peters stated. “And then our members tell us when we’ve done that. We look at a bunch of different signals—around engagement, retention, what plans they’re taking—and we occasionally ask them, ‘Hey, please pay a little bit more.’”

Differentiation in a Crowded Market Netflix’s competitive edge lies in its ability to excel in both creative and technological domains—a balance that competitors struggle to replicate. Traditional studios like Disney and Warner Bros. May dominate content creation, while tech-driven platforms like YouTube or Amazon may lead in product experience. Netflix, however, seeks to be equally strong in both areas.

“They can be as good as us in one,” Peters said. “But being as good in both is tough.”

As Netflix navigates a rapidly evolving media landscape, Peters’s comments underscore a clear philosophy: growth will come not from reckless expansion, but from disciplined investments in content, technology, and member-centric innovation.

This article is based on an interview with Netflix co-CEO Greg Peters published in TIME on May 17, 2026.