Why Netflix Needs a Merger — and Soon

by Roger Scott | Apr 20, 2026

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I’ve been watching Netflix closely — not just their shows, but their business. And the earnings they just posted confirmed what I’ve been saying for a while now: Their model has serious structural problems.

I’m a heavy Netflix (NFLX) user, probably 15-20% of everything I watch is on their platform. I love the foreign films they’ve been adding. But being a fan doesn’t mean ignoring the reality of what’s happening underneath the surface.

The stock fell about 10% after earnings. That kind of drop isn’t noise — it’s the market sending a message. Subscriber growth is slowing, pricing power is weakening and the content budget keeps ballooning in ways that don’t translate into sustainable returns.

Unsustainable Spending

One of the biggest issues is how much they’re paying for content that doesn’t fundamentally move the needle. Shelling out $100 million for a stand-up special might generate headlines, but it doesn’t justify itself in long-term subscriber growth. At some point the economics stop making sense.

They need to shift toward scalable original content that builds durable value instead of relying on splashy once-and-done projects. Netflix used to excel at inventing a content style that no one else had. Now they need a fresh reinvention — something that aligns with where the industry is headed instead of where it was 10 years ago.

The Tesla Parallel

What’s happening now reminds me a lot of what I saw years ago with Tesla (TSLA). I said back then that their business model wasn’t going to hold without big structural changes or a larger partner stepping in.

They built something groundbreaking, but the economics beneath it didn’t support long-term independence.

Netflix is in a similar position. They created a brilliant concept, dominated early and set the standard. But the competition is different now, the margins are different and the cost of keeping up is crushing. They’ve backed themselves into a corner where incremental tweaks won’t fix the trajectory.

The leadership shift happening at the top only underscores the need for a bigger strategic reset. Netflix would benefit enormously from the resources, financial stability and diversified content ecosystem that come with being part of a larger media or tech conglomerate.

A merger isn’t just an option — it’s increasingly the most logical path forward.

For traders, keep an eye on Communication Services (XLC) and Consumer Discretionary (XLY) names. Netflix’s struggles ripple through those sectors, and merger speculation could create meaningful volatility.

I hope that helps!

Roger Scott
Roger Scott Trading

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