Netflix Co-CEOs Greg Peters and Ted Sarandos came prepared. For the last several weeks there have been a litany of reports about how Netflix is approaching the future or trying to chase down YouTube, which still beats Netflix in terms of the amount of hours people spend on the platform. On Thursday’s earnings call, they knew analysts would have questions about them all.
Bloomberg had reported that Netflix was suffering a drop in some of its top shows between Seasons 1 and 2, with a series like “Beef” experiencing the steepest decline compared to its debut. Another report talked about the introduction of FAST channels, or free ad-supported streaming television, to boost engagement, and sure enough, Netflix also announced the acquisition of media content, including videos from IndieWire, that in theory could compose a free tier. These reports all come in the context of Netflix adding video podcasts to its platform and thinking about new ways to define that buzzword “engagement.”
That’s a lot, and it doesn’t even include the big revelation that 300 Netflix titles used generative AI in some way, which we wrote about here.
On the issue of a drop between Seasons 1 and 2, Sarandos flatly downplayed those reports and said that “in the aggregate,” the falloff between Seasons 1 and 2 is actually slightly improved this year compared to last year. To that end, Sarandos denied that there’s any change in strategy moving forward. So no releasing episodes one at a time instead of all at once, or adjusting the gap of time between various seasons.
“Very often we see drop off from Season 1 to Season 2. It’s very common in the industry, but it’s even more so with us, because we launch our shows so big,” Sarandos said. “Our shows tend to start really big where most other places their shows start pretty small and grow from there.” Quite the flex to brag that an audience is so big that it has so many who can lose interest.
What Netflix is trying to stress is of the most importance to them is not just hours spent on Netflix but the “quality” of engagement time. Netflix disclosed as part of its semi-annual engagement report (the company also announced that it’s changing from twice a year to just once a year moving forward) that it had 97 billion hours viewed in the first half of 2026. It’s a new record, but just barely, and you could even say it was flat, as it was just a 2 percent increase from last year.
Peters came ready to defend that incremental growth and explain what he means by quality over quantity. An increase of 2 percent is still an extra 1.5 billion hours, he explained, as well as above the 1.5 percent of growth the year before, and there is not a linear relationship between hours and revenue. The streamer’s recent interest in live programming (remember when Netflix was never going to do live events or God forbid sports?) is a good example. Those shows produce more ads and more revenue, and more people are signing up to watch those shows in particular. It does all that even though live programming is just 1 percent of the company’s overall viewing hours. Conversely, kids programming creates up to 8 percent of viewing hours, but Netflix invests in kids content at the same level it invests in live.
“Better understanding of how we are doing at delivering member value and member love is critical to our business. We get it. We geek out at that improving that understanding,” Peters said.
All of that doesn’t necessarily mean its strategies are going swimmingly. Podcasts are the big push Netflix has made in recent months to increase the quality of engagement, and Netflix oddly did not even include how those shows are doing in its current engagement report. But Sarandos suggested what the introduction of podcasts has done has been to get engagement from members outside of primetime hours, with people tuning in early in the day or in the afternoon, and that podcasts are, predictably, over-indexing on mobile. Who knew a lot of people like to listen to podcasts on their phones?
People also like listening to podcasts for free, and Peters also answered a question about whether Netflix would consider adding FAST channels or a free tier of some kind to better reach those people. He even acknowledged reports that Netflix is in fact experimenting with giving free trials to non-returning new users in some other countries.
For FAST channels though, Peters said a “free offering could make sense in some markets, but we have to be thoughtful about cannibalization of paid tiers.”
“Free is something we’re going to continue to consider, but we have no near term plans to launch something,” he said.
There’s a whole lot of asterisks he gave, but that doesn’t sound like a “no” to us.
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