Supersized media M&A haunts Netflix’s next act

Another way to attract and retain audiences while staying true to its mission would be by embracing episodic one- to two-minute videos. Viewers watch an ad, buy a token or subscribe to see more of a soapy series. Known as micro-dramas, they are already popular in China, where they have generated $9 billion of revenue, surpassing the country's $7 billion in box office ticket sales, according to tech research firm Omdia.

It's a wide open field, after Hollywood tycoon Jeffrey Katzenberg and former tech boss Meg Whitman arrived on the scene too early with their ill-fated short-video service Quibi in 2020. A handful of apps such as DramaBox and ReelShort are gaining popularity now, but no one company controls the market. Younger consumers are flocking to it. Of the estimated 28 million micro-drama watchers, more than half are aged 18 to 34, Activate Consulting reckons.

Done well, it would be a promising area of growth. By 2030, micro-drama revenue will exceed $20 billion, with a third coming from outside China, per Omdia. If Netflix captured, say, $3 billion of the pot, its forecast 42% EBITDA margin would translate into $1.3 billion of extra profit. On the company's two-year average valuation multiple of 30 times, it would reap some $40 billion, or a 13% uplift for the enterprise. Taking creative risks in micro-doses would be a wiser use of capital than jumping the shark with a silly mega-deal.