Netflix Is Building the Pipes Its Future Competitors Will Use
Netflix's $3 billion ad business depends on programmatic infrastructure that advertisers are already learning to use for their own brand storytelling with generative AI
[Author’s Note: Apologies. Monday’s essay on the MPA and Bytedance was paywalled when the Author’s Note said it was free to all subscribers. The paywall has been removed and you can read the full essay at the site here.]
One core message of Netflix’s Q1 2026 letter to shareholders last week is that the “landscape” of the media marketplace is “more dynamic than ever”. In a section entitled “Our Focus”, management lists a series of factors impacting the business:
“Streaming continues to take view share from linear.
Technology is enabling a massive increase in video content from a wide variety of storytellers.
There are more ways for consumers to connect to the stories they love, including through open content platforms, interactive and gaming services.
‘Premium’ content is increasingly defined by the viewer.
The lines between entertainment on TV and mobile devices are blurring.”
This story has been told in different ways by Netflix management over the course of the last few years. The gist has always been Netflix competes with some mix of YouTube, gaming and social media platforms. The new detail is in the second bullet point about “a massive increase in video content from a wide variety of storytellers.” That phrasing broadly implies both more human creators, and more content from generative AI tools and platforms.
The result is more creators, more content and more platforms are fragmenting both the demand for consuming content on TV and the definitions of “premium content”. Netflix is positioning itself as a success story in subscription streaming—”slightly higher-than-planned subscription revenue”—and ad-supported streaming—projected to grow 2x year-over-year in 2026 to $3 billion.
These twin bets on subscriptions and advertising assume its content and inventory remain valuable to both consumers and advertisers. But the market dynamics it describes in that same section point toward a collision. Advertisers are increasingly turning to AI storytellers to create stories using their brands. It is their own version of premium content, and their natural monetization model is advertising. The implication is that the programmatic pipes for ad buying that Netflix is building are the root of both its future business model and its future competition.
