Netflix's CEO Just Admitted Growth Isn't Moving Fast Enough

Netflix Inc. (NFLX, Financials), the streaming entertainment company, is growing more slowly than Co-CEO Ted Sarandos would like, putting greater attention on whether its investment in live programming can improve subscriber acquisition and retention.

Sarandos said Netflix spends about 5% of its $20 billion annual content investment on live programming, even though those programs generate only about 1% of total viewing.

That gap could look inefficient based on viewing hours alone. Sarandos, however, said live programming generates substantial signups and helps reduce subscriber churn, making its financial value dependent on customer acquisition and retention rather than simply audience share.

The comments come as Netflix faces questions about engagement and competition. HSBC recently downgraded the shares to Hold from Buy, citing concerns about engagement and YouTube's gains, while Wells Fargo downgraded Netflix to Underweight. Deutsche Bank took a different view, upgrading the stock to Buy after second-quarter results.

Sarandos said the business remains healthy despite his dissatisfaction with the pace of growth.

The next test will be whether Netflix's live programming can produce enough incremental subscriptions and lower churn to justify a growing share of its content budget.