Netflix Inc (NASDAQ: NFLX) plans a broad theatrical release for the sequel to its record-breaking film "KPop Demon Hunters." CEO Ted Sarandos announced the strategy at the 2026 Bloomberg Screentime event, signaling a shift toward traditional cinema partnerships to address growth concerns.

The original film, produced by Sony Group Corp (NYSE: SONY), became Netflix’s most-watched movie with 325.15 million views in its first 90 days. This significantly outperformed the second-place title, "Red Notice," which logged 230.9 million views. Despite this digital dominance, Sarandos stated that current growth rates are insufficient, prompting the pivot to theatrical distribution for high-profile titles.

Strategic Shift in Distribution

The decision follows a limited two-day theatrical run of the first film’s sing-along version, which grossed approximately $19 million. Notably, this revenue was generated without participation from AMC Entertainment Holdings (NYSE: AMC), which had previously boycotted Netflix over disputes regarding the 45-day exclusive theatrical window. By engaging with theater chains, Netflix aims to capture box office revenue while maintaining its streaming subscriber base.

Sarandos noted that Netflix was unprepared for the consumer product demand generated by the first film. A theatrical rollout for the sequel, expected in 2029, could improve licensing opportunities and potentially secure a more favorable box office revenue split than previous arrangements.

Upcoming Theatrical Slate

Netflix has scheduled several titles for theatrical release, varying in window duration:

What the Numbers Show

The divergence between the first film’s massive streaming viewership (325.15 million views) and its modest limited theatrical gross ($19 million) highlights the challenge of monetizing digital hits in physical venues. While the theatrical run demonstrated untapped potential, it occurred without major chain support. The upcoming strategy relies on balancing early theatrical exclusivity against the risk of delaying streaming access, which could dampen initial subscriber engagement for the sequel.

Risks to Streaming Model

For a company dependent on recurring subscription revenue, prioritizing theatrical windows introduces execution risk. If the sequel plays exclusively in theaters before hitting Netflix, the platform may lose immediate demand from subscribers eager for content. Netflix must offset lower early viewership with strong repeat consumption and theatrical earnings. The final balance between these channels remains undefined as the company refines its approach for the 2029 release.

Netflix Inc (NASDAQ: NFLX) co-CEO Ted Sarandos acknowledged that the streaming giant is not growing as fast as desired, stating the company is working to accelerate this move. The comments come as Netflix prepares to report third-quarter results next month, following mixed second-quarter performance where revenue missed analyst estimates while earnings per share beat expectations.

Sarandos spoke at Bloomberg’s 2026 Screentime event, highlighting that overall viewership rose only 2% year-over-year in the first half of 2026. He emphasized that live sports and content are central to the growth strategy and are currently generating "a lot of signups," reducing subscriber churn and aiding advertising revenue. "Overall, we're not growing as fast as I want us to, and we're working on making that move faster," Sarandos said.

Live content economics

Netflix allocates approximately 5% of its annual $20 billion content investment toward live programming. Despite this significant financial commitment, live content currently contributes only around 1% of total viewership. However, Sarandos noted that this segment is critical for expanding the overall subscriber base, suggesting a strategic trade-off between immediate viewership share and long-term user acquisition.

Warner Bros. Discovery bid strategy

Sarandos also addressed the decision not to pursue a higher bid for Warner Bros. Discovery (NASDAQ: WBD), which was ultimately acquired by Paramount Skydance (NASDAQ: PSKY). He stated there were no regrets regarding the pricing strategy, noting that a higher bid might have pushed returns into "negative territory."

"We won the deal at some point, so we think we priced it right — at our scale," Sarandos said. "That was the top price point where I thought we could return value to our shareholders." He added that the potential streaming threat posed by the Paramount-WBD combination remains unclear, describing it on paper as "one and one."

What the numbers show

The data reveals a divergence between capital allocation and immediate viewership impact. While live programming consumes 5% of the $20 billion content budget, it accounts for only 1% of viewership. This indicates that Netflix is prioritizing strategic subscriber acquisition and churn reduction over immediate audience share gains from live events. The modest 2% year-over-year viewership growth in H1 2026 underscores the pressure on the core business to deliver faster expansion, aligning with Sarandos’ admission that current growth rates are inadequate.