Netflix Inc. (NASDAQ:NFLX) shares closed Thursday down 0.6% at $73.17, even as the broader S&P 500 gained 1.7%. The decline followed the announcement of a global licensing agreement with AMC Global Media Inc. (NASDAQ:AMCX), valued at $500 million, for the rights to seven series within The Walking Dead franchise, encompassing 371 episodes over a five-year term.
Under the terms of the deal, Netflix will make annual cash payments of approximately $100 million from 2027 through 2030, with an initial payment of about $25 million in 2026. This represents roughly 0.5% of Netflix's projected content spending and about 3.3% of its anticipated advertising revenue for 2026. The nominal cost per episode stands at $1.35 million.
Importantly, the agreement is co-exclusive, meaning AMC retains its own streaming rights, and the licensed rights revert to AMC after each five-year period. This structure allows Netflix to rent a well-established franchise without acquiring the studio outright, a strategy that underscores the importance of scale in the streaming wars.
The market's reaction highlights the premium valuation Netflix commands relative to peers. With a trailing P/E of 22.4x, Netflix's multiple is 46% higher than Walt Disney's (NYSE:DIS) 15.4x and nearly triple that of Comcast (NASDAQ:CMCSA) at 7.6x. This elevated valuation leaves less room for error, making investors particularly sensitive to content spending that may not yield proportional returns.
Lori Conkling, Netflix's vice president of licensing, noted that the original series “continues to attract new fans,” while AMC CEO Kristin Dolan characterized the deal as a “meaningful source of cash flow for years to come.” For AMC, the financial benefit is clear: the company anticipates licensing revenue of $200 million to $225 million in both 2026 and 2027.
Despite the deal's limited financial impact on Netflix’s overall content budget, the company’s advertising business is growing in importance. Advertising is projected to account for roughly 5.9% of revenue in 2026, up from over 3.3% in 2025, and could contribute nearly a quarter of the year’s sales growth. This makes established library content like The Walking Dead more strategically significant than its top-line expense might suggest.
Netflix’s growth is moderating. Q2 2026 revenue rose 13.4% year-over-year to $12.56 billion, but the company’s Q3 2026 forecast points to an 11.7% increase, signaling a deceleration. Operating margins remain steady around 33%, while diluted EPS is expected to grow from $0.80 in Q2 to $0.82 in Q3. The company recorded over 97 billion hours of viewing in the first half of 2026, up 2% from the prior year.
Investors will get a direct peer comparison next week when Disney reports its fiscal third-quarter earnings on August 5. Key focus areas will include streaming profitability and advertising performance, which will help gauge Netflix’s relative valuation.
Risks to the deal include the co-exclusive nature of the rights, varying launch schedules across regions, and the potential for lower viewership or reduced ad demand. Starting in 2027, annual view-hour disclosures will complicate return tracking. Nonetheless, the agreement provides Netflix with another engagement pathway for its subscriber base.
