Netflix Inc. (NFLX) is shaking up its playbook with an $82.7 billion all-cash bid for Warner Bros. Discovery Inc. (WBD). It's a massive departure from the streaming company's traditional approach of building content rather than buying it, and co-CEO Greg Peters has some interesting thoughts on why.

YouTube: The Competitor That Matters

During a Thursday interview with Stratechery's Ben Thompson, Peters got candid about who Netflix really competes against. Spoiler: it's not Disney+ or HBO Max. It's Alphabet Inc (GOOGL) (GOOG)-owned YouTube.

"YouTube is the formidable competitor. They drive a lot of hours, they have a great model," Peters said in the interview transcript.

The logic here is pretty straightforward. Netflix thinks about competition in terms of time and attention—basically, what are people watching when they're not watching Netflix? And increasingly, the answer is YouTube. That viewership dominance played a significant role in pushing Netflix toward the Warner Bros. acquisition strategy.

Why Drop $83 Billion on Warner Bros.?

Peters laid out three main reasons the deal makes sense: theatrical distribution capabilities, expanded production infrastructure, and the HBO brand's premium reputation. "We started building the value case for this and we got to impressive numbers," he explained.

Here's the pitch: Warner Bros. has this massive content library that's currently "being underexploited," according to Peters. Netflix's global reach could squeeze significantly more viewing out of that catalog. Think classic films, HBO series, and the Warner Bros. vault getting distributed to Netflix's 280-plus million subscribers worldwide.

The deal structure shifted this week. Netflix moved to an all-cash offer of $27.75 per share on Wednesday, replacing an earlier mixed proposal of $23.25 in cash plus $4.50 in Netflix stock.

Making the Regulatory Case

Peters is already laying groundwork for regulatory approval, arguing the deal should be viewed as "really a vertical deal" because of the theatrical and production components. His point: Netflix isn't just buying a competitor's streaming service—it's acquiring production capacity and distribution channels.

The numbers support some of that argument. HBO has roughly 100 million subscribers, and most of them already subscribe to Netflix. So rather than eliminating competition, Netflix argues it's creating a complementary offering.

And then there's the YouTube angle again. Peters emphasized that YouTube isn't just user-generated cat videos anymore. They're producing NFL games, broadcasting the Oscars, and securing deals with major UK broadcasters including BBC, Channel 4, and ITV. The competitive landscape is broader than traditional streaming services.

NFLX Price Action: Netflix shares were up 2.81% at $85.88 at the time of publication on Friday.