Netflix’s biggest competition is social media and that’s a fight it won’t win

  • Netflix’s latest financial results reveal that while it is a popular source of entertainment, in most markets folks are spending their time on social media.
  • In most markets, YouTube is where the majority of time is spent watching content.
  • The firm says that by attracting improving its content, expanding its offering and catering to fandoms, it can tap into “a $600B+ opportunity revenue market”.

On Tuesday, Netflix released its financial report for the final quarter of 2023. Despite the outcry over paid-sharing, the streaming behemoth saw its revenue grow 12 percent compared to Q4 2022.

It was good news across the board. Globally, memberships are up 12.8 percent to 260 million, but most importantly, there was some movement in the US and Canadian markets. In the third quarter of 2023, growth in those markets had stopped, so a three percent growth spurt is probably very welcome.

Unfortunately in the Asia-Pacific region, Netflix saw its average revenue per user decline 5 percent despite higher revenue and more members joining the platform. Elsewhere there was growth to be found in all markets as regards both revenue and memberships.

However, Netflix, and other streaming platforms face competition from an unlikely source – social media.

As shown in the graph below, video-sharing platforms such including YouTube account for the most watch time in multiple markets.

Netflix isn’t even as concerned about the likes of Disney, Warner Bros. Discovery or other production houses.

“We’re not interested in acquiring linear assets. Nor do we believe that further M&A [mergers and acquisitions] among traditional entertainment companies will materially change the competitive environment given all the consolidation that has already happened over the last decade (Viacom/CBS, AT&T/Time Warner, Disney/Fox, Time Warner/Discovery, etc.). But we expect our industry to remain highly competitive given: the franchise strength and programming expertise within traditional entertainment companies; ongoing heavy investment from large tech players like YouTube, Amazon and Apple; and broader competition for people’s time, including gaming and social media (TikTok, Instagram etc.). It’s why continuing to improve our entertainment offering is so important, and as many of our competitors cut back on their content spend, we continue to invest in our slate,” Netflix told investors.

As outlined above, Netflix has 260 million subscribers. In comparison, YouTube boasts an estimated 462 million users in India alone. All tolled, YouTube has an estimated 2.4 billion users worldwide which is simply not something Netflix can ever hope to achieve purely because it’s a pay-to-play service.

As detailed by Statista, video-sharing platforms, and platforms that incorporate video sharing well were among the most used social media platforms of 2023.

Netflix rightly recognises that growing its platform is going to require tempting folks to spend time on it, but that’s a tough fight to win. The fact of the matter is that folks only have so much free time and investing hours into a movie or series is a tough ask unless it’s a global or even local phenomenon.

Can Netflix offer that up 12 months of the year? We’re not so sure, but Netflix is.

“If we continue to execute well and drive continuous improvement — with a better slate, easier discovery and more fandom — while establishing ourselves in new areas like advertising and games, we believe we have a lot more room to grow. It’s a $600B+ opportunity revenue market across pay TV, film, games and branded advertising — and today Netflix accounts for only roughly 5% of that addressable market. And our share of TV viewing is still less than 10% in every country,” the firm told its investors.

We’re not sure what the play is here because unfortunately for Netflix, it’s created a hydra it no longer has control of.

Many users around the world have grown weary of the endless requirement for yet another subscription to unlock the content they want to watch. The good news is that content rights holders and studios are remembering they can license content out to other platform operators.

This doesn’t necessarily mean that the likes of Warner Bros. Discovery will be shuttering Max anytime soon. There is potential for Netflix to hoover up licensing deals and attract those who are tired of running multiple subscriptions just because of the size of its catalogue. That was what attracted folks to streaming on Netflix in the first place after all.

But the times they are a changin’ because these days content published to YouTube, TikTok, Reels and other social platforms can be as, if not more, entertaining than watching something on Netflix. Creators aren’t just voices on a single channel on YouTube, their content pervades every corner of the internet and we’d argue that names like MrBeast are as popular or more popular than the star of a Netflix Original.

The war for your time is now on and until streaming platforms offer a free tier, they’re fighting a losing battle against social media.

[Image – Souvik Banerjee on Unsplash]


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