Netflix Inc. NFLX is setting its sights on a larger portion of the TV market, seeing Alphabet Inc.’s GOOG GOOGL YouTube as both a competitor and a collaborator.
What Happened: During its second-quarter earnings call, Netflix co-CEO Ted Sarandos responded to a question from Morgan Stanley’s Ben Swinburne about the company’s strategy to compete with YouTube for more passive home entertainment engagement.
Sarandos said that Netflix and YouTube together make up about 50% of all streaming to TVs in the U.S. citing Nielsen data from June.
“So our two services — us and YouTube represent about 50% of all streaming to the TV in the U.S. and we use the U.S. only because that’s where we have the data. So really what we’re focused on here is focusing ourselves on that other 80% of total TV time that isn’t going to either us or YouTube,” he said.
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While recognizing competition with YouTube in certain areas, Sarandos also underscored a mutualistic relationship. He pointed out that Netflix’s popular teasers, trailers, and behind-the-scenes clips perform well on YouTube, indicating that the two platforms “feed each other pretty nicely.”
Greg Peters, another Netflix executive, stated that Netflix meets a unique need for consumers and creators by offering high-quality movies and TV shows that generate significant viewership and fandom. “It’s really hard to imagine how that kind of big creative bet would happen and be possible within YouTube’s model.”
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Why It Matters: Netflix had a successful second quarter. The company reported a revenue of $9.56 billion, a 16.8% increase year-over-year, beating the Street consensus estimate of $9.53 billion, according to data from Benzinga Pro.
The company also made a significant move by discontinuing its most affordable ad-free subscription plan in the U.S. and France as it stated that “ad revenue is growing nicely and is becoming a more meaningful contributor” to its business.
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