Streaming wars: YouTube, Netflix battle for control over the television set

 

By John Koblin

 

For many years, Netflix executives bristled at the notion that the company really had a rival. Not Hollywood powerhouses like Disney, nor tech giants like Amazon. Instead, Reed Hastings, the company’s co-founder, insisted at one point that Netflix competed with people’s desire to socialise, or to go to sleep.

 

But there’s no hiding from YouTube.

 

Netflix and YouTube are increasingly locked in a fierce battle for control over the television set, a rivalry that even Netflix’s executives can no longer deny.

 

“That was more of a fun narrative than it was, you know, the brutal truth,” Jason Kilar, the founding chief executive of Hulu and a former chief executive of WarnerMedia, said about those past comments. “The brutal truth is that YouTube is indeed the biggest competitor of Netflix at this point.”

 

The rivalry signals how the streaming wars have entered a new phase. For years, increasing subscriber numbers to their streaming services was the ultimate goal for media companies. Now, those companies are trying to increase the amount of time viewers spend on their service. On that score, YouTube and Netflix stand above the competition.

 

The two accounted for 20 percent of all television viewing time in the US in May — 12.5 percent for YouTube, 7.5 percent for Netflix, according to Nielsen. The next closest streaming competitor is Disney, whose multiple streaming services (Disney+, Hulu, ESPN+) together accounted for 5 percent of TV time in May, Nielsen said.

 

And YouTube’s lead keeps getting wider. Two years ago, YouTube’s share of TV time was roughly half a percentage point higher than Netflix’s — now it is five percentage points.

 

Their strategies for success are very different, but, in ways large and small, it’s becoming clear that they are now competing head-on. Top executives at both firms are beginning to mention each other in public more, sometimes dismissively. And the companies are veering into each other’s turf, with Netflix executives showing an increased appetite for signing up creators who otherwise call YouTube their home — and trying to explain why their business model would be better for them.

 

“Who is in the biggest fight around scale and eyeball aggregation? YouTube and Netflix,” said Ben Silverman, the chairman of Propagate, a production company, and a former chairman of NBC Entertainment.

 

Representatives for Netflix and YouTube declined to comment for this article.

 

Both firms are competing from a position of strength. Netflix’s revenue in 2024 reached $39 billion, and it has more than 300 million global subscribers, more than any other streaming service. The company is also hugely profitable: Netflix had more than $10 billion in operating income last year.

 

YouTube, which is owned by Google, had revenue of $54 billion last year. The only media company with more was Disney. MoffettNathanson, a media analyst group, projected that YouTube would eclipse Disney in revenue this year and described it as “the new king of all media.” The company does not disclose profits, but MoffettNathanson estimated that YouTube’s operating income was just under $8 billion in 2024.

 

YouTube took a stab at making original TV shows but abandoned that game plan years ago. It worked. Now people go to YouTube for virtually anything, ranging from cat videos to music playlists to video podcasts. On average, YouTube has an audience of seven million viewers watching off a TV set at any given moment during the day, more than Netflix’s daily average of 4.7 million, Nielsen said.

 

During prime-time hours, however, when the highest concentration of viewers is watching TV, the margins are tighter. An average of 11.1 million Americans are tuned into YouTube on their TV screens at night this year while 10.7 million are watching Netflix, Nielsen said.

 

Roughly 70 percent of Netflix’s audience, for instance, watches its programmes via a television set, and the other 30 per cent through other devices, the company said.

 

In recent months, Netflix has licensed shows from creators who used to be primarily on YouTube. Ms. Rachel, a children’s programme that appears on YouTube, has also been streaming on Netflix. Netflix has also brought on shows like the game show Pop the Balloon and Sidemen, a popular British YouTube group. The firm has also been in talks with representatives from other YouTube channels, including Mark Rober, Dude Perfect, Danny Go and Gracie’s Corner, according to sources.

 

“Netflix was like, ‘We want to be a studio,’ and they became a platform,” said Jad Dayeh, a senior partner at the William Morris Endeavor talent agency. “YouTube was a platform that is now becoming a studio. That’s where the battle starts to really shape up, because they’re competing for the same everyone audience.”