Netflix shares fall 40% as YouTube overtakes it in daily viewing

Netflix shocked markets last week by bidding $83bn for Warner Bros Discovery, a move that failed to mask underlying fears about its future. The company simultaneously announced it would scale back viewership data releases to once a year. It comes as Netflix’s share price has tumbled 40% over the past twelve months.

The aggressive acquisition attempt signalled a need to shore up a thinning content pipeline as major franchises like Stranger Things and Squid Game end. But the deeper issue is the failure of the binge-watch model that built the company. Analysis of hit shows like One Piece and Beef reveals audience declines of 30% to 70% in their second seasons. “We’ve been saying to TV producers to be careful, it might be tempting to take the big money being offered to make a show for Netflix, but the saying goes that it’s often the case of ‘one and done’ – you’re cancelled,” says one senior TV industry executive.

Streaming cancellations are inherently high compared to traditional television. Netflix cancels about 22% of its roughly 180 annual shows, a rate mirrored by rivals, whereas traditional broadcasters like the BBC typically cancel scripted shows after five or six seasons. Peter Fincham, co-chief executive of production company Expectation and a former BBC and ITV executive, notes that linear broadcasting is biased towards recommissioning. “In the world of streamers, which is much more data driven, it is much less sentimental,” he says.

The stagnation is not unique to Netflix. Emarketer forecasts that time spent on Disney+ will grow just one minute this year in the US, Netflix’s largest market. The real threat to the streaming hegemony is YouTube. Last year, average daily viewing on YouTube passed Netflix for the first time across 20 major markets, rising to 99.1 minutes compared to Netflix’s 93.4 minutes.

Crucially for European broadcasters, YouTube has successfully colonised the living room. In the UK, TV sets are now the primary device for YouTube viewing across all age groups, from teenagers to the over-55s. According to Barb, YouTube’s combined share of UK television and streaming viewing reached 18.3% in June, second only to the BBC’s 20.55%. Furthermore, an estimated 68% of YouTube viewing is now dedicated to long-form content over 20 minutes.

Netflix itself acknowledged this shift during its failed WBD bid, explicitly arguing that YouTube should be considered a direct competitor in the market. With US daily viewing forecast to grow by just two minutes this year and one minute annually thereafter, the company faces a harsh reality. “The problem is Netflix isn’t distinctive any more, it is now just part of the firmament,” the senior executive says. “It is not head and shoulders above everyone else any more, and is no longer the first choice destination for discovery, and I think that is massive.”