Netflix gave investors a simple message on Oct. 20. It emphasized that its strategy remains unchanged. Yet the questions it faced told a different story.
During the third-quarter earnings interview, analysts asked whether short-form video, user-generated content, or a central streaming portal belongs in the plan.
Also Read: Netflix makes it clear that a U.S. price hike is coming
The question never named YouTube. But short-form video and user-generated content are precisely what YouTube is built on.
The Nielsen numbers explain why the question came up and why Netflix’s (NFLX) answer deserves a closer look.
YouTube just set a viewership record
According to Nielsen’s July Gauge report, released Sept. 10,
- YouTube viewing rose 6% from June. Pushing its share of all TV time to a record 14.2%.
- It also stretched YouTube’s lead in Nielsen’s Media Distributor Gauge to 5.0 share points.
- Streaming as a whole had a big month, accounting for 49% of total TV, followed by Broadcast, which held 19.5% and Cable at 18.7%.
- For scale, Disney’s streaming services captured 4.7% of TV, while Peacock took 2.6%.
- July is historically a strong month for streaming, and the World Cup lifted total TV use by 2.2%.
The Nielsen release I reviewed states that Netflix has a 7.8% share, making it the fourth-largest player. But the direction is clear. One platform is collecting a record slice of the living room.
What Netflix told investors
Co-chief executive Ted Sarandos shut down any talk of a pivot. “Our strategy is unchanged,” he said.
He added that roughly 95% of Netflix’s spend, and nearly all of its revenue, goes to the core business of originals, licensed titles and live events.
Sarandos described short-form and user-generated content as early-stage efforts and said Netflix is not aggressively spending on these formats.
Sarandos stated:
“We keep our focus and our investment in those areas very tight because the core is the critical growth engine.”
Co-chief executive Greg Peters also provided key numbers to support Netflix’s strategy:
- Churn improved year over year, both globally and in the U.S.
- Price increases in 2026 performed in line with past ones.
- India view hours rose 24%, and revenue grew nearly 20%.
- The ads business is still growing more than 80% this year.
- U.S. members pay the least per hour of viewing among subscription video on demand (SVOD) services, according to Peters.
The view hours problem
Here’s what CFO Spence Neumann said about viewing.
“To be clear, we want to grow view hours faster. We’re not satisfied. We’re working on it.”
Neumann said revenue rests on three levers: member growth, pricing, and ads, all of which are working.
But Peters called the reaction to price changes the ultimate test of value, which depends on how much people watch.
Here is my view. Revenue can grow while attention slips and for a while, price increases can cover the difference.
More Netflix:
- Why Goldman Sachs still backs Netflix despite falling viewership
- Wall Street bank backs Netflix despite U.S. drift to YouTube
- Down 46%, is Netflix a buy now?
If YouTube keeps setting records, Netflix has to win viewing time as well as subscribers.
The U.S. is where Netflix sees the most room to improve.
Peters called engagement there solid, but said the goal is to go from very good to great. “We know that we can do better, and that better is our upside,” he said.
Peters also said the business is “a bit behind” its annual target due to delays in new ad products and partner integrations.
He also said the revenue gap between the ad tier and the standard plan is narrowing, but it still exists.
Notably, Netflix plans ad tiers in 15 new countries next year.
Netflix reshuffles its playbook
Netflix is also changing who runs its content as Peter Rice joins as Chief Content Officer.
Sarandos said he has known Rice for about 15 years, and Rice has led TV networks, movie studios, and streaming services.
Sarandos also thanked Bela Bajaria for a decade at Netflix, including building the international team behind its local for local content.
“There’s no need for a fundamental shift in the strategy. We do need better execution in the U.S.,” Sarandos said.
Related: Netflix cut 1,000 jobs. Here’ why and how it impacts your subscription
Netflix has also trimmed its workforce. Peters framed the cuts as a response to areas Netflix built quickly and then overbuilt.
Q4 guidance includes about 120 basis points of cost tied to headcount reduction and severance payments.
CFO Spence Neumann would not put a number on savings for 2027 and said full guidance, including margins, will come in January.
Netflix now carries a full TF1 network in France, Disney films in the U.S. and a large Globo license in Brazil.
Theaters are part of the push too. Sarandos said Netflix’s film “La Bola Negra” opened above $69,000 per screen, the second-highest average ever for a non-English-language film in the U.S., behind only “Parasite.”
My take: attention decides the winner
To be fair, Netflix is not in trouble, even as its stock trades 50% below its all-time highs.
Churn improved in the third quarter, both globally and in the U.S, while management still plans to deliver its full year guidance.
The fourth-quarter slate is also loaded, according to Peters.
East of Eden is off to a great start, The Diplomat returns for a fourth season and a new Cliff Booth film with Brad Pitt, directed by David Fincher, is under production.
Then come the Christmas Day NFL games and, for the first time, a Thanksgiving Eve game with U2 at halftime.
Still, growing revenue and growing attention are different things. YouTube is winning the second one, and Netflix has said as much by admitting it wants faster view hour growth.
