In Q2 2023, PARQOR will be focusing on three trends. This essay focuses on "'Premium content' is being redefined by creators, tech companies and 10 million emerging advertisers".

To remind you, PARQOR identifies a few key trends each fiscal quarter that reveal the most important tensions and seismic shifts in the media marketplace. Must-read stories or market developments are not always obvious from press reports or research analysis, and often require a deeper dive. PARQOR’s analysis questions established ideas and common wisdom, reassesses the moving pieces, and reveals the potential in the media marketplace in 2023.

I have been asked the same question in casual business meetings over the past week: how do I see the next five years playing out in media?

I think Netflix answered that question this week with a chart of third party data showing “Netflix and YouTube are the clear leaders in streaming engagement”.

The implied story here is that streaming is currently a niche user behavior. This reads counterintuitive given the scale of Netflix (232.5 million subscribers) and YouTube (nearly 3 billion monthly active users). But Netflix management wrote to shareholders on Tuesday that they envision growing their “share of total viewing by multiples higher than today’s 2-4% share in Brazil, Mexico and Poland, or 7- 9% share in the US and the UK.” And they “remain highly confident that streaming’s share of engagement will continue to grow at the expense of linear”.

Netflix and YouTube have always pursued the disruption of the linear model as a mission statement: Cord-cutting was inevitable, and the emergence of smartphones and tablets meant younger generations would increasingly consume content over the Internet and via mobile devices instead of via cable networks. The companies that solved that problem would have enormous global scale, perhaps even 1 billion subscribers.

So, Netflix has sought to “become the best global entertainment distribution service” (its new mission statement from then-CEO Reed Hastings in 2011), and YouTube launched in 2005 with the mission “to give everyone a voice and show them the world.” 

The surprising implication of the Netflix letter, especially in the third party data it shared, is that neither of the mission statements seem true anymore in 2023. In fact, Netflix's data suggests that both businesses seem niche.

Key Takeaway

It seems a bit ridiculous to describe both YouTube and Netflix as niche businesses. But, both face headwinds that counterintuitively make it easier to imagine them unable to fulfill their original visions of global domination.

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Total time reading: 7 minutes