Netflix may be down but it is not out. A study out from Piper Jaffray shows YouTube surpassing Netflix for the first time as the streaming platform of choice among teens. That does represent a minor defeat for the streaming television and movie giant. But it hardly poses an existential threat to its business model.
Netflix shares (NASDAQ: NFLX) closed the market at $280.48 on Thursday, the company’s best stock price in three weeks. That was after Goldman Sachs analysts backed Netflix’s global subscriber growth estimates.
Goldman Sachs reportedly slashed its price target on Netflix but is not worried about the company losing its leadership position in the content streaming wars, saying in a report:
“Netflix’s incremental net subscriber additions have grown continuously despite significant competitive pressure. We continue to believe that the relative value (price divided by content consumed) of Netflix far exceeds any of the current or planned competitive offerings, making it unlikely that any of them will replace Netflix as consumers’ primary streaming choice.”
Meanwhile, the Piper Jaffray study surveyed teens, mostly clustered in cities, regarding the amount of their time spent on streaming platforms. Teens self-reported spending an average of 37 percent of their streaming time watching YouTube. Teens say they spend 35 percent of viewing time on Netflix. Far behind them were Hulu with 7 percent and Prime Video with 5 percent.
Why YouTube Leads Among Teen Viewers
YouTube attributes its success among teens to its diverse content library, “with a wide array of teen-oriented content.” That includes influencer channels, tutorials, music videos, and gaming channels. An obvious reason for the shift toward YouTube is the fact that users must be 18 years old and above to get a Netflix account. YouTube allows users 13 years and older. Netflix also charges a subscription fee, while YouTube is a free content platform.
So teens whose parents don’t have their own account have an access point of friction that doesn’t exist for YouTube. That’s not necessarily a problem for Netflix. SnapChat and Vine are two other platforms popular among teens because they’re free and allow teens to register accounts. Snap’s stock (NYSE: SNAP) has had a troubled run since its debut in 2017. This week Snap Inc. shares were worth half of their 2017 IPO price. Although widely popular, especially with teens, Vine has been defunct since January 2017.
Netflix and YouTube Aren’t Direct Competitors in Streaming Wars
Although there is some overlap, YouTube isn’t really the competition. It’s more like the other free, user-generated content platforms SnapChat, TikTok, and Vine. Investors are more worried about the influx of actual competitors to the Netflix space— streaming movies and television shows with high production values. The streaming entertainment powerhouse’s real threats are from HBO, Apple, Disney, Amazon, AT&T, NBC, Hulu, and Roku. And the Piper Jaffray survey shows teens markedly prefer Netflix to its peers, with teens spending 500 percent more time watching Netflix than Hulu and 700 percent more time than Prime Video.
In the report, Piper Jaffray analysts said:
“Among the subscription services, Netflix is the leader in category that contains massive multi-year growth potential as more content viewing shifts online…we believe the market will support multiple players, with Netflix leading the way.”
Millennials, who spend more money online than any other age group, also stream a staggering amount of Netflix. In a September survey, millennials reported watching an average of 6.6 hours of Netflix a day. That could end up being an entire decade of their lives.
This article was edited by Gerelyn Terzo.