Netflix (NFLX) views Alphabet Inc.’s Google (GOOG) and Google (YouTube) as both competitors and allies as it sets its sights on a bigger slice of the TV market.
What happened: During the second-quarter earnings conference call, Netflix co-CEO Ted Sarandos was answering a question from Morgan Stanley’s Ben Swinburne about the company’s strategy to compete with YouTube for more passive home entertainment engagement.
Citing Nielsen data from June, Sarandos said Netflix and YouTube combined account for about 50% of streaming to TVs in the U.S.
“Our two services, us and YouTube, account for about 50 percent of streaming to TV in the U.S. We go to the U.S. because that’s where the data is. So what we’re really focused on here is focusing on the other 80 percent of all TV time that’s not going to us or not going to YouTube,” he said.
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While Sarandos acknowledged that there is competition with YouTube in certain areas, he also stressed that it’s mutual: He pointed to Netflix’s popular teasers, trailers and behind-the-scenes clips doing well on YouTube, suggesting that the two platforms “feed off each other well.”
Greg Peters, another Netflix executive, said Netflix fills a unique need for consumers and creators by offering high-quality movies and TV shows that generate large audiences and fanbases. “It’s really hard to imagine how that kind of big creative bet would happen or be possible within YouTube’s model.”
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Why it matters: Netflix had a strong second quarter: The company reported revenue of $9.56 billion, up 16.8% year over year and beating the market consensus estimate of $9.53 billion, according to Benzinga Pro data.
The company also made a significant move by eliminating its most affordable ad-free subscription plan in the US and France, saying that “advertising revenue is growing well and is becoming a more meaningful contributor to our business.”
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