Netflix’s next move against YouTube should be an embrace of “high-value short-form content,” Wells Fargo media analyst Steven Cahall argued in a recent note.
Cahall thinks Netflix could lure creators from YouTube by promising exclusive multi-year deals.
Cahall wrote that adding shorter videos would perfectly complement Netflix’s vast library. It would make the streamer a top destination for viewers, even if they only have a few minutes to spare. That could help form fresh habits with young audiences hooked on TikTok, YouTube Shorts, and Instagram Reels.
“Short-form could help Netflix navigate generational changes,” Cahall wrote.
Wells Fargo
Satisfying viewers’ short-form itch could assist Netflix in closing the widening viewership gap with YouTube, even though it can’t replicate YouTube’s unrivaled firehose of user-generated content. It could also help Netflix boost its mobile experience, which it recently upgraded with a vertical video feed and AI-powered search.
Netflix could offer more financial security for content creators. YouTube pays creators 55% of its ad revenue, gives them lots of data, and lets them have a direct relationship with their audiences. Still, they only get paid if the videos are a hit.
“They’re doing it all at their own risk,” Netflix co-CEO Ted Sarandos has said of YouTubers.
Netflix could flip the script by paying YouTubers upfront so they’re not on the hook for flops. This could be a win-win, since Cahall estimates that Netflix could pay top creators an average of $60 per 1,000 hours viewed, which is 26% less than the rate it’s paying for content now.
Netflix has already entered YouTube’s territory with moves like inking a deal with YouTube megastar Ms. Rachel, and Sarandos hinted that he’s targeting video podcasters, as Business Insider previously reported.
Short-form is also getting a second look in Hollywood, as so-called “mini dramas” — vertical serials with bite-sized episodes —gain popularity.
However, not everyone on Wall Street believes Netflix should branch out into short-form video.
Joseph Bonner of Argus Research doubts Netflix could seriously challenge YouTube or TikTok on the short-form front. Instead, he told BI that the streaming titan should focus its attention on improving its nascent advertising technology and building out its burgeoning ad tier.
A Netflix spokesperson didn’t respond to a request for comment.
YouTube is playing the long game
Netflix may have YouTube in its crosshairs, but the inverse is also true.
YouTube is betting big on long-form content by investing in its TV app, which now drives more viewership than its mobile app or website.
Some creators are cashing in as YouTube’s viewership shifts to TVs. Fede Goldenberg, YouTube’s head of TV and film partnerships, recently said that 30% of YouTubers are making the majority of their revenue from the TV app, where long-form content is especially popular.
“These are generating incredible retention — and, obviously, monetization,” Goldenberg said. “You get more bang for your buck when you’re programming long form on YouTube.”
Podcasts are one of the bigger draws on the big screen. Goldenberg said 1 billion people watch podcasts through YouTube’s TV app each month for 400 million combined hours.
YouTube’s quest is to build a one-stop shop for video, whether it’s short-form or long-form.
Paul Snow, YouTube’s head of sports and studio partnerships, recently outlined that strategy.
“How do we make sure that we’re the place people want to stay after they watch a single video opposed to navigating to many other platforms that are available?” he said.
