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The Netflix Q2 Earnings Question No One Is Asking (...Yet)
How ReelShort's gamified video-on-demand and AI-generated content success on YouTube are forcing an inevitable rethink of Netflix's $17B content strategy
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Netflix’s Q2 earnings call this Thursday will take place in an expanded competitive marketplace. The call will reveal whether management is willing to acknowledge fundamental shifts in its competitive landscape.
Netflix is now the market paradigm for success in subscription streaming—and its business model is almost entirely reliant on subscription revenues for its streaming service. However, it also is navigating a more fundamental shift in how people consume culture.
Since July 2021—when it hired former EA executive Mike Verdu to run gaming—it has been nudging its story to investors and consumers away from streaming and towards a broader concept of “engagement” that includes gaming and advertising.
I wrote in June that this framing means:
Netflix competes with Fortnite (110 million monthly active users (MAUs)) , which competes with ChatGPT (175 million weekly active users), which competes with YouTube (2.7 billion MAUs). They all fight for the same prize: Capturing $20-per-month of your attention.
In 2025, that list has expanded to include ReelShort (55 million monthly users) and a growing list of AI platforms like ChatGPT, Google Veo 3 and Midjourney. These offer new and compelling forms of consuming and creating culture for $10 to $20 per month.
An important question for Thursday’s Q2 earnings is whether management will concede this expanded competitive dynamic:
What will it imply if they do concede?
What will it imply if they do not?
Competition
In its Q4 2023 letter to shareholders was the last time Netflix spelled out its competition for investors:
[W]e expect our industry to remain highly competitive given: the franchise strength and programming expertise within traditional entertainment companies; ongoing heavy investment from large tech players like YouTube, Amazon and Apple; and broader competition for people’s time, including gaming and social media (TikTok, Instagram etc.).
Since then it has described it in broad brush strokes, as it wrote in its Q1 2025 letter to shareholders: “Our business remains intensely competitive with many formidable competitors across traditional entertainment and big tech.”
Past essays related to this topic:
