For the past few years or so, streaming services have been engaged in a multibillion-dollar battle to grow as fast as possible and capture market share.

However, as interest rates have risen and demand for new content has dried up post pandemic,

companies have responded by battening down the hatches and trying to squeeze as much money as possible out of their existing subscriber base.

At first glance, the winner here looks to be Netflix, who have maintained their dominance in the streaming game and seen their share price recover over 2023.

However, the real winner here might actually be YouTube which has seen by far and away the steepest increase in view time over the past year.

So in this video, we're going to take a look at how the streaming wars are going, why Netflix is doing better than the rest and why YouTube is actually doing the best.

So let's start with a quick recap of how the streaming wars are going.

In the late 2010s and during the pandemic, there was a sort of streaming gold rush as big players plowed billions of dollars into streaming to guarantee themselves a share of this apparently lucrative market.

When digital companies like Netflix started producing competitive original content in the 2010s, the Hollywood establishment started worrying that Silicon Valley was making a play for its business.

Like many other industries before them, music, books, taxis, the movie industry suddenly looked at risk of being replaced by a flashy digital surrogate.

And Netflix and co weren't quiet about their ambitions either.

In 2013, after Netflix released the critically acclaimed House of Cards, its CEO Ted Sarandos told investors that the goal is to become HBO faster than HBO becomes us.

To defend their position, establishment titans like Disney HBO and Paramount plowed billions of dollars into developing their own streaming services.

Netflix and co then responded in kind, borrowing and investing billions of dollars in an attempt to supercharge their growth and capture market share.

And this investment only grew in 2020 and 2021 when money was cheap and the pandemic spurred demand for new shows.

However, in the past 18 months or so, as the cost of borrowing has increased and subscriber growth has stalled, the streaming gold rush has apparently come to an end.

In fact, subscriber bases started shrinking and many streaming services started posting billion dollar losses throughout 2022.

Now, these companies then reacted by focusing less on subscriber growth and more on cutting costs and squeezing as much money out of their existing subscriber base as they could.

To do this, they laid staff off, stopped commissioning as many shows and cut writer costs.

Some of them also introduced ads or tiered subscriptions.

And Netflix specifically cracked down on shared subscriptions.

And this tighter monetary environment has proven especially difficult for smaller streaming services who don't have piles of cash in the bank.

And there's a good chance that if borrowing costs stay high for a while, these smaller companies could end up being bought out by their bigger cash-rich peers.

The richest of these is Apple, which obviously has a presence in the streaming industry via Apple TV, and has literally the biggest cash reserve of any company in the world with an estimated $160 billion.

In fact, Apple is so rich that in 2021 when it decided to borrow $14 billion in five year notes, its annual interest rate was just 0.7%.

That means that incredibly, Apple could borrow money roughly as cheaply as the US government.

But perhaps the one company that's truly the exception to this tightening and this squeezing of budgets is Netflix.

Like other streaming services, Netflix did have a tough 2022.

In fact, we made a whole video about it, but it's rebounded significantly this year.

You can see this just by taking a look at their stock price which fell 75% from October 2021 to May 2022, but has since recovered about two-thirds of its 2023 value.

Netflix's revival seems to have something to do with the fact that it has the deepest content library, which means that it was the least affected by Hollywood's writers' strike, which began on May 7th with the Writers Guild of America.

Anyway, according to its Q3 report, Netflix's profits were actually up 20% year on year and they added 9 million new subscribers.

However, while it's not really a streaming service in the typical sense, perhaps the even bigger winner of the streaming wars this year has been YouTube.

Now, Netflix have always made clear that they weren't just competing with the other streamers, but rather with the entire attention economy.

Its CEO even once said that they thought they were competing against sleep.

But while Netflix has had a good few months as streaming services have started squeezing their existing user base for profits, they've still made the experience more expensive and less fun.

And the big winner here has apparently been YouTube.

Data collected by Nielsen suggests that a year ago, Netflix accounted for 7.3% of all TV viewing in America while YouTube accounted for 6.9%.

Today though, while Netflix's share has gone up a bit to 8.1%, YouTube has been the big winner, leapfrogging Netflix to 9%.

In practice, this means that YouTube accounts for nearly a quarter of all streaming time more than any other platform.

Now, this has helped YouTube maintain its steady revenue growth, which has gone from an estimated few billion in the early 20 tens to about $30 billion today.

Impressively, ad rates have also held up pretty well in 2023, despite the wide economic slowdown.

And in fact, they're actually expected to come in higher than last year.

And it's not just these big aggregate numbers.

Individual YouTubers like MrBeast already garner more eyeballs than the best TV shows out there.

According to data from tech analyst Benedict Evans, if you assume that MrBeast viewers watch 75% of the entire video, then he would get as many views as all but the most watched Netflix TV series.

Anyway, the data here suggests that while some people have moved from other streaming services to Netflix, more people just gave up on paid streaming altogether and decided to spend their screen time on YouTube instead.

Netflix even made a passing mention to this in their Q3 shareholder letter noting that our share of TV stream time in the US is greater than any streamer other than YouTube.

While this might have been meant as a brag, it betrays a real problem for streaming services.

If margins remain tight and streaming services have to increasingly rely on ads, then their fraction of the total attention economy will wane even further, probably to YouTube's benefit.

Perhaps the main question for YouTube is whether they can convert these new casual viewers into paying subscribers.

YouTube TV, which sells a bundle of live television channels to American viewers has been a bit of a damp squib.

And while Alphabet doesn't regularly publish subscriber numbers, YouTube's ad-free subscription, YouTube Premium, reached 80 million subscribers in late 2022.

And while this sounds like a pretty big number, it's only about a third as many as Netflix.

So there's definitely space for growth.

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