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As competition mounts, Netflix faces shrinking market share, report says

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Netflix remains the dominant force in streaming but is losing ground to rivals.

That’s the takeaway of a new report examining the company’s share of the streaming business.

Netflix’s share of global audience demand of digital original series dropped to below 50% for the first time ever, according to data released by West Hollywood-based Parrot Analytics on Tuesday.

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Parrot measures demand for Netflix shows by capturing online audience interactions with its content and has been tracking this aspect of the company since 2015.

Global audience demand share for Netflix digital original series was 48.3% in the second quarter, down from 54.9% a year ago, Parrot Analytics said.

Meanwhile, competing services like Disney+, which launched in 2019, saw its market share grow thanks to original Marvel programs such as “Loki” and “The Falcon and the Winter Soldier,” the firm said.

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Disney+’s global audience demand share increased to 7.3% in the second quarter, up from 6%, Parrot Analytics found. The company’s data focuses on digital original series and does not factor in licensed shows like “Grey’s Anatomy” or movies.

“Netflix has struggled to push out breakthrough original content in the last few quarters — with the exception of season three of ‘Cobra Kai’ — and likely won’t have another massive original hit until Q4 with season two of ‘The Witcher’,” Parrot Analytics said in a statement, referring to two of Netflix’s popular series.

Netflix declined to comment on Parrot’s data. The streamer has been heavily investing in content, significantly increasing the number of new movies on its platform to 70 this year. The Los Gatos company has been adding local language productions and seen popularity skyrocket globally for shows like thriller “Lupin,” filmed in French.

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The company as well as other streamers saw a huge surge in growth in the early part of the COVID-19 pandemic, as many people looked for ways to entertain themselves as they sheltered at home. But now it appears as though that exponential growth has slowed considerably.

In the first quarter, Netflix missed its new subscriber estimates, adding about 4 million instead of 6 million. The company at the time said it did not believe competition intensity was a factor.

For the second quarter, Netflix was already anticipating slower growth compared with the 10 million new subscribers last year. The company beat its estimates in the second quarter, adding 1.5 million new subscribers, up from its forecast of 1 million.

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Despite the slower growth, Netflix said in a letter to shareholders on Tuesday that it believes its future is bright, as more people shift their viewing habits to streaming.

“Considering that we are less mature in other countries and that this excludes mobile screens (where we believe our share of engagement is even lower), we are confident that we have a long runway for growth,” Netflix said in its letter.

To counteract any potential loss of subscribers, Netflix can continue to keep its brand at the forefront of consumers’ minds by marketing its shows on podcasts and through games and live events, analysts said. Netflix recently added executives to head up podcasting and game development, which could signal its plans for further investment in these categories.

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Netflix said on Tuesday that it will offer mobile games to its subscribers at no additional cost.

“We view gaming as another new content category for us, similar to our expansion into original films, animation and unscripted TV,” Netflix said in a letter to shareholders Tuesday.

The additions come as studies have shown that younger audiences spend a lot more of their time gaming versus watching TV.

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“Video games and podcasts that incorporate or leverage top Netflix IP reiterates and reaffirms,” wrote Julia Alexander, Parrot Analytics senior strategy analyst in an email. “Same with live events that help create a more physical and personal connection to a beloved show.”

Netflix also recently launched an online store, selling merchandise related to its programs, such as a $55 side table with a quote from the main character in “Lupin.”

Over the years, Netflix has added programs with interactive elements to its platform, which could increase the amount of time people spend with the streamer as they rewatch programs to watch alternate endings and character storylines.

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