The Battle That May Matter Most for Netflix Stock Isn't Against Disney

Netflix (NASDAQ: NFLX) is the dominant streaming video and movie service in its sector, with over 325 million paid memberships as of the end of 2025.It's maintained its position over the years, despite a crowded space with competition from the likes of Walt Disney, which runs Disney+, Hulu, and ESPN+.

Competition in 2026 and beyond, however, is starting to look different, especially as concerns increase around Netflix's ability to keep subscribers engaged. With a new challenger emerging, how it handles the situation will determine the bear and the bull case for the video streaming giant in the years ahead.

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The engagement issue at Netflix

In July, The Wall Street Journal reported that Netflix's subscriber engagement was showing signs of decline and was becoming a more frequent topic of discussion within the company. When Netflix reported its 2026 second-quarter earnings results on July 16, it called engagement "healthy."Still, it also decided to cut back the frequency of its What We Watched report, which provides viewership details, from twice a year to once a year.

In its third-quarter earnings, released on Oct. 20, Netflix addressed engagement concerns again in its shareholder letter:

We know there's some investor concern about our view hours growth. Member response to our 2026 price increases is consistent with prior price changes and our expectations, an indicator that our engagement -- which encompasses quantity, quality and variety of viewing -- remains healthy and that we continue to deliver strong value to members. But we do seek to accelerate growth in view hours as well, and we're confident we'll do that by relentlessly focusing and executing against the aforementioned strategy.

Essentially, the streaming giant is acknowledging the engagement concern and suggesting it has room to do better. That's why, in the battle to win over and keep more people's attention, Netflix's competition is looking less like Disney and more like Alphabet's YouTube.

The bear and bull outlook for Netflix

YouTube offers free videos as well as a premium subscription plan that provides endless hours of unique and niche content to stream. It can be years before new seasons of shows or movies are released on Netflix, but YouTube offers fresh content daily or even hourly from video creators. That's the attention Netflix is battling for now, more than against Disney or any other service.

With this dynamic, long-term, the bear case would be that Netflix doesn't figure out how to compete and keeps losing eyeballs to YouTube. During the 2026 FIFA World Cup, YouTube had over 1.7 billion unique viewers watch World Cup-related videos.The ad revenue it generates is also massive, sitting at $11 billion in just the second quarter of 2026. In comparison, for all of 2026, Netflix expects ad revenue of $2.7 billion.

The bull case is that Netflix is starting to figure out this new landscape, showing signs that it understands the importance of unique content. From football games to boxing events to concerts, it is adding more live-event programming. The only catch is that those types of events cost money to win the rights to, so there will be additional spending needed.

Ultimately, more and more of Netflix's success will be based on how it defends itself against YouTube's hold on attention.

Jack Delaney has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Netflix, and Walt Disney. The Motley Fool has a disclosure policy.