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THE company that built a global entertainment colossus by rewriting the Hollywood script now finds itself grappling with a familiar plotline – a creative slump.

Netflix, which evolved from delivering movies by mail to producing buzzy original series such as House of Cards and Stranger Things, has struggled lately to come up with series and films that capture the cultural zeitgeist.

Worse, the creative drought comes as Netflix’s chief rival, Alphabet’s YouTube, has increased its share of TV viewing time in the US, and competitors Apple TV and HBO Max garner critical acclaim.

In short, Netflix has lost its aura.

What’s going on at Netflix?

Netflix reported its slowest sales gains in three years in the third quarter ended Sep 30, a trend the company projected would continue for the final three months of 2026. The results fanned investor concern about the world’s largest online television network, whose stock has dropped nearly 28 per cent this year.

Against the backdrop of decelerating growth, Netflix in October announced plans to lay off 6 per cent of its staff, or about 1,000 people. The reductions would be the biggest at the company since 2022, when Netflix reported its first quarterly subscriber drop in more than a decade.

Netflix also let go two prominent executives, chief content officer Bela Bajaria and film chief Dan Lin, in a signal to the market that the company’s senior leadership wants to do better.

Why is Netflix struggling?

Netflix co-CEO Ted Sarandos said during the Q3 earnings call that the company’s success hinges on delivering ambitious, exclusive films, series and live events.

At a time when consumers are awash in entertainment choices, Netflix is searching for new hits to follow its latest breakout offerings Wednesday, the supernatural series inspired by the Addams Family cartoons, and KPop Demon Hunters, the animated musical.

This is where Netflix has lately fallen short.

As the streaming service strives to provide something for everyone – be it true-crime podcast My Favorite Murder, YouTuber Mark Rober’s CrunchLabs science series or a WWE Championship match pitting John Cena against Cody Rhodes – it has failed to find the next show that permeates popular culture.

That is reflected in Netflix’s engagement report released in July, which documents what subscribers watched in the first half of the year. Time spent grew a modest 2 per cent during the period, something Sarandos and co-CEO Greg Peters acknowledged the company needed to improve.

To reignite its creative spark, Netflix hired veteran entertainment executive Peter Rice, who will take over as Netflix’s chief content officer on Monday (Oct 26).

Sarandos said he is looking for Rice, who has held top film and television jobs at Walt Disney and Fox, to take Netflix’s slate “to the next level”. That is especially the case for shows produced in the US, which – if they are big and buzzy – can reverberate around the globe.

How have YouTube and other rivals affected Netflix?

Netflix co-founder Reed Hastings once said the main threat to the streaming service’s growth was sleep. Now, YouTube is causing Netflix executives to lose sleep.

The video-sharing service has surpassed Netflix in average daily viewing time globally, according to research firm Digital i.

YouTube also rules the living room in the US, accounting for more than twice the viewing time as Netflix, Nielsen reported. YouTube’s eclectic collection of how-to videos, children’s animation, video podcasts and personality-driven channels have contributed to its dominance.

What is Netflix doing to try to compete?

Netflix has been here before.

When mainstream Hollywood studios began clawing back Netflix’s rights to studios’ films and television shows about a decade ago to launch their own streaming services, Netflix went on the offensive. It pursued top talent including Grey’s Anatomy creator Shonda Rhimes and Stranger Things producer Shawn Levy.

The streaming service is following the same playbook to combat YouTube, luring away some of its biggest stars to Netflix.

Netflix similarly embraced podcasting – the contemporary version of the television talk show – striking deals for dozens of podcasts, including hits such as Pardon My Take.

The streaming service also is augmenting its original stories with content licensed from Disney, Sony Pictures and Universal Filmed Entertainment. It struck a first-of-its kind deal with French broadcaster TF1 to bring its live television to subscribers in that country.

Now, investors will be watching to see if Rice can help Netflix mount a creative comeback. BLOOMBERG