If you're trying to identify the best-performing stocks of this century, Netflix (NFLX 0.45%) should probably be on that list. Over the past two decades, the streaming stock has soared 22,050% (as of May 22). Netflix has clearly done things right from an operational and strategic perspective to deliver a remarkable performance like that.
The business, which now sports a market capitalization of $373 billion, has certainly developed an economic moat. But is it the widest one in streaming?
Image source: The Motley Fool.
Scale is critical in streaming
Netflix has experienced such rapid growth because it was early to the streaming race. People found it provided a drastically better experience than cable TV.
As of Dec. 31, 2025, Netflix had over 325 million subscribers, up from 71 million paid members 10 years before. In 2026, management expects the company to report about $51 billion in revenue. This is a scaled operator, enabled by its first-mover advantage.
That scale provides a cost advantage, which supports Netflix's moat. Unlike subscale peers, this business produces meaningful profits. Its operating margin was 32.3% in Q1 (ended March 31). And leadership's forecast calls for $12.5 billion in free cash flow for all of 2026.
Plus, it's hard to underplay the brand. Netflix's name has become synonymous with streaming video. And it's often used as a verb, indicating robust consumer mind share.
Scale is clearly a key component for streaming businesses to achieve profitability. Just look at Walt Disney, which is one of the few streamers that can be mentioned in the same breath as Netflix.
For years, the House of Mouse was posting significant operating losses within its streaming segment, which is anchored by flagship service Disney+. Since the third quarter of fiscal 2024, the company's direct-to-consumer operations have generated ballooning profits. With higher revenue and a larger subscriber base that can absorb sizable content investments, the bottom line has exploded.
Netflix's rival possesses a powerful network effect
Competition for attention is fierce. And these days, Netflix has to go up against a formidable opponent, a powerful technology titan, in the battle for eyeballs. I'm talking about Alphabet's (GOOGL 2.54%) (GOOG 2.52%) YouTube.
I'd argue it has the widest economic moat in video streaming, thanks to its network effect. As more viewers join, it makes the platform more attractive for content creators looking to reach a broad audience. And as more content is added, it's easier for viewers to find what they're looking for.
It's estimated that YouTube has billions of users. And on average, 20 million videos are uploaded every single day. This makes YouTube incredibly valuable to advertisers.
In today's internet-driven economy, a network effect has arguably proven to be the strongest source of economic moat. It allows a business to get better over time, providing more value to stakeholders as it gets larger. This setup is hard to topple.
NASDAQ: GOOGL
Key Data Points
The chicken or the egg
Imagine what it would take to create a direct rival to YouTube from scratch. Convincing creators to produce content for your platform (when there aren't any viewers), while also bringing on viewers (when there isn't anything to watch), is an impossible task. This is true even if you have unlimited access to capital.
It's the classic chicken-and-egg problem. Between content and viewers, what comes first?
Now think about building a Netflix copycat, an easier proposition. With access to capital, you could spend copious amounts of money to produce content, develop the tech infrastructure, market to subscribers, and launch the service. Of course, it will be extremely challenging to scale up. But the service can at least be created.
Monetization also matters. In 2025, YouTube generated over $60 billion in total revenue ($40 billion from advertising). The total was 33% more than what Netflix raked in.
Additionally, YouTube's engagement is far better than that of its streaming competitor. According to data from Nielsen, YouTube accounted for 13.2% of daily TV viewing time in the U.S. in March, compared to 8.2% for Netflix.
Netflix might deserve credit for bringing streaming video entertainment to the mainstream. However, the widest moat belongs to YouTube.
