Netflix engagement concerns remain after earnings, highlighting the company's need to prioritize releasing original, high-quality content as rival services -- from streamers to social-media platforms and YouTube -- threaten to steal viewers.

The streamer reported fiscal third-quarter financial results after the market closed on Tuesday. Netflix stock was down 5.4% on Wednesday to $64.99 and has now fallen 31% this year and 42% over the past 12 months.

Investors are worried about user engagement. Declining viewership could lead to a drop in advertising sales and, eventually, a drop in subscriber numbers. Netflix acknowledged the concerns during its earning call on Tuesday night. Management said that, while engagement is solid, "we know that we can do better, and that better is our upside."

The growing number of subscription-based streaming platforms on the market has put pressure on Netflix, as have short-form video services like TikTok.

Then there's YouTube. While the Alphabet-owned video service offers an ad-free subscription service, YouTube Premium, it's best known for being home to the world's largest collection of free-to-watch user-generated content. That ad-supported free tier accounts for most of YouTube's revenue, and offers viewers a nearly infinite selection of long- and short-form video.

YouTube regularly dominates viewership hours vs. its competitors, according to research firm Nielsen.

So how does Netflix compete with a (mostly) free platform?

Netflix early on realized the value of creating high-quality original content, both to attract and retain audiences and to sidestep costly licensing agreements. Shows like Bridgerton, Stranger Things, and Squid Game, and movies like KPop Demon Hunters, Red Notice, and Carry-On are just some of its success stories that have cumulatively racked up hundreds of millions of viewing hours from subscribers. They're precisely what's needed to keep users watching and, crucially, paying their monthly subscriptions.

Netflix says that is exactly where its putting its focus moving forward.

"We want to be the must-have entertainment service, the first one members check for a great series or a great film, and the last service they'd ever cancel. Now, the anchor of that strategy [is] the Netflix originals, differentiated, exclusive, ambitious, professionally produced series and films and live events," Co-CEO Ted Sarandos said on the earnings call, adding that 95% of the company's spending is focused on that strategy.

Other areas, like short-form video and third-party or user-generated content, are "early-stage initiatives meant to explore future programming expansions, and we keep our focus and our investment in those areas very tight, because the core is the critical growth engine."

Netflix is already competing with YouTube, TikTok, and Instagram Reels, and others for consumers' finite attention. The best way to differentiate itself is by returning to the strategy that made it stand out initially: producing compelling original content that keeps subscribers coming back, over and over again.