Netflix (NFLX 1.74%) and Warner Bros. Discovery (WBD 0.33%) are two of the biggest names in the streaming space. Netflix has over 223 million subscribers worldwide, while Warner Bros. Discovery counts just under 95 million global customers across its HBO Max and Discovery+ offerings. But the two companies have taken somewhat divergent approaches to growing those numbers. So which is the better buy for investors? Let's break it down.

More content vs. less

Netflix was one of the pioneers of the streaming age, first delivering movies and TV shows over an internet connection in 2007. In the decade-and-a-half since, the streamer has evolved into a film and television studio, acquiring and producing thousands of hours of content. Netflix has become so prolific that in the third quarter of 2022, it released over 1,000 episodes of original programming -- over five times as much as its rivals.

Warner Bros. Discovery spent much of 2022 scaling back its content output. In July, the company shut down multiple HBO Max Original productions across Europe. And in August, it drew ire from many parts of the internet when it pulled direct-to-streaming movies Batgirl and Scoob!: Holiday Haunt while they were in the edit suite. More recently, Warner Bros. Discovery has been scrubbing films and shows from HBO Max, including former tent-pole projects Westworld and The Nevers.

Initially, Netflix's approach might seem like the better call. After all, customers sign up for streaming services because they want something to watch. But from Warner Bros. Discovery's perspective, having an extensive catalog under a premium banner could suppress other business opportunities.

AVOD vs. FAST

After seeing its subscriber base decline earlier this year -- the first such drop in more than a decade -- Netflix opted to launch an advertising-based video-on-demand (AVOD) tier that would cost less than its other plans.

Many analysts were initially bullish on the idea of Netflix getting into the ad arena. One projection from MoffettNathanson estimated Netflix would see as much as $2.7 billion in ad-based revenue by 2025. Netflix was also putting out positive signals, reportedly telling marketing partners it expected to reach 40 million ad-backed customers by the end of 2023.

Netflix's Basic with Ads arrived in early November, priced at $6.99 per month. And though licensing arrangements have meant some movies and shows are unavailable, with over 1,500 Netflix Originals, the company ostensibly has enough to offer customers who don't mind ad breaks. Initial reports, however, suggest there may not be quite the demand Netflix and Wall Street had hoped.

Multiple Digiday sources claim Netflix is returning money to advertisers because Basic with Ads viewership fell short of expectations. According to the report, Netflix has only reached about 80% of its previously estimated audience size, clearing the way for marketers to get refunds for some of their inventory.

Warner Bros. Discovery has been in the AVOD business for a while. Both HBO Max and Discovery+ are available as lower-cost ad-supported tiers, and it's a business model the company has said it will continue after its streaming platforms merge in 2023. But Warner Bros. Discovery also has its sights on free ad-supported streaming TV (FAST).

During the company's fiscal 2022 third-quarter earnings call, Warner Bros. Discovery CEO David Zaslav described FAST "as a real opportunity."

"We have the largest TV and motion picture library," said the executive. "[W]e have the ability on the FAST side to build a service without buying content."

Warner Bros. Discovery's FAST strategy is interesting, considering the pace at which the sector is growing: 55% of U.S. consumers use at least one FAST platform, according to a second-quarter 2022 report from Hub Entertainment Research. That number was 46% in the fourth quarter of 2021.

Better buy?

Warner Bros. Discovery's display of frugality will probably speak to many stakeholders; a company that manages to not only reign in its spending but also build a new offering with what it already owns certainly shows promise. Of course, as Netflix has shown, trying to establish a fresh line of revenue using existing content is not necessarily as simple as it might sound.

Netflix, meanwhile, is not just focused on movies and TV shows to bring in subscribers -- it also staked a claim on gaming. And while that venture is likely some years from proving its worth, it at least demonstrates that Netflix is not resting on its laurels.

That helps make it the likely smarter bet for investors considering whether to put their money into Netflix or Warner Bros. Discovery right now. Even if some of its endeavors are costly or don't bear fruit, a margin of almost 130 million subscribers shows Netflix is still doing a lot right.