Goalkeeper Adam Bogdan may have gifted the Hornets their opener, but Souness insisted the entire team was to blame, appearing on Sky Sports' Super Sunday:
I don't think the players are good enough and there's a lot of work ahead for them. They got off to a terrible start but you are looking for a reaction at that time and for the players to be angry and not to feel sorry for themselves.
The bottom line, when you cut away all the excuses, [is] are they good enough? It's not a quick fix. They've got some decent players and some that might get better but it's going to be a long road for them.
It's been a sharp plummet back to earth for a team that initially showed such promise following the arrival of former Borussia Dortmund manager Jurgen Klopp at the helm in October.
However, a poor run of form recently has seeded doubt as to whether the German has improved matters since arriving, with Sky Sports recently comparing his reign to that of his predecessor, Brendan Rodgers:
The similar failure to perform suggests some blame has to sit with the common denominator between the two managers: the playing staff.
While Souness feels the quality of the players is in question, Klopp suggested after Sunday's defeat that mental strength may be an even greater factor among his charges, per Tony Banks of the Daily Express:
We lost our mind after the first goal, we lost our compact formation, we didn't play easy, as we should have done. It was really bad. We made bigger mistakes than the referee. But the goalkeeper had both hands on the ball, so it's a foul. That's what happened. But mistakes, fouls, whatever, can happen. The reaction has to be better.
Hopefully it's the most disappointing moment in my whole Liverpool FC life so far. We don't feel good, of course, because we came here to do something really different. There was a big space between what we wanted to do and what happened and that's what we have to fill before the next game against Leicester [City on Boxing Day].
Unlike Souness, Klopp did his best to dispute some aspects of the defeat to Watford, but there's no debating the gulf in quality that separated the two teams for a majority of Sunday's encounter.
The Liverpool of today is a far cry from the Liverpool Souness represented through the late 1970s and early '80s, when he won five First Division titles, three European Cups and more across a span of six years.
The Scot then managed the Merseysiders to the FA Cup in 1992 and can be considered something of an authority when it comes to what it takes to win, but times have changed at Anfield.
Souness is only too aware of how long it will be before the Reds are back on top, and Klopp's dream start at the club looks to already be over as questions are once again asked of Liverpool and their stars.