Is Netflix Kids’ Streaming Part of Nickelodeon’s Ratings Drop? Netflix Users Streamed 2 Billion Hours in the Fourth Quarter

Feb 2, 2012  •  Post A Comment

By Jeanine Poggi
Advertising Age

Netflix is adamant that its streaming service will not cannibalize the cable industry, but Nickelodeon’s recent ratings decline may provide the first suggestion that at least one subset of viewers is at risk of abandoning live TV.

While Nick parent Viacom has blamed Nielsen for at least some of Nickelodeon’s apparent ratings drop, the decline also coincides with new high-water marks for Netflix streaming. Netflix subscribers watched more than 2 billion hours of movies and TV shows through its streaming service in the fourth quarter of 2011, more than in any previous quarter, the company said early last month.

This statistic suggests that Netflix subscribers are averaging an hour of streaming content daily, according to Janney Capital Market analyst Tony Wible.

"While this can’t be proven yet, it seems more than coincidental that this 2 billion stat comes during the same quarter as Viacom’s disastrous Nickelodeon ratings," Mr. Wible said. "This could mean Viacom sold too much of its content to Netflix or isn’t charging enough."

Netflix and Nickelodeon don’t think there’s a connection. Netflix notes that it has worked with many cable networks without pressuring ratings. "By way of example, Netflix has had the Starz catalog since 2008 and Starz subscribers grew during that time," a Netflix spokesperson said.

Nickelodeon remains positive on its partnership with Netflix. Netflix subscribers streamed no more Nickelodeon content during the fourth quarter than in the summer, when the network’s ratings were stable, according to one person at Nickelodeon.

Netflix has been showing increased interest in viewers under 12 years old, however, introducing a "Just for Kids" channel to its website in August and extending it to the Nintendo Wii in October and Apple TV in December. The section features family-friendly content organized based on favorite characters, viewer age and other easy-to-navigate subgroups.

Neflix declined to say how much of the fourth quarter’s 2 billion hours of streaming came from children’s programming. When "Just for Kids" was released, Netflix said that nearly half of its users in the United States and Canada had streamed two or more movies or shows intended for children during the previous 90 days.

Nickelodeon isn’t alone in its ratings concerns, with some pressure being felt at other children’s cable networks, including the Cartoon Network and Disney XD. But other networks’ declines aren’t as pronounced.

Their content offerings on Netflix, and other streaming services like Hulu, also aren’t as robust, according to Mr. Wible.

In May, Viacom increased the amount of its content available on Netflix, giving subscribers access to Nickelodeon favorites such as "Yo Gabba Gabba" and more episodes of "Spongebob SquarePants," "iCarly," "True Jackson, VP" and "Dora the Explorer."

Nickelodeon also attracts a slightly younger demographic than the Disney Channel, its biggest competitor, whose ratings have remained steady. Nielsen puts Nickelodeon’s target audience at 2- through 11-year-olds, compared to Disney’s 6- through 14-year-olds.

Young children often demand to watch the same show — or even the same episode — over and over, as Netflix pointed out when it introduced "Just for Kids." That may be making it easier for parents to satisfy young children’s demands with on-demand services.

If kids are indeed seeing more streaming video and less live TV, that could be worrisome for the traditional model. What happens as those kids grow up?

Netflix Chief Executive Reed Hastings has been vocal about being a "complementary" service to cable, saying on a conference call last week that the company has no plans to bid on the rights for current seasons of TV shows. Instead Mr. Hastings said it is positioning itself as better suited for "catch-up television." "We would rather be additive to cable, not competitive," he said.

Cable networks, however, aren’t entirely at ease. Starz subscribers may have increased during the time that Netflix has offered the channel’s content, but Netflix is also now losing Starz content — reportedly because it refused the network’s demand to put Starz content on a premium tier costing subscribers extra.

Ultimately, Netflix’s two billion-streaming-hours milestone could have content providers scratching their heads.

"We think that Netflix has underestimated the resolve of content owners to seek a fair price for their content, and by advertising the 93 hours per subscriber of streaming consumption during the quarter, we believe Netflix has sealed its fate," Wedbush analyst Michael Pachter wrote in a research note last week.

It remains hard to say with certainty whether or how much Nickelodeon ratings are being affected by Netflix. Some observers dispute any connection.

"We do not believe Nick content availability of Netflix is the culprit," Credit Suisse analyst Spencer Wang wrote in a research note in December, pointing out that Netflix increased the relevant offerings most dramatically in February 2011, long before the Nickelodeon ratings drop. "Rather, it appears that declines in overall viewership in the people 2-11 demo and ratings share shift to Disney Channel are the main reasons," he wrote.

Children are seeing more digital video, but they’re still watching just as much TV as before, said Jack MacKenzie, president at Magid Generational Strategies, a research-based consulting firm. "Kids know mom’s phone or Dad’s tablet is a potential TV show," he said. But Mr. Mackenzie believes these streaming outlets aren’t replacements, but augment the TV viewing experience. "Kids are just watching more," he said.

But Needham analyst Laura Martin said it’s important for content providers to continue to evaluate conditions. It’s possible that Netflix can’t pay enough to make up for the risk to live viewers and associated ad revenue, she said.

Even if Netflix users aren’t streaming any more Nickelodeon content now than they did before the network’s ratings fell, Mr. Wible added, perhaps some viewers’ turn away from TV is lagging their adoption of streaming.

"We may see the same level of streaming, but could be seeing it finally displace TV demand were it was not in the past — people are more comfortable without the TV element now," Mr. Wible said. "Lastly, the streaming of Nick needs to be looked at with all the other kids fare on the Netflix service that could be gaining share of time on the site at the expense of TV. It’s too early to know the real story, but it is hard to explain why the Nick ratings are down otherwise."

One Comment

  1. The only way to proof netflix is making a show or tv network better is by putting a new episode only on netflix cant be on tv or others service. Just like what netflix is doing with HUGO and others movies. new show new episode pilot u will lead to 1 million hours of viewing. bring doug season 1 to 4 you will get 20 to 40 years old viewing not kids 2 to 12 because they dont know doug only pokemon stuff. See netflix is the not the bad guy they are the good people to bring best network tv to bring shows that we cant even get on tv these days. So nick, disney, cartoon and disney xd bring your shows and everything to netflix and start counting the views and hours we are streaming from netflix.

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