The Danger of Television Repates
As 2011 wrapped, Nickelodeon suffered a ratings drop big enough to ripple throughout Viacom’s entire operation. The company’s total ad revenue for the last quarter dropped by 3% due to Nickelodeon’s lowered ratings. Viacom CEO Philippe Dauman was quick to dismiss initial reports that Netflix streaming was mostly to blame. Dauman pointed out that the data on streaming did not increase in the same time frame as the Nickelodeon drop (ibid). Then, late in April 2012, Bernstein Research issued a report that directly refuted Dauman’s claims: Nickelodeon viewership was down 6% in homes with streaming, but up 2% in home without streaming.
A quick look at the numbers, though, reveals a slightly different pattern: with children’s networks, all streaming homes have a negative difference in growth when compared to non-streaming homes. The difference in ratings for Nickelodeon is -8%, while Nicktoons, Disney XD, and Teen Nick sit at -16%, -17%, and -36% respectively. The channel with the smallest difference is Cartoon Network, with -3%. Time Warner CEO Jeff Bewkes blamed the drop in Nickelodeon-syndicated content ratings on Netflix, stating that part of the reason for Cartoon Network’s ratings increase was due to not having “shows spinning” on streaming services.
While that may have something to do with it, streaming has paid off for AMC who distributes nearly all flagship shows on Netflix. Bernstein Research shows higher ratings for AMC’s original programming in streaming homes than in non-streaming. The four biggest broadcast networks have also seen more viewership in streaming homes. In fact, the report reveals that people with streaming services tend to watch more television on the whole. Based on this study, maybe the question isn’t about if a network sees a total viewing decline, but rather if that decline is specific in streaming homes.
If streaming households watch more television, why aren’t they watching certain channels? First, there is a definite trend in children’s television that might be tied to the emergence of Netflix Kids, but no research is readily available to show causation. Second, there’s an important finding from the Bernstein Research: off-network syndication viewing is down by 19 percent in streaming homes and 9.7 percent in non-streaming homes. This may provide some clue: Teen Nick saw the biggest difference between streaming and non-streaming households—a painful -36%—and has only one original program currently airing; Disney XD has seven original programs and a difference of -17%; Nickelodeon has 20 original programs, and Cartoon Network has 25 combined with 11 Adult Swim programs. The networks with most original programming (in descending order) are: Cartoon Network, Nickelodeon, Disney XD, Nick Toons, and Teen Nick. Now, the shows best able to keep just as many streaming and as non-streaming homes (in descending order) are: Cartoon Network, Nickelodeon, Nick Toons, Disney XD, and Teen Nick. There is a strong correlation between these two lists, save the swap between Nick Toons and Disney XD (with differences of -16% and -17%, respectively). In this case, there’s reason to believe that networks’ ratings are not just effected by content distribution on streaming services, but also the capacity to show more original content.
Days after the report was issued, Philippe Dauman stated that the mentioned numbers are impossible, since Nickelodeon programs on Netflix only amount to 2% of total viewing time for the channel. Of course, it’s possible that Netflix viewing of Nickelodeon is small with a noticeable impact on television viewing. Stepping into a space of pure conjecture: it takes less time to watch a 1-hour program of choice than to have to turn on the TV and wait for something worthwhile to play. But, more importantly, according to Phillipe Dauman, “…we are getting nice revenues from these (subscription VOD) deals.”
Online television can be used to build program loyalty and is a great way for people to catch up on programs. In fact, if these numbers show anything, it’s that online TV viewing is preferred over traditional TV viewing. As patterns emerge, it becomes clear that people watch TV online because of the increased access and ease. This comes as nothing new, but it does indicated that people still prefer live television as the way to watch new programming. However, people are not interested in sitting in front of a screen for a long period of time with no promise of content that appeals directly to their interests.
By Zac Stockton, Product Manager