Commentary
If Netflix Is No. 1 U.S. TV Network -- And It Doesn't Sell Ads -- Should You Care?
- by Wayne Friedman , Staff Writer, February 22, 2016
Folks everywhere from NBCUniversal to Nielsen and comScore are wondering: What are the viewing numbers for Netflix?
Still, execs at traditional TV networks may be just rolling their eyes and thinking, “Netflix doesn’t sell TV advertising, and that means they don’t compete with us. So who cares?”
But there are those 43 million Netflix subscribers
who are watching lots of TV -- viewers who aren’t watching other things.
Many analysts have pointed to a direct association between Netflix viewing and erosion for some traditional TV
networks.
Howard Shimmel, chief research officer of Turner Broadcasting, recently offered some eye-opening numbers. ”Based on our methodology," he said, "Netflix was the number-one rated TV network total day, U.S.-based.”
Are you interested now? If TV viewing is turning to more advertising-free subscription VOD services, TV executives want to know.
"Netflix reports its gross streaming hours," Shimmel said at the Media Insights & Engagement Conference, according to advertising publisher/consultant, Warc.
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"We've built a methodology at Turner to [assess] the Netflix numbers. We estimate how much is U.S. versus international, how many people per stream are watching, and how much is on the big TV, versus on some other device.
"Is it a perfect measurement? No. Do I feel better, as a researcher, giving my management some line of sight that's based on some data and instincts and what I believe to be a pretty solid rationale? I think the answer is, 'Yes.'"
And that’s the key. Forward-thinking TV executives increasingly need to think about the fast-changing media-TV ecosystem. At some point, they assume, there will be more fractionalization of media.
But unlike others before it, Netflix doesn’t want any third party to measure its viewership. It is not important to its business, the company says, where it has its own first-party, heavily detailed digital data not encumbered by old TV viewing formulas.
For competitors, it’s a different story. This isn’t 1992, when advertising-supported cable networks were still of little consequence to the broadcast networks, and premium cable networks like HBO and Showtime were niche viewing players.
The big shifts have come, at least in part, from a company that doesn’t sell -- nor want -- traditional TV advertising.
Wayne Friedman is West Coast Editor of MediaPost. You can reach Wayne at wayne@mediapost.com.
That makes Netflix just like its audience: It doesn't want advertising. Yes, people will still watch ads, but only if you force them. And that seems less easy to do with each passing season.
According to our own calculations, Netflix is generating viewing tonnage across a total day that amounts to roughly 5- 6% of all TV/SVOD viewing. Accordingly, it is about the same size as one of the fully programmed broadcast networks and in some cases, slightly larger. Our own analysis of what Netflix users watch, as presented in the just released edition of "TV Dimensions 2016", reveals that they tend to be fairly well below the norm as broadcast network viewers but are more likely than the norm to watch cable shows. What this tells us and how it relates to the demographics of Netflix users is described in some detail in our own report. While avoidance of TV commercials is probably one of the factors, its importance is being way overblown. What really drives Netflix subs is a desire for more diversified and out-of-the-ordinary content as well as hands-on control of content access---watching what you want, when you want it.
Thanks, Ed. Very interesting insights...
Ed your calculations seem a bit low given the Cable Co estimates on evening broadband usage and Netflix as the biggest payload. What gives? Skewing?
Looking at those numbers, they treat Netflix as if it were a network. Yet some portion of its viewing is still, essentially, video store replacement. I consider that important because, if we take Ed's 5-6% number, the key question is what portion of that 6% is "taken" from other viewing and what portion is added - not a competitive take-away?
Leonard, I was referring to the total day, not just primetime. Actually, our investigation reveals that Netflix users are very sub par in terms of watching the broadcast networks' early AM and daytime shows and early evening news but their usage perks up considerably around 7 PM and up to midnight. It's here where they seem to have the most negative impact on broadcast network viewing, but this is only a three to four hour window that involves about 30-35% of an average person's TV time. I should add that this finding is entirely consistent with the Netflix demographic signiture which is very heavily 18-49, better educated and away from home much of the average weekday before 7PM.
Focusing on primetime, I would estimate that Netflix has a share of audience in the 7-8% range. The three fully programmed broadcast TV networks ---ABC, CBS and NBC---- have a combined share of around 23%. All of the rest goes to cable ( about 50-55% ), independent TV stations, including their Fox and CW programming ( about 6-8% ) , PBS, local cable and other SVOD services (8-10% ). As a guess, I believe that Netflix is costing ABC/CBS/NBC about 2.5 share points in primetime, which is dispropportionate to its overall share of primetime viewing. Hopefully, Nielsen will eventually give us some hard data on viewing, not streaming, so we can stop guessing and really get a handle on SVOD's competitive impact.
Does anyone get it? The gain of 'internet TV' if you will is due exactly to the various cable TV providers cramming so many unwanted channels down the consumer’s throat year after year.
The cable TV companies always have the highest prices in all categories, yet have the very lowest customer satisfaction in all categories for decades. How can any real business survive this oxymoron of highest prices and lowest satisfaction? The answer is simple. The cable TV companies are real life and effective monopolies. Another example: Look, how the cable TV companies rob nearly all their customers by charging truly outrageous prices for the cable modem, yet the cost never goes always but only gets higher. Again, I submit you are seeing a revolt against Cable TVs monopoly position which is entrenched and long standing.
Gene, if you are right why is it that so many Netflix subscribers are also basic cable viewers? Why aren't they going all the way in their "revolt" and dumping cable? Yes, it's true that many cable subscribers are compaining about rising cable fees but that's nothing new. The same kinds of compaints were voiced---and loudly---in the 1990s and over the past 10-15 years. And, yep, a certain percentage of people opted out and became broadband-only or no TV at all consumers. But not all that many---if you check the stats. As for digital TV replacing cable in a meaningful way---like destroying cable's viability due to massive subscriber defections-----that doesn't seem likely because complaints or not, the alternative---opting out and using only digital content----does not provide many forms of content that many people want---nor is it likely to.
Just for the record I, too, am not happy with my cable service, its pricing and the menu of packages offered, but I recognize what the alternative ----digital-only-----is lacking and, therefore will continue to subscribe to cable, while grumbling about it every month when I get my latest bill.
Ed gross ratings by day parts without any granularity is not applicable therefore your results are Voided.
Leonard, I don't understand your point and my estimates about the relative share of audience for Netflix across all dayparts as well as primetime cannot be "voided" due to lack of "granularity". What did you expect, second by second estimates by various shows for every Netflix movie or program?" Looking at total viewing tonnage across channels is a perfectly valid way to assess the overall effects of their total program content, one against the other.
Re comment "As for digital TV replacing cable in a meaningful way---like destroying cable's viability due to massive subscriber defections-----that doesn't seem likely because complaints or not, the alternative---opting out and using only digital content----does not provide many forms of content that many people want---nor is it likely to." Well, that's not my experience. What I do need is an app to manage the programs I view across many, many channels. I'm always forgetting where I stopped watching (series and episode numbers) where I was (Netflix, Amazon, Channel4 -love the brit shows-Acorn.tv, Vimeo, YouTube, PBS, NBC Nightly News) and even what program I was watching as there is just so much out there I don't give Comcast, er, xfinity a thought and now prefer watching on my large screen iMac desktop rather than a dumb TV. And to send others off the edge, yes, I watch Amazon.com and Netflix movies on my iPhone 6, late at night, in bed, under the covers. I chose the larger iphone instead of buying an iPad which is because I like a screen I can carry in my purse. Viewing tonnage is just what it sounds like. Experiencing viewing choices is a better way to start to appreciate the option of going all the way.
Leonard, gross rating points by daypart is merely the sum of the 'granularity' (i.e. minute by minute viewing) averaged over the duration of that daypart. Accordingly, your comment is voided, and Ed's data should stand (which pretty much resembles Australia and the UK data), in lieu of any other evidence.
Ruth, I didn't say that every single person is a dedicated "linear TV" fan nor did I say that not a single person has "cut the cord". What I'm referring to is the total weight of TV usage----and non-usage-----across the entire population, not the relatively small number of exceptions at the extremes. I, for one, just about never watch a primetime broadcast network show---except for specific research purposes like writing my latest book about TV---but I recognize that not everyone feels about such "pap" as I do. You and I may be different from the statistical norm but that doesn't change the normative averages all that much. There are too many people out there and many of them aren't terribly bright or demanding about the kinds of TV they watch. Oops, I better stop, least my comments get "voided" by you know who.
Dear Ed and John,
Whatever experts say about "Ratings", Dayparts" , and its this that and best and but the facts are best eloquently stated by Barry Diller recently, "It's a Con Game".
The end Truth is TV is selling less Audience for more $$$$ historically and than any other advertising channel.
Better yet TV is not accountable for Attribution or proof that the TV ad spend converts to Sales$ yet you claim granularity.
Amazing logic and rationale.
As Barry Diller said, "Its a Con Game".
Leonard, Barry Diller's off-hand and very unconvincing remark is extrmemly poor documentation for your case against ratings. I saw the video. Also, TV ad sellers were never responsible for advertiser sales nor is it reasonable to expect that this should be the case. That's the advertisers' responsibility, along with fashioning effective ad campaigns that motivate consumers to try and buy their products. Finally, you keep pounding away at TV for selling declining audiences at higher CPMs--- or costs per viewer--- as if this is a unique and unsustainable situation. Next time you go grocery shopping check out the sizes of the packages and how well they are filled with the prices now and, say 10 years ago. Marketer after marketer---yogurt is a prime example----has cut the size of its product and either held the price constant or upped it. They give you less for more, yet they survive because consumers keep buying. The TV networks function in the same manner. Rating fragmentation has cut down their average commercial audience delivery while CPMs keep rising. But advertisers will continue to buy because of a lack of suitable and effecftive mass reach alternatives that allow them to employ TV commercials as their primary communications form. Moreover, there are other reasons why many keep using TV---merchandising, high profile, buzz-generating program environments, etc.
I have a high regard for Barry's credentials as a TV network executive and his subsequent adventures in show biz---but he hasn't a leg to stand on regarding the comment that TV ratings are a "con game"----implying that they are either irrelevant or hopelessly inaccurate. Whie I'm a frequent critic of TV time buying and the rating system, at this point, its better than anything else when it comes to "linear TV". It remains to be seen whether Nielsen can master out-of-home venues and digital platforms, however.
Barry has More Weight than you. Sorry.
We agree TV ads do not deliver Attribution !
I did not know Consumers now buy TV ads ! Thanks for the info !
And we agree Less for More$$ is a Con Game !
Leonard, when it comes to TV audience research, I'm afraid that Barry is not the heavyweight you assume and I suspect, if asked, he would concede the point. Once again, I invite anyone who gives a hoot to Goggle "Barry Diller, TV ratings are a con Game" and watch the video to draw their own conclusions. Barry starts off by saying that Nielsen began measuring TV with diaries---wrong!!! Then he rambles on briefly and finally makes the statement you keep quoting in a rather offhanded manner. The other members of the panel ignored his remark.
I don't recall saying that consumers buy TV ads.
Finally, yep, everything these days is a "con game", not just network TV. As for TV ads not delivering attribution, we agree but that's obvious. TV ads were never sold on the basis that the TV network guarantees the advertiser a certain amount of sales response. That proposition is simply impractical unless the advertiser gives the network complete control over the design, pricing and distribution of the products, allows the network veto power over the positionning strategy and creative execution for the campaign and, finally, gives the network hiring and firing power over its marketing managers and the agency if they do a bad job. The network sells access to audiences; the rest is the advertiser's responsibility.
Ed you made an apple to apple comparison of consumers buying less for in CPGs versus CMOs buying TV ads- the two are different !
The CMOs with the $$$$ to spend on TV ads Want Attribution.
If TV ads are relying on just selling access to audiences then the Harvard Business case for the demise of TV broadcast ads is here......
Imagine buying a product that has not changed in 50 years............hmmmm