Why Networks Are Scared of Netflix (and why they Shouldn’t Be)


For those that don’t know or are not in the know, the Television Critics Association (TCA) Press Tours for the Winter Season 2016 have just wrapped up. The Press Tour features panels for all the major television, cable, and public broadcast networks to present their slate of upcoming programs to various press outlets. Recently though, digital streaming services like Amazon Prime, Hulu Plus, and Netflix have risen in popularity while network and cable ratings have been dwindling. During the NBC lunch panel, NBC Universal chief researcher Alan Wurtzel revealed all kinds of interesting analytics regarding ratings including those belonging to Netflix and Amazon. Both streaming platforms are known not just for their groundbreaking programs, but for keeping its ratings of said programs secret from its competitors. In an article outlined by Variety, NBC truly believed they had a correct estimation:

“From September through December, the average episode of Netflix’s “Jessica Jones” averaged 4.8 million viewers during a 35-day viewing cycle, according to Wurtzel’s presentation. Aziz Ansari’s “Master of None” (produced by Universal TV) grabbed 3.9 million while “Narcos” grabbed 3.2 million during the same frame. Amazon’s “Man in the High Castle,” a show that Amazon has identified as its highest-rated original series, averaged 2.1 million.”

Their data comes from Symphony Advanced Media, a tech firm specializing in gathering consumer media usage using audio receiving technology attached to consumers devices. The company had a sample size of 15,000 Netflix Subscribers (which is just a tad bit off the 69.17 million worldwide subscribers Netflix had) and used their viewing habits to come up with an estimate. So the firm is not exactly as prestigious nor as accurate as the Nielsen Ratings system but NBC was so curious about Netflix’s viewership, they went out of there way to try and hack Netflix. But when it come for Netflix to speak at their part of the press tour, chief content officer Ted Sarandos mocked NBC’s findings to be false. Entertainment Weekly reported Sarandos statement to the press:

“So there’s a couple of mysteries in play for me. One is why would NBC use their lunchtime [press conference] to talk about our ratings,” Sarandos told reporters at the Television Critics Association’s press tour in Pasadena on Sunday morning. “Maybe cause it’s more fun to talk [about] than NBC’s ratings. The second is, the whole methodology and the measurement and the data itself doesn’t reflect any sense of reality of anything that we keep track of. That could be because 18-49 year old viewing is so insignificant to us. I can’t even tell you how many 18-49 members we have. We don’t track them. It’s an advertising-driven demographic that means nothing to us. I don’t know why anybody would be spending so much energy and time and given what I believe is remarkably inaccurate data … I don’t understand the methodology of it. The outputs don’t reflect any reality that we track.”

So why is the data that NBC spent millions to find irrelevant to Netflix? Well that’s because they’re competing against an entity that has a completely different strategy about how to generate revenue and different goals about what content to put on their service. TV Networks need high ratings for individual shows because they sell advertising time based on viewership and are chained to the Nielsen ratings system. TV Networks also have to answer to affiliate stations who broadcast content to local areas and dubious satellite/cable providers in order to carry the broadcast signal to those stations. 

 Netflix on the other hand generates revenue by monthly subscriptions and access to the service is easily carried (for most people) from the internet to streaming devices so the exact ratings of individual shows doesn’t really matter. Viewers can watch popular shows like Daredevil, old programs like Cheers, or even tiny niche shows from some network you’ve never heard of. According to The Hollywood Reporter, Netflix doesn’t track and has no reason to track the 18-49 year old demographic:

“I can’t even tell you how many 18-49 users we have … we don’t track them,” he said. “Those sample sets don’t give you a lot of information when people are watching thousands of shows [on Netflix] around the world. Somewhere in the world, every second of every day, someone is pressing start on a Netflix original. … There is not an apples to apples comparison to Netflix watching and any Nielsen rating.”

So if you watch anything on Netflix, regardless of whatever arbitrary demographic you fall under and you keep coming back month after month, then it’s a win for Netflix. This also applies to Amazon Prime as their own slate of licensed and original streaming content offsets the exorbitant $99 a year cost for Free 2-Day Shipping on their site. So the only reason why NBC would want to bring up Netflix’s ratings is to deflect any conversation about their declining ratings. This act is self defeating for NBC as any attempt to derail the success of the service who intercepted Unbreakable Kimmy Schmidt and scored a touchdown after NBC themselves dropped the ball will only hurt them in the long run.

And that is why networks are scared of Netflix. They’re competing against a company that’s not restrained by their ways of doing business. They shouldn’t be scared because Netflix really isn’t competing against them; they just provide a better service at a reasonable subscription fee. I’m not saying they shouldn’t compete against Netflix but let NBC’s ratings stunt be the example to others. If you’re going to shoot Goliath’s with a slingshot, make sure there’s a rock inside instead of a dust clod.