Wall Street Tells Viacom: Turn Off the Nickelodeon Netflix Stream

Dora the Explorer If Viacom (VIAB) has a claim to fame among the pre-high-school set, its name is Nickelodeon. Home to kiddie staples ranging from Dora the Explorer to SpongeBob SquarePants to iCarly, the Nickelodeon network is "top-rated" among kids, Viacom boasts. So why is CEO Philippe Dauman nervous about his ratings?

One word: Netflix (NFLX).

Popular as children's television is on ... well, television, it's pretty popular on this purveyor of video over the Net as well. So much so that analysts are starting to wonder if kids might prefer to watch their favorite shows on Netflix -- what they want, when they want it -- rather than tuning in to Nick to see what Viacom might be showing at any given hour.

Asked whether such a trend might explain Nickelodeon's slipping ratings back in February, Dauman demurred, blaming deficiencies in Nielsen's methodology in calculating viewership instead. He even went so far as to declare: "We don't think that the availability of the limited amount of Nick library content on Netflix ... has had a significant impact."

But doth Dauman, perhaps, protest too much?

Wall Street Weighs In

A few days ago, Bernstein Research suggested this may be the case. According to Bernstein, allowing Nick programming to be distributed on Netflix really is having a "direct, measurable impact" (and not the good kind) on the live TV ratings of Viacom. It's preventing Cartoon Network parent Time Warner (TWX) and Walt Disney (DIS) from garnering as many TV viewers as they might have, had Netflix never been invented. Bernstein argues that the networks should probably pull their programming from Netflix sooner rather than later if they want to hold on to their viewership... and their profitable television commercial revenue.

Not just "should," but "will." Indeed, Bernstein warns that unless the networks "pull their premium kids' programming from Netflix asap," it may "be too late."

Yes, you read that right. Viacom and its fellow cartoonists have created shows that kids love. They've built out their brand, created fan loyalty, encouraged viewers to seek out their content in multiple places, and given them an easy way to do it. They've been wildly successful at this.

But according to Wall Street, once you've created a kids' show and it proves to be wildly popular, first on your own network and then later on Netflix, the correct response is to yank it off Netflix. To not give the consumers what they want. To instead take away what they want and force them to accept what you choose to give them, when you want to give it to them, in predetermined time slots. Or else your network dies.

Stream No Evil

Balderdash. This makes no sense. The truth is that Nickelodeon is not dying on television. It can't die. If it did, there would be no one making the programming in the first place for Netflix to restream it later. The truth is that producing new content for television, then reselling and re-reselling it via Netflix and other media, helps to reinforce consumption of these shows multiple times.

It's cross-promotion like this that encourages viewers to seek out new episodes on "live" TV, and to seek out old favorites on Netflix. It's the media equivalent of building a Starbucks on every street corner, and when you run out of street corners, "opening new Starbucks in the restrooms of existing Starbucks" (as the joke used to go). Saturation. Domination. Profit!

Rather than pull its content from Netflix (which, Bernstein warns Netflix shareholders, will hurt their company's subscriber growth), Viacom and its peers should make the more logical choice: Viewers want to watch more content on Netflix? Fine. Point this out to Netflix. Point out how valuable access to Nickelodeon content has become to Netflix's subscription base, and charge more for it!

It's really as simple as that, folks. Give the people what they want. Charge what the market will bear. Lather, rinse, and repeat.

Motley Fool contributor Rich Smith holds no position in any company mentioned. The Motley Fool owns shares of Walt Disney and Starbucks. Motley Fool newsletter services have recommended buying shares of Walt Disney, Starbucks, and Netflix, as well as writing covered calls on Starbucks.

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Michele Latsachack


May 22 2013 at 10:42 AM Report abuse rate up rate down Reply

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May 04 2012 at 9:52 PM Report abuse rate up rate down Reply

More and more people are dumping pay for view tv for the standard Antennae TV (i did)...and if VIacom wishes to make any money from these people whatsoever (in the form of merchandising)...they better leave the streaming alone....if you remove the streaming...the kids will not know your show even exists...

May 04 2012 at 6:24 AM Report abuse rate up rate down Reply

With the advent of the net, television as we know it will disappear.

May 03 2012 at 8:54 PM Report abuse rate up rate down Reply

The Neilson rating thing neesd to be either dropped or modified to accept web-streaming and alternative viewing options! My current favorite TV show, The Big Bang Theory, plays at a time where I cannot easily sit and watch it. Instead, I record it to my DVR and watch it about an hour later, between putting my son to bed and getting ready for my next MMO raid and usually with my wife. That view apparently doesn't count according to the Neilson setup because I didn't watch it as it was broadcast. It puts one of the most intelligently humored shows at risk if we were to only go by Neilson. If that ever happens, thankfully I have seasons 1-3 on DVD and 4 coming soon...

May 03 2012 at 4:28 PM Report abuse rate up rate down Reply

I think, IMHO, that NEILSEN ratings need to figure out a way to use streaming and DVRing in their ratings. SO MANY good shows are being cancelled due to flawed data. With the technology that MODERN users take advantage of, we can watch the shows when it is convenient to us. Neilsen data is outdated. GET WITH IT NEILSEN AND TV EXECS.

May 03 2012 at 3:00 PM Report abuse rate up rate down Reply

Of course kids like it better on Netflix. If you remember being a kid, you can watch the same episode over and over and it only gets better with each viewing because you already know what's going to happen. (Completely the opposite of adult TV viewing where we get bored when we know the plot.) Little kids will watch an episode of something, rewind, and watch the whole thing again (multiple times) in one sitting. They don't really want the program to change or as you state, encouraging "viewers to seek out new episodes on 'live' TV". The only reason you'd ever need new episodes is for the sanity of the parents.

May 03 2012 at 2:42 PM Report abuse rate up rate down Reply