Netflix says not behind Nickelodeon ratings fall

Wed May 23, 2012 4:20pm EDT

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By Yinka Adegoke

BOSTON, May 23 (Reuters) - Netflix Inc isn't responsible for a ratings dip at Viacom Inc's Nickelodeon children's network, and is unlikely to lure viewers away from its cable TV partners, said the programming chief at the streaming and DVD rental company.

Some analysts have cited Viacom's decision to license hundreds of hours of some of its popular children's shows to Netflix as a reason for a surprise dip in its ratings in recent quarters. Viacom has disputed that claim, and Netflix Chief Content Officer Ted Sarandos backed its partner on Wednesday.

Sarandos said Netflix's programming strategy was focused on high engagement with its customers by allowing them to personalize their choice of favorite shows. This makes it unlikely that any one show would get watched very broadly, he noted.

"People's taste are so diverse that no specific program or network has such high viewing concentration that you'd see that cause and effect on ratings," Sarandos said on a panel at the National Cable & Telecommunications Association's annual Cable Show in Boston.

Netflix has been at the heart of much controversy in the cable industry in the last year.

Netflix is pitched as a friend of the business since it spends hundreds of millions of dollars on library content from programmers. But traditional pay-TV providers also see it as a threat, since consumers could drop their $80 a month cable packages in favor of the $8 video package of library content that Netflix offers.

However, industry data show that cable subscriber numbers have been at worst marginally down to flat mainly due to a tough U.S. economic environment over the last year.

Netflix argues that it has little impact on the ratings of cable networks from which it licenses shows. But proprietary research on TV set-top box data by Bernstein Research a few weeks ago seemed to show a strong correlation between Nickelodeon ratings declines in homes and Netflix.

Children's programming is thought to be especially vulnerable as it can be watched over and over, taking away from time watching live television.

NETFLIX HELPS RATINGS

Netflix argues that it can be used to help promote current TV shows if programmers license it older episodes. With more than 22 million subscribers, Sarandos said Netflix has had an impact on TV shows like AMC Networks' popular 'Mad Men' series.

"In the gap between season 4 and season 5 we brought maybe a million new viewers to AMC for the new season of 'Mad Men'," said Sarandos.

"People had four years to watch this show and didn't; then we gave them the opportunity to watch the show in a well-priced and well-distributed model. In that way we're quite additive."

AMC has been criticized by satellite TV operator DISH Network Corp for putting its shows on Netflix, in the middle of a negotiation over carriage fees. DISH Chairman Charlie Ergen said the availability of the shows on Netflix reduced the need to carry AMC for his subscribers.

In an interview at the Cable Show, AMC Chief Executive Josh Sapan said his company had thought long and hard before signing the Netflix deal, which he believed had bumped up viewing numbers by 20 to 30 percent, citing early internal AMC estimates.

"It's improved the viability of what we sell to cable operators because of the extra exposure it had gained, making cable TV even more important," said Sapan.

Another complaint by the cable industry is the heavy use of its broadband networks by Netflix subscribers.

Cox Communications President Pat Esser, who was also on the panel, said 40 percent of his company's broadband users used Netflix streaming service in March.

Netflix Chief Executive Reed Hastings complained in April that Comcast Corp was favoring its own Web TV services over others.

Comcast last week announced a trial in which it would charge customers by usage rather than a flat fee for Internet connection. The move was supported by Federal Communication Commission Chairman Julius Genachowski this week.

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