Netflix is the Frenemy

At The Cable Show this week, Cox Communications President Patrick Esser referred to Netflix and its Chief Content Officer Ted Sarandos — on the same panel — as a “frenemy.”

It’s one of those comments that will live on for a long time, I suspect, like Jeff Zucker’s “trading analog dollars for digital pennies” from NATPE in 2008, and Comcast CEO Brian Roberts’ characterization of Netflix last year as “Rerun TV.”

The TV business and Netflix do have a prickly relationship, however. Netflix offers a service that can boost interest in TV given its large library of TV episodes, yet it hogs so much bandwidth -- nearly one-third of all prime-time Web traffic comes from Netflix. But that can also be a good thing because it can boost adoption of broadband service. There’s also evidence so far that Netflix streaming is not hurting cable operators. TV viewers aren’t cord-cutting as prognosticators had predicted.

But whether Netflix is helping or hindering TV networks is a whole other story. On the one hand, there have been reports that young Netflix streamers are responsible for Nickelodeon’s precipitous drop in ratings of late, as kids watch network episodes on Netflix rather than on TV. But then there’s the “Mad Men” boost. At the Cable Show, Sarandos suggested that the “Mad Men" season five ratings debut at 3.5 million viewers -- more than a million above last year’s season average of 2.4 million -- was due to the show now being available to Netflix streamers.

Here’s the thing -- both might be true, and both might be untrue. It’s entirely possible that “Mad Men” has won some new converts, thanks to Netflix and the ability to catch up on past episodes. And it’s entirely possible that the ease for kids in watching shows online has led to Nickelodeon’s ratings drop. 

It’s also possible that “Mad Men’s” four Emmys might have more to do with its ratings rise. “Mad Men” might have hit its tipping point before the fifth season anyway. And Nickelodeon might have siphoned viewers even without streaming options.

My point is -- it’s too early to tell. It’s best not to make assumptions too quickly, but instead to keep studying and be prepared for how the business plays out.

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