Commentary

Are TV Networks Making A Mistake With Netflix?

by Wayne Friedman , Staff Writer, October 2, 2015

Maybe major media companies have dipped their toes too deep into the waters of subscription video-on-demand operators like Netflix and Amazon.

In an investor meeting, David Zaslav, president/chief executive officer of Discovery Communications, said this practice doesn’t make sense. "It’s just not rational that all of us in the content business sold our content to a distributor and have allowed that distributor to gain so much share and offer it without our brands ... Ultimately, content is what sells every platform."

Versus other networks, Discovery isn’t in much of this bind. It did make some deals with Netflix for its non-scripted programming some years ago, and pulled back in other areas -- kids programming -- with the subscription video service. But Discovery has no plans to pursue a big slate of scripted TV programming.

Zaslav did hit on something important: that while live TV viewing is still king, increasingly many viewers are happy to take their time in getting to a current season’s episode or past seasons episodes.

This goes to the argument that there is too much good TV for viewers to consume live — or, at best, in the near-term. Instead, TV viewers rely on their DVR units, VOD services, ad-supported digital services -- or, yes, Netflix -- to view that content whenever.

So maybe getting the newest, freshest shows around isn’t all that important -- especially for younger viewers?

Still, anywhere from 57% to 66% of TV viewing is live, same-day viewing. So, TV broadcast networks still cling to the idea of live viewing -- that, for example, viewers might rush to catch up on a previous season’s worth of shows to be ready for the new crop of episodes.

But what if this is decreasingly not that important? So here we go back to the likes of Netflix, fully happy to buy up recent -- but not necessarily current -- seasons of TV shows.

Netflix business then seems to be built on an oversupply of good TV programming -- kind of like a library, or a bookstore. Lots of good stuff to get through.

So -- what’s the rush?

netflix, streaming, tv

7 comments about "Are TV Networks Making A Mistake With Netflix? ".

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Ed Papazian from Media Dynamics Inc, October 2, 2015 at 2:27 p.m.
Two comments.

First, we have to stop eqauting broadcast primetime TV with all of TV. It represents a small fraction of TV in its totality across all dayparts, including cable and local programming by the stations. So, while live viewing does represents about 65-70% of the average broadcast primetime audience, it is a much higher percentage of total TV consumption.

Second, as I pointed out in a post some time age, Zaslav is perfectly right in pointing out the short sighted stupidity of the networks in allowing Netflix and other SVOD entities to use program content that was created originally for the networks. Sure, the producers, and their network "partners" make a few extra bucks this way----but at a great cost in accelerated rating fragmentation to the networks. Were this supply of off-network content limited to normal syndication channels---independent ststions and basic cable----as in the past, this would put great pressure on the SVOD folks to generate enough worthwhile content for their subscribers.
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Douglas Ferguson from College of Charleston, October 2, 2015 at 3:02 p.m.

Viewers don't watch brands. They watch shows.

Todd Koerner from e-merge Media, October 2, 2015 at 5:28 p.m.

Good points, Ed, but we know that the bif producers/studios have been supplying rival networks for decades - Twentieth Television and WB supplied a lot of programming in the past to every network. Perhaps it is a sign of the weakening secondary environment that such programming is not the cash cow it once was. Getting those gross backend points ain't what it used to be. I'm sure it has had an impact on the vaunted packaging fees that agencies charge.

I foresee a time when negotiating a supplier's deal will become more complex as producers consider this new financial landscape.

Leonard Zachary from T___n__, October 5, 2015 at 12:12 p.m.

Viewers simply want to be in control. Curated linear TV at a specific time does not meet that criteria. The cost to produce high quality content is no longer a barrier to entry which helps the "broadcast prime time" nnetworks Ed relentlessly endorses. Ed when was the last time you watched the 6 o'clock evening news? David Zaslav has done amazing things with Discovery but the irritation displayed showcases a lack of innovation that all "broadcast prime time" networks face- how do we adapt and deliver what the users want?

Ed Papazian from Media Dynamics Inc, October 5, 2015 at 1:01 p.m.

Leonard, again you are stating that "viewers want to be in control , implying that this is true of all, or the majority of viewers, when what is actually the case is that "some viewers---mainly light viewers, I suspect---want to be "in control", always dictating exactly when they want certain content and excactly how to get it.

By the way, I'm going to publish a book shortly called "TV Now and Then" which you should make a point of reading, Leonard, as it certainly will show you how little I endorse what the broadcast TV networks are doing on the content front. Also, to answer your recurring question about when I last watched the 6PM news---I take it that the 6PM news is not one of you favs----I don't watch the 6PM news, either---- nor the 11PM news.

One last point. You say that "the cost to produce high quality content is no longer a barrier to entry". Are you contending that the "original" series fare that Netflix and Co. is offering is as appealing or much more appealing than what the networks are offering, but also much cheaper? Have you any data regarding how much audience tonnage Netflix gets via its "originals" versus movies and off-network fare?

I think that the TV networks would be delighted if all Netflix offered was original made-for-Netflix content. Were that to happen---and I doubt that Netflix would ever try to get by with only such programming, even if it paid what HBO usually pays---which is often higher than a typical network program license fee--- Netflix would be in deep, deep trouble. Too many of its "original" series would be "bombs". The risk of relying only on dramas and comedies is too great; moreover, most people need other fare---news, sports, cartoons for the kids, etc.

Leonard Zachary from T___n__ replied, October 7, 2015 at 3:36 p.m.

Have you ever been on YouTube or Netflix???

Do the "Networks" know they are competing against a universe of user produced content on an open system unlike OTA TV and Cable?

Do you own a smartphone??

Ed Papazian from Media Dynamics Inc, October 7, 2015 at 5:17 p.m.

Leonard, the actual amount of user produced content viewed on YouTube is minimal, according to Nielsen. I suppose your answer to that is that Nielsen is wrong, but I doubt it as the quality of the user-generated content I see on YouTube is pretty poor. I doubt that the TV networks or cable channels need to lose much sleep if that's their "competition".

As for Netflix, surely you realize that most of what is watched by Netflix subscribers is high cost content--not YouTube-style "user generated" stuff. Even so, a typical Netflix subscriber devotes only about 50 minutes per day to Netflix. Some of the remaining 3.5-4 hours goes to other SVOD services and a little to YouTube, and some also goes to PBS and pay cable, but the remainder---probably 2.5-3 hours a day is spent with "regular" TV content.

I do agree with you that Netflix and, to a lesser extent, Amazon, Hulu Plus and the new HBO service are a threat to the network's primetime entertainment series ratings, but this is because they are using, for the most part, "quality" content that was originally aired and, in many cases, initiated, by the networks, plus, of course, a growing amount of their own "original" fare. The latter, however, does not come as cheap as you may think, nor does it attract the bulk of SVOD subscriber usage. There's not enough of it and the quality is spotty---so far.

Sorry, but I can't buy your idea that free, user created content, accessed online, is going to steal away a great deal of broadcast network and/or cable viewing tonnage.