Commentary

Netflix Poised To Become Biggest TV Network? Who's Really Worried

Will Netflix become the biggest TV network in terms of programming hours viewed in three years? Don’t worry -- just yet.

One projections has it Netflix will grow to 69 million U.S. subscribers by 2019, up from 43 million currently, according to ARK Investment Management. So projections are that Netflix subscribers will be spending some three hours and 20 minutes a day on the service.

In total, Netflix will deliver 83 billion hours of video viewed per  year -- easily more than any network broadcast and cable (excluding sports). Nearest TV network groups will be NBCUniversal and Disney, which will only get to around 60 billion hours a year each.

Sounds incredible. Should TV networks be worried? Yes -- but not about those estimates. The biggest concern is if there are “cannibalistic” results -- that Netflix viewing is directly affecting the viewing on its own TV networks.

A few years ago, an analyst pointed to Viacom’s Nickelodeon as being affected by Netflix -- that deals with the big subscription-video-on demand service was hurting Nick’s traditional linear TV viewing.

But will the same be true for adult programming? Will Netflix deals for CBS, NBC, Fox, or ABC mean lower viewing for “Supergirl,” “The Blacklist,” “Empire,” and “Scandal”?

We all know these traditional TV networks are hedging their bets, offering up competing OTT platforms: CBS All Access, for example. Not to be left out, Viacom announced an OTT service for Nickelodeon about a year ago.

Traditional TV networks still tout access to producing premium TV shows as the reason for their continued strength -- but also find significant license fees from Netflix are decent business.

All of which gives them negotiating leverage against Netflix -- angling to keep some of this TV viewing closer to home, perhaps in new  advertising-supported and subscription-fee video platforms.

And Netflix will have some leverage as well. The same report estimates Netflix will spend $5 billion on content in 2016 -- 50% more than in 2015. And that will grow by 22% per year over the next five years.

Netflix is no CBS, NBC, CBS, or Fox as yet when it comes to producing/greenlighting scores of TV shows. But if it get to a massive scale level in a few years, look for bigger TV disruptions.

3 comments about "Netflix Poised To Become Biggest TV Network? Who's Really Worried".
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  1. Doug Garnett from Atomic Direct, April 15, 2016 at 2:02 p.m.

    In other parts of the world, the TV business has remained wise - looked carefully at the new fads and fought the mis-information that feeds the growth of the fads.

    In the US, networks and stations seem to lack that inventiveness - to stick up for what they deliver that is valuable and craft a wiley approach through new fads to a strong long term business.

    And the race to put stuff on Netflix seems like the most obvious "cave" to the fad without constructing a strong approach. 

    Why aren't networks taking advantage of the growing Netflix anger among viewers? They've lost BBC, Mythbusters, and far more just this year. Among the people I know, we're all bitching about Netflix every time. 

    But what about those big numbers? Well...big does not equate with meaningful. I wrote this post years ago about the YouTube mythology around Lady Gaga. Don't know what the exact correlation is here. But there is a general approach used by new media - to sucker us with big, but meaningless, numbers and never really talk about what's important. And, the business falls in line behind them.

    http://www.atomicdirect.com/blog/communication/an-axiom-for-new-media-big-numbers-are-not-the-same-as-meaningful-numbers/

  2. Doug Garnett from Atomic Direct, April 15, 2016 at 2:07 p.m.

    We should all read "Disrupted" by Dan Lyons which ponders (among many things) how HubSpot can be valued at $1.4B when it is losing $40M on $90M in revenue.

    So let's look at Netflix financials here. An investment of $5B on content? Given that they don't even have that much revenue they'll be operating at a massive loss once all their other costs are accounted.

    I always wondered whether Netflix had a valid business plan when they started the shift from online video store to original programming. I think we should continue wondering.

  3. Ed Papazian from Media Dynamics Inc, April 15, 2016 at 3:50 p.m.

    According to our own estimates, Netflix now accounts for 6.2% of all TV viewing, counting live and delayed broadcast TV and cable, plus out-of-home TV and SVOD. This does, indeed, make it about as large as any one of the three fully programmed broadcast TV networks in terms of total viewing tonnage across the total 24 hour day. However we also see Netflix penetration slowing in the U.S. as it must compete with more SVOD services and as the networks rethink the wisdom of letting shows that they initiated go to rival SVOP platforms, thereby competing for ratings. There are other factors that work against SVOD, in its current form, luring away the vast majority of "linear TV viewing, which we will shortly elaborate on in an upcoming series of "Mediology" white papers to be announced shortly. More later.

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