Netflix's Internet-streaming service depressed ratings for kid-oriented networks from Viacom and Walt Disney Co. and syndicated TV shows in the first quarter of 2012, according to an analysis by Sanford Bernstein.
Sanford Bernstein senior analyst Todd Juenger, a former TiVo advertising executive, used data obtained from TiVo DVRs to compare usage of households with Netflix and those without.
"Turns out, Netflix Streamers watch just as much traditional TV as Non-Streamers," he wrote in a report. "However, there is a significant share shift among Streamers. Kids' networks (not just Nickelodeon) and syndicated shows are getting severely whacked."
In the first quarter of 2012, TV ratings among TiVo/Netflix homes in the sample grew year-over-year 2% for Viacom networks and 6% for Disney's. However, for non-Netflix TiVo subs, the ratings increases were 6% for Viacom and 11% for Disney, according to Bernstein.
Viacom and Disney will likely "pull their premium kids' programming from Netflix ASAP," Juenger speculated. If the media companies withdrew their children-oriented content from Netflix, it would cost them each about $75 million in revenue starting in fiscal year 2013, he added. At the same time, Juenger wrote, by "limiting the depth of Netflix's kids' programming library, this would make the Netflix offer less compelling."
As a result of his findings, Juenger cut his already-below-consensus fiscal year 2013 earnings per share estimates for Viacom from $4.51 to $4.34 per share. He did not change estimates for Disney, estimating the maximum impact of Netflix streaming is less than $0.04 per share and Disney "has many operational alternatives, as they are currently winning the kids' TV war."
Viacom's domestic ad sales declined 3% in its fiscal quarter ended Dec. 31, 2011, which the company blamed in part to a ratings drop-off at Nickelodeon. Previously, Viacom CEO Philippe Dauman had asserted that Nielsen's ratings figures showing a double-digit decline in Nick ratings were an "anomaly" that needed to be corrected.
On the other hand, according to Bernstein, some categories of TV -- broadcast, movies, general entertainment originals and news -- have shown higher ratings in Netflix households.
For example, AMC's Q1 ratings in TiVo/Netflix households soared 86% versus 71% in non-Netflix TiVo households. Netflix provides past seasons of AMC shows including Mad Men and Breaking Bad, which fuels "catch up" viewing and ultimately pushed more tune-in to AMC's linear TV broadcasts, Juenger said.
The data Bernstein used in the report came from TiVo's PowerWatch service, which relies on an opt-in panel of about 35,000 subscribers.
In the first quarter of 2012, Netflix added 1.7 million streaming-only video subscribers in the U.S., to stand at 23.4 million total domestically (including subs who also have DVD plans). The company's shares fell Tuesday after Netflix said domestic net adds in the second quarter of 2012 would slow down because of quarterly "seasonality." Netflix expects to add 200,000 to 800,000 net streaming subs in the U.S. in the current quarter, and add a net 7 million for the full-year 2012 (the same as in 2010).
Netflix represents the largest single component of downstream traffic during primetime hours, according to bandwidth-management equipment vendor Sandvine. Netflix streaming-video traffic over wireline broadband networks in North America climbed 30% over the past six months, Sandvine said in a report released Wednesday.
In announcing earnings this week, Netflix executives cited a record amount of streaming in Q1 but did not provide details. In the fourth quarter of 2011, subscribers streamed more than 2 billion hours of video, the company said.
"Netflix subscribers do not seem to be candidates for cord-cutting, but rather passionate TV and movie enthusiasts," Juenger observed. "They want more TV, not less."