Netflix's Billion-Hour June: Big, Just Not Quite as Big as You Think

Streaming Service Is Rising, but Americans Still Watch Far More Traditional TV

By Published on .

Netflix's 1 billion hours of streaming viewership in June is an impressive number, one networks and marketers are rightfully noting. It just might not cast the same shadow over TV that it seems to at first.

After CEO Reed Hastings took to Facebook this week to tout Netflix's achievement, analysts said the service had surpassed any individual TV network in homes with Netflix.

But that 's assuming Netflix is more akin to MTV or Discovery Channel than Comcast or Time Warner Cable. "Netflix clearly isn't a cable network; it is more of an MSO," Janney Capital Markets analyst Tony Wible said, using industry jargon for cable and satellite TV services. That means it's paying many networks for the right to show subscribers their content -- not simply tearing eyeballs away without any compensation.

TV on the whole continues to dominate. People watch more than five hours of traditional TV a day each month, Mr. Wible said, citing Nielsen research. Netflix's billion hours of streaming content works out to about 80 minutes of viewership per day on the platform, he said. And that 's for Netflix subscribers, not the much larger pool of traditional TV viewers.

"If you look at it this way, that 1 billion is not nearly as big a number," Mr. Wible said.

Mr. Hastings' announcement could still be a warning for advertisers and ad-supported TV. "While it is true that we have not yet seen dramatic 'cord-cutting' of cable-TV subscriptions as a result of Netflix usage, cord-cutting is likely going to grow in popularity as Netflix usage continues to grow," Wedbush analyst Michael Patcher said in an email.

"More importantly, hours spent watching Netflix without commercials cannibalizes hours spent watching commercial-sponsored television, meaning that overall ratings for commercial television shows will (and likely have) suffered," he said. "This, in turn, will lower the advertising rates commercial advertisers are willing to pay to the television networks, cutting into their television profits."

The average cable bill is $86 monthly, according to a study published by the NPD Group in April. Netflix charges just $7.99 per month for streaming.

According to Mr. Pachter, this means Netflix customers pay a little less than 23 cents per hour for content without commercials, while cable-TV subscribers pay around 56 cents per hour for programming with advertisements.

"The message to advertisers is there is a continued risk to ratings , and as a result, to advertising revenue," Mr. Wible said. "Networks will become more desperate to sell digital rights to make up for this advertising shortfall."

Animation and kids programming are most at risk, Mr. Wible noted, while sports is the most immune.

But programmers should be figuring the impact on their ad model into their pacts with Netflix. And Pivotal Research analyst Brian Wieser believes the situation is less dire than it seems.

"As a practical matter I don't believe that Netflix is substantially cannibalistic across the entire population," he wrote in an email. "Consumption of ad-supported video is generally still rising, so it's more likely than not that Netflix leads to incremental viewing of non-ad-supported video. To that end, while good news for Netflix will lead many observers to talk further about the 'death of TV,' it's really more about ongoing growth of video given an expanded range of choice of video for consumers."

In this article:
Most Popular