New Report Says Streaming Hurts Kids, Off-Net Programs

Analyst lowers earnings estimates for Viacom

By Jon Lafayette -- Broadcasting & Cable, 4/26/2012 8:49:49 AM

A new report indicates that the availability of programming through streaming services such as Netflix is affecting traditional television networks that show kids programming and off-net reruns.

Sanford Bernstein & Co. analyst Todd Juenger, a former TiVo research executive, used TiVo set-top box data to analyze differences in viewing behavior between streaming home and non-streaming homes.

Juenger found that "streamers' viewing choices have changed over time, indicating Netflix is increasingly influencing their behavior. Kids, syndicated TV and sports have lost; broadcast, movies, general entertainment originals and news have gained."

He also found that "streamers have natural skews in TV preferences based on different household demographics (streamers are more likely to have kids) and pre-dispositions (streamers like movies, comedy, and 'smart' entertainment)."

In the fourth quarter, Viacom announced lower ad revenues and earnings in part because of a sudden drop in ratings at Viacom that some analysts suspected might be related to streaming. In his report, Juenger says Netflix is "holding the smoking gun."

Juenger notes that if kids programmers like Viacom and Disney pull their content off Netflix, it would cost each about $75 million in revenue annually starting in 2013.

As a result, he has lowered his estimate of Viacom's 2013 earnings by 7 cents per share to $4.51.

If, as a result of these trends, creators of children's programming and off-net programming decided to withhold programming from Netflix, or seek higher prices, that would have a negative impact on Netflix's earnings, Juenger added.

Juenger says that owners of premium, serialized original content, including AMC Networks, News Corp. and Time Warner should be expected to embrace (and seek higher prices from) Netflix. "This upside is usually offset by audience declines for syndicated TV programming which makes up the majority of hours on those networks," he added.

Juenger also noted that "Netflix subscribers do not seem to be candidates for cord-cutting, but rather passionate TV and movie enthusiasts. They want more TV, not less."