Leave it to the worrywarts to turn a Netflix (NFLX -8.95%) success into a problem.
The Wall Street Journal's "Heard on the Street" column this morning takes a look at the video service's appeal to children, but also concludes on how it may ultimately backfire on Netflix.
Miriam Gottfried's column keys in on the wide availability of commercial-free content from Viacom's (NASDAQ: VIA) Nickelodeon and now even more Disney (DIS -0.27%).
Is that spoiling kids and parents into expecting commercial-free programming? Will kids now rely less on the Nickelodeon and Disney Channel cable networks for fresh entertainment?
Sanford C. Bernstein research is introduced in the piece. TiVo data shows that ratings during this year's first quarter for the kids' cable genre rose 8.5% for children who aren't streaming content but only 0.4% for those who did. It's easy to conclude that Netflix streaming is eating into numbers of young viewership, but this seems like an incomplete study.
Kids that are streaming content are likely in more affluent homes than those that are not. They're also using those tablets and video game consoles for more than just streaming video. They're playing apps. They're surfing the Web. They just happen to have more entertainment options than the kids that don't have online access.
"If Netflix gets too popular with kids, it could find fewer content companies willing to play in its sandbox," Gottfried concludes.
It's not a fair knock.
Okay, so maybe kids won't interact with Netflix the way that adults do. Thanks to Netflix specializing in prior seasons, shows including Mad Men have seen a major pop in ratings. That may not necessarily happen with kid shows, but what do you think would happen if Viacom and Disney pull their Netflix content?
For starters, they would be forgoing the meaty licensing revenue that Netflix pays. However, does anyone really believe that these kids would just flock back to cable? Of course not. They'll find new shows.
How about consumer products? TV ratings are only material for when Viacom and Disney need to renegotiate cable deals or set advertiser rates. However, the exposure to Netflix kids can pay off in different ways. They can ask for toys and licensed products of the shows that they are streaming. Disney is better than everybody at making sure that a property gets milked through its theme parks, retail stores, and third-party licensing deals. Families paying for Netflix are more likely to have the disposable income that will make them magnetic to kid-friendly properties. Do you really think that Disney and Viacom won't want to play in that sandbox?
Jumping to an incomplete conclusion on incomplete data isn't right at all.
