Nickelodeon, usually a ratings star, has been on a slide recently, and several analysts this week put the blame on Netflix (NSDQ: NFLX). On Thursday, Viacom (NYSE: VIA) CEO Philippe Dauman weighed in.
Nick parent company Viacom reported a 65 percent drop in profits for its fiscal first quarter to $212 million. The drop was largely attributable to a 3 percent fall in ad sales in the company’s cable division, which accounts for nearly 80 percent of Viacom’s stock price. Analysts say the key reason is that Netflix has been siphoning away viewers from Viacom’s perennial children’s TV powerhouse, Nickelodeon, which saw double-digit ratings drops in the October-December period.
Dauman, speaking to investors following Thursday’s earnings release, dismissed that theory, suggesting the ratings decline stemmed from a methodology problem on behalf of TV ratings arbiter Nielsen.
Nickelodeon is traditionally a star performer in Viacom’s profitable TV networks division. Top Nickelodeon series including SpongeBob SquarePants and iCarly have been streaming on Netflix since April 2009. However, with viewership for kids 2-11 declining 14 percent during the three-month period, a number of equity analysts have suggested that during the crucial pre-holiday periods during which kids are away from school and traditionally watching Nickelodeon, they were streaming Nick shows on Netflix instead.
Dauman said Viacom officials have been monitoring the number of Netflix streams for their shows, and their numbers didn’t increase dramatically during the period in question. “It certainly does not account for the ratings drop that we saw,” Dauman said.
Viacom officials believe most of the ratings problem has to do with Nielsen’s “sampling” of its Nickelodeon audience and has asked the ratings company for a re-count.
The debate over Netflix’s role in this matter comes as analysts are widely speculating that traditional media outlets catering to kids are going to be the first to experience big audience drops related to emerging platforms. On Tuesday, for example, BTIG Research analyst Richard Greenfield suggested the kids DVD market – previously thought to be relatively immune to digital erosion – is in the most danger.
“We increasingly believe the family/kids DVD segment is actually the movie industry genre most exposed to digital substitution, as subscription streaming platforms offer so much family content to stream online anytime, anywhere across a wide array of devices,” Greenfield wrote on his blog.
In addition to ratings declines at Nick, Viacom’s earnings were also impacted by the $379 million it had to set aside to deal with an arbitration matter related to the video game Rock Band.