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His streaming service has been blamed by many in the media industry for contributing mightily to the ratings demise of kids channel Nickelodeon (s viab). But Netflix (s nflx) content chief Ted Sarandos told a business conference Wednesday that syndication of TV content on the service has done far more to help networks than hurt them.
In fact, speaking at the Nomura 2nd Annual U.S. Media & Telecom Summit in New York, Sarandos stopped just short of saying that Netflix’s four-year, $1 billion deal with the CW’s parents, Time Warner (s TWX) and CBS Corp (s CBS), has saved the broadcast network from extinction.
“What’s important to note is that you look at programming at CW, Netflix license fees makes that content profitable,” he said. “Without it, it was struggling along.”
Did Netflix really save an entire broadcast network? Well, based on the just-released dire ratings data for CW from last season, the jury is still out on that. But as the network seeks to stabilize its linear TV ratings situation as it transitions itself into broadcast TV’s first true multi-platform programming institution, those Netflix dollars — as well as revenue culled from a separate streaming deal with Hulu Plus — are proving pivotal.
Broadcast TV’s most innovative model
The CW targets a much narrower audience than the Big Four networks (ABC, CBS, Fox and NBC), primarily going after young women 18-34 with shows like Vampire Diaries and Heart of Dixie. But while its scale is much smaller, the network presents a very forward looking model for the television industry.
Simply put, CW’s audience is migrating to digital platforms at a faster rate than viewership for the Big Four networks. And CW is innovating its monetization strategy at a quicker pace as a result.
“Their demographic is much more cutting-edge, demanding and fickle,” noted Bill Carroll, a senior analyst for Katz Media, a firm which advises TV stations on programming decisions.
In fact, CW digital chief Rick Haskins told paidContent Tuesday that the network received 18 percent of its viewership during the just-completed 2011-12 TV season from digital platforms.
“When you’re bumping up on 20 percent of your viewing being someplace else, you’re model has to be different,” Haskins said.
For CW, that “different model” means limiting the differentiation between broadcast and streaming for both viewers and advertisers.
The CW has been putting full TV-like commercial loads into its streams for several years and pushes harder than any other network to integrate the sale of impressions on its digital platforms with those on its linear channel to advertisers.
While ratings have trended down for the network recently, ad sales have not. During last year’s upfront market, for example, the CW generated nearly $420 million in ad revenue, which was 10 percent year-over-year growth.
Having worked to create its own systems of measuring viewership across platforms for several years, network president Mark Pedowitz told advertisers during the CW upfront presentation two weeks ago that the company will soon introduce its own fully-baked cross-platform ratings system to the TV industry.
Almost in the same breath, Pedowitz touted a new digital studio that will specialize in low-cost, short-form digital content, extending the CW brand mobile platforms in a way no other network has attempted.
About those ratings…
But as the CW transitions into a next-generation, multi-platform video programmer, it can’t surrender the underpinnings of its traditional business model — drawing viewers to its affiliate broadcast stations, which still accounts for more than 80 percent of its viewership.
And right now, that part of the business isn’t going well.
On Friday, ratings tracker Nielsen revealed that for the just-completed 2011-12 TV season, CW’s primetime usage dipped 15 percent to an average of only around 1.5 million watchers. Viewership for the network’s target demographic, adults 18-34, dropped 20 percent to 800,000.
With ratings like these, how can the network’s affiliate partners survive, much less negotiate hefty retransmission fees with cable and satellite operators?
It is here where the Netflix licensing deal has helped tremendously, delivering the network — which had previously struggled to sell its shows to cable and syndication — back-end resources for the first time.
Rather than having to further cut back on the number of fresh, original programming it will supply to its affiliates next season — thus further dropping ratings — CW announced that it will have 50 additional hours of original series on the air next year and will be able to supply original programming during the summer for the first time.
“We’ve taken the money and put it back into supporting the model,” Haskins noted.
Here’s former CW president Dawn Ostroff discussing the Netflix deal with paidContent editor Staci Kramer last year: