Netflix, Inc. (NFLX): Marching To The Beat Of Its Own Drummer


What does it take to be a leader? Netflix, Inc. (NASDAQ:NFLX) revolutionized the DVD rental business, and now it’s changing the television business. But TV people just don’t like it. They can’t bear the thought of change. After all, if Netflix is going to offer its own original series, then shouldn’t it have to publish ratings? Not at all, says the company’s chief content officer.

Netflix, Inc.  (NFLX): Marching To The Beat Of Its Own Drummer

Netflix takes aim at theaters

And it looks like Netflix doesn’t want to stop with just changing the TV industry. Recently Netflix, Inc. (NASDAQ:NFLX) Chief Content Officer Ted Sarandos took aim at theaters, saying that theaters shouldn’t be the only ones allowed to screen new movies. He suggested releasing them on Netflix at the same time so that viewers could watch them on their own time.

Pros And Cons Of Tail Risk Funds

tail risk fundsEditor’s note: This article is part of a series ValueWalk is doing on tail risk hedge funds. The series is based on over a month of research and discussions with over a dozen experts in the field. All the content will be first available to our premium subscribers and some will be released at a Read More

David Horsey of the Los Angeles Times reports that theater owners responded that this would ruin their businesses. They said Netflix already got rid of the DVD rental business and now wants to destroy their business.

TV executives don’t like Netflix either

And then there’s the argument that Netflix, Inc. (NASDAQ:NFLX) should release ratings for its original series in a way similar to how television networks do. Executives at Fox and HBO said the company should do this because everyone else in the business does and because they question whether Netflix’s original shows are as popular as the company says they are. Never mind the large quantity of Emmy nominations Netflix banked on those original shows.

Sarandos says paying too much attention to ratings limits creativity. In addition, they aren’t pursuing advertisers, who are the ones most interested in ratings. Also the company already knows how many people are watching its shows and when they are watching them because of the nature of their business.

How Netflix changes the ratings game

I think what TV executives are also missing is that quantifying Netflix, Inc. (NASDAQ:NFLX)’s ratings is different than it is for live television. There’s been an interesting shift in the TV industry where advertisers are only starting to consider popularity on streaming sites like Netflix and Hulu as part of their determination of a show’s popularity.

It’s going to take some time to quantify this because watching streaming video isn’t the same as regular television. You can’t just put a box on someone’s television to see what they’re watching at what times. Undoubtedly Netflix has a system for this down already, but there are many questions that should be asked when gauging a show’s popularity on a streaming service like Netflix. During what time span do you measure viewers? Do you measure just the first week after a new episode is added? The first two weeks?

Rest assured. Netflix, Inc. (NASDAQ:NFLX) knows what it’s doing and has its own ratings determination figured out. But to compare it to the system used by live television is ludicrous without some sort of translation between the two different kinds of results. Let’s face it. Netflix is changing how the TV business works. The industry will have to change to keep up with technology or else get left in the dust.