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Nielsen Sizes Up Netflix

How many people are viewing a particular show on Netflix? We know shows like House of Cards and Orange Is the New Black are massive hits, but the OTT provider offers no information on the actual viewership of each show, or how it measures up to hit shows on linear TV.

According to a report in The Wall Street Journal, that's about to change. The Nielsen Co. , the company that tracks TV viewership in the US and provides the ratings numbers upon which billions of dollars' worth of advertising spend are based, is now offering viewership data on Netflix Inc. (Nasdaq: NFLX) shows.

Nielsen has been analyzing viewership of individual companies on SVoD services, but not offering comparable data on competing shows. This new service will give studios a more holistic understanding of a show's performance.

The new service tracks viewership across 12,000 titles in the Netflix library, including those produced by Netflix itself. And next year, similar data will be available for Hulu and Amazon Prime Video as well. Viewership data will be segmented in similar ways to that for TV ratings (i.e., number of viewers, age, gender and frequency of viewing etc.) to enable comparisons with shows on linear TV.

The ratings company said it had already signed on eight networks and production studios, including A+E Networks, Disney-ABC Television Group, Lions Gate, NBCUniversal and Warner Bros. The data is attractive to them because it helps them better understand user behavior across platforms/distribution outlets.

Netflix has refused to share this data with content providers in the past, arguing that it doesn't sell advertising so the data is unnecessary; and that viewing on on-demand platforms is difficult to track because it's unscheduled, unpredictable and spread across long periods.

It has also dismissed Nielsen's numbers, saying the data "is not accurate, not even close, and does not reflect the viewing of these shows on Netflix," in a strongly worded statement.

But studios and networks, trying to evaluate the best distribution channels for their content, need to be able to compare viewership across platforms to determine the best mix to maximize their revenue. This service allows them to compare viewership of their show on Netflix to viewership of a highly rated show on live TV, for example. Then they can calculate the advertising revenue the same number of viewers could have got them on live TV, compare it to the licensing fee they are getting from Netflix and decide which is better. Today, they are not able to do that, because they have no idea how many people are watching their show on Netflix.

This is particularly important as content owners are increasingly exploring a third strategy -- going direct to the consumer with their own OTT service. In recent months we've seen announcements from CBS, Disney/ESPN and Viacom -- all of whom are launching OTT services, in the US and abroad. In fact, Disney will be pulling the plug on its Netflix partnership next year to make way for its own service. (See Disney Joins OTT Bandwagon and CBS Streaming Service to Expand Globally.)

Viewership data is critical to better understand how they need to balance each of these strategies so they can generate the most revenue.

Nielsen has had to develop a new technology to track Netflix viewership because Netflix strips out "watermarks" added to studio content that are used to measure TV viewing. It now uses its existing panel of households along with its new proprietary technology to estimate viewership. The technology has its limitations though -- it can't track mobile viewing, which is an increasingly important channel for SVoD consumption, especially in key youth demographics.

Previous attempts to measure SVoD viewership have not been successful, and Netflix has already attacked Nielsen's data. But the existence of this service, accurate or not, gives the studios something to negotiate with.

If Netflix claims -- as it has -- that Nielsen data is not accurate, then studios will demand information about the internal data set that Netflix is using to compare, and discredit, Nielsen's numbers. Whether Nielsen's SVoD estimates become the currency that its TV ratings have is unclear today, but it does seem that sooner or later, Netflix will have to start disclosing its viewership numbers, and very probably via an objective, credible third party.

— Aditya Kishore, Practice Leader, Video Transformation, Telco Transformation

Joe Stanganelli 10/21/2017 | 10:17:52 PM
Re: protest too much @Michelle: You bring up good points, but viewing data for non-internal purposes might create confusion. After all, Netflix's business model for original content means no back end for creators; all the money is upfront. Ditto for licensing. It simply doesn't matter as long as Netflix is making money.

I mean, I suppose it matters for investors, but at the end of the day, it's that people are watching (or, at least, continuing their subscriptions). That's why it's so important for Netflix to constantly be getting new content--lest people feel they've watched all they care to watch and then cancel their subscriptions.
242ak 10/20/2017 | 7:33:11 AM
Value in data I think more than anything else Netflix recognizes there is value in the data they collect. It's valuable for them, in terms of product development and strategy, but it's also of value to others in the eco-system. And I think they are wary of sharing it, because it gives them insight that others don't have.
komatineni 10/19/2017 | 9:05:16 PM
Netflix should share it openly.. With the IP based video, Netflix can gain much more granular insights. Well, if Netflix is not, somebody else (like Nielsen) gonna find ways to share it. If not Nielsen, the ISP or local agencies can sure take this up with a sample audience. 

I don't see a very solid reason on why netflix can't share the stats. Also, the international sub appears to be more of promo (based on marketing costs) and would be interesting to see how Netflix can gain international sub to pay $$$. 
Michelle 10/19/2017 | 2:43:21 PM
protest too much What is Netflix hiding exactly? Is viewership significantly lower than estimated? They say available data is way off but provide nothing to counter. Will viewing transparency result in fewer good deals for Netflix and force them to raise prices even higher in the future? What's really going on??
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