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Drama over Netflix viewership reveals tension between networks and streaming services

Ted Sarandos, chief content officer for Netflix, recently downplayed NBC's suggestion that original programming on streaming service don't perform very well.
Ted Sarandos, chief content officer for Netflix, recently downplayed NBC's suggestion that original programming on streaming service don't perform very well.
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The Television Critics Association recently had its winter session in Pasadena, where networks preview the shows that will debut over the coming months.

And even though Netflix isn't a traditional TV network, it made an appearance at the TCAs as well, announcing the return of shows such as "Orange Is the New Black," "Marvel's Jessica Jones," and "Unbreakable Kimmy Schmidt."

Other network executives were buzzing about Netflix ... just not exactly about the streaming platform's programming. During NBC’s session, the network’s research chief said he had intel about viewership numbers for Netflix — and he asserted that some shows on the streaming service aren’t as popular as it would have you believe.

That touched off a war of words that revealed an underlying tension in the TV industry between the broadcast and cable networks that have to satisfy advertisers, and the streaming services that play by different rules.

Lucas Shaw, entertainment reporter at Bloomberg, joined us on The Frame to discuss the many reasons network execs want to see Netflix's viewer ratings, plus why Netflix values its shows differently than traditional broadcast networks.

Interview Highlights:

What exactly did NBC claim to know about Netflix's viewer ratings? How did they get that data?

NBC worked with this company called Symphony to formulate ratings projections for what different Netflix shows got. A number of different TV networks have attempted to formulate ratings for Netflix using different data — I know that some competitors have used piracy data to reflect how Netflix shows compare to some of their programming.

All these different TV networks are really curious to expose what the ratings are for Netflix, because a lot of them believe that the ratings are lower than Netflix would have you believe and that Netflix is getting away with a lack of transparency, and thus hiding these from investors.

And what does Netflix gain from all this? What numbers are they compelled to release?

Netflix only releases its subscriber totals and profit margins, sales — things like that. Netflix's argument is that the only way it makes money is if it sells additional subscriptions, and so that's the only number that matters. If the shows weren't working, you'd see subscriber numbers decline.

In that way, it's much like HBO and Showtime, which are also subscription-based models. Ratings don't really matter to any of these people, because ratings only matter to advertisers. However, HBO and Showtime have historically reported numbers, just because it's television convention.

You said that NBC's not the only network that has tried to ferret out Netflix's numbers — is this just nervousness on their part, due to Netflix's growth?

I think it's a mixture of nervousness and a legitimate desire to know. You speak to agents in Hollywood and they're very frustrated by the fact that they don't have any transparency from Netflix. They're used to constructing deals with some numbers, so they can evaluate the success of a given show, and Netflix just doesn't play by the same rules as everybody else. But Netflix would certainly have you believe that this is a reflection of nervousness. Ted Sarandos, who oversees all content for Netflix, has made jokes that NBC did this because they wanted to distract people from their own ratings.

If Netflix isn't looking at ratings like TV networks do, I wonder how they determine how much they can spend on an individual show, or to produce a series.

Netflix definitely has data on how much individual shows are watched. But what really matters for them is how many subscribers they think they gain and/or retain because of a particular show.

So I think there are some shows that are niche hits, that are so popular with a particular group that if there are 100,000 people who subscribe to Netflix just because of a given show, that's valuable to them in a way that might not be as valuable to NBC.

NBC needs as many viewers as possible to tune in to every show, because they're advertising-based. Netflix, HBO,and Showtime need, as they like to say, "singles, doubles, triples, and home runs," where you can have "Orange is the New Black," which everybody agrees has been a huge hit, but then you can also have shows that are a little less popular but have popular fan bases.

How many subscribers does Netflix have now? Are their projections for growth on-target?

They have about 75 million subscribers [globally]. Subscriber growth has picked up steadily overseas — this most recent quarter, they added four million customers overseas and about 1.5 million in the U.S.

What has some people concerned is their growth in the U.S. seems to be slowing, but that will matter less if they have the kind of explosive growth overseas that they anticipate. They're saying they can get way more customers outside the U.S. than inside, but whether that's reality or not remains to be seen.

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