"The reports of our death have been greatly exaggerated." – Alan Wurtzel, NBCUniversal president of research and media development
"Given what is really remarkably inaccurate data, I hope they didn't spend any money on it." – Ted Sarandos, Netflix chief content officer
The looming demise of cable and satellite TV has been a popular topic among pundits for quite awhile now, and 2015 provided plenty of fresh ammunition for those who make the argument that pay TV is dying.
The downturn can be seen in Nielsen’s (NLSN, Financial) list of Top 10 basic cable networks. Six witnessed declines in primetime audiences, especially among young viewers, between Dec. 29, 2014 and Dec. 20, 2015. Heavyweights like ESPN, Disney and USA, which has been the No. 1 entertainment network for a decade, were among those that dropped, with many of those losses in double digits.
Of the Top 10 only Fox News, Discovery, HGTV and AMC showed gains.
Opinions differ on the reason for this trend. There are many plausible causes, not just the influence of original programming although that seems to get the most attention.
Nielsen does not gauge viewership on new platforms, it doesn’t consider slumping ratings for syndicated reruns of once-popular network series, and it doesn’t measure the impact of streaming services.
Of the latter, the greatest threat to cable and satellite seems to be posed by Netflix (NFLX, Financial), the Los Gatos, California-based provider of rent-by-mail DVDs and Internet streaming media.
AdWeek reported recently that Alan Wurtzel, president of research and media development for NBCUniversal, dismisses Netflix as a threat. Wurtzel cited figures from Symphony Advanced Media, which uses automatic content recognition software to track Netflix’s ratings metrics.
Those figures suggest that the average audiences for Netflix’s original series have been comparable to the audiences for original programming on commercial broadcast networks.
“I don't believe there's enough stuff on Netflix that is broad enough and consistent enough to affect us in a meaningful way on a consistent basis,” Wurtzel said.
Wurtzel made a compelling case, compelling enough to provoke an angry response from Ted Sarandos, who has directed content acquisition for Netflix since 2000, going to work there a year after Netflix began its subscription-based service.
“Somewhere in the world, every second of every day, someone is pressing start on a Netflix original,” Sarandos said. “There is not an apples to apples comparison to Netflix watching and any Nielsen rating.”
“Why would NBC use their lunch slot to talk about our ratings?” Sarandos asked. “Maybe because it's more fun than talking about NBC ratings.”
Initially circulating DVDs to its customers through the mail, Netflix responded to reports that DVDs were often scratched and wouldn’t play completely by offering instant streaming, which has the benefit of greater convenience but the disadvantage of more limited options since some of Netflix’s programming is only available on DVD.
By October 2015 Netflix reported nearly 70 million subscribers worldwide.
Two years after Sarandos took his position with Netflix, the company initiated a public offering, selling 5.5 million shares at $15.00 per share. At the close of the market Friday, the stock was selling for $104.04 per share.
Chase Coleman (Trades, Portfolio) is Netflix’s leading shareholder among the gurus with 17,997,273 shares. The stake is 4.21% of Netflix’s outstanding shares and 22.88% of the guru’s total assets.
Four gurus – Andreas Halvorsen (Trades, Portfolio), George Soros (Trades, Portfolio), Jim Simons (Trades, Portfolio) and John Burbank (Trades, Portfolio) – bought stakes in Netflix in the third quarter. Julian Robertson (Trades, Portfolio) raised his existing stake by more than 15%.
On Sunday Netflix announced 2016 season premiere dates for 11 new or returning series.
Netflix has a P/E of 276.0, a forward P/E of 140.9, a P/B of 20.5 and a P/S of 7.0. GuruFocus gives Netflix a Financial Strength rating of 5/10 and a Profitability and Growth rating of 7/10.
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