Analyst: Online Streaming Now Hurting Some TV Networks' Ratings

Users of the likes of Netflix might be "starting to migrate online, cannibalizing the networks they once helped," says Janney's Tony Wible.

The online streaming availability of TV content may have helped TV ratings in the early going, but its benefits are peaking and even reversing for some networks, Janney Montgomery Scott analyst Tony Wible suggested Monday.

TV audience data for May suggests "a worsening trend" for the TV industry as C3 ratings pressure "has intensified for the past three quarters," the Wall Street observer wrote in a report that reviewed data from a sample of 2 million TiVo users.

In his latest contribution to the debate about whether online content services cannibalize traditional media consumption, Wible said the recent TV ratings decline "is ill-timed and could impact upfront negotiations for affected networks," which are ongoing.

"Investors need to look at a broader set of metrics as they evaluate the impact of new technology adoption," he said. The data "is not reflective of current trends in the broader population but rather is a tool that helps us find harbingers for future trends," he argued.

Wible said that by far the biggest surprise in reviewing the data came in broadband content usage, including the likes of Netflix and Amazon. Users of broadband services watched 1 percent more TV in aggregate when looking at C3 ratings, he pointed out.

But he also said that over-the-top service providers look like they are "indirectly responsible" for recent TV ratings weakness.

He highlighted that Viacom, whose Nickelodeon has been struggling, Time Warner and News Corp. have been particular beneficiaries of streaming content ratings boosts.

"Industry ratings may have been weaker for a longer period but were masked by a rapidly growing over-the-top sub base," Wible said. "The growth in over-the-top subs is now slowing, and the ratings benefit is moderating. ... This could be a sign that over-the-top subs are starting to migrate online, cannibalizing the networks they once helped."

Or, put another way: "Its early benefits are peaking ... [and] actually reversing for some networks," he wrote, arguing that Netflix's ratings benefits for network peaked in November.

"This could imply," Wible summarized, "that over-the-top is helping consumers discover content on other TV networks and/or that over-the-top will eventually pull viewing away from the TV networks they initially helped."

Email: Georg.Szalai@thr.com

Twitter: @georgszalai