The Netflix Effect

Television viewing of both cable and broadcast networks fell among adults under age 50 in the fall season. According to Nielsen, the major broadcast networks lost an average of 15% of their viewers in the 18-49 demographic compared with the prior season. In contrast, A record 456.6M online videos were watched in 2012 by more than 182M users. The switch is obvious in my test lab (aka: household) where my tech savvy wife and highly connected teens stream 90% of the video they watch from the web. While this all makes sense I have also noticed the ginormous audience growth that each new season of shows like "Breaking Bad", "Sons of Anarchy" and the resent return of "The Walking Dead" were seeing. Is there a snowball effect to new seasons viewing because of the easy access to past episodes? Just how are streaming services like Hulu, Netflix and others effecting the viewership of television? In a quest for quantifiable data to answer these questions, I uncovered two 2012 studies, one done by Bernstein Research and the other by GfK North America that confirmed my theory and shed some light on my questions.

The Bernstein Research analysis of viewing patterns was conducted in Tivo homes during the first quarter of 2012. What the study identified was that ratings for AMC, which exclusively licenses several of its original series to Netflix, were actually 15% higher in homes with Netflix than non-Netflix homes. Tie this back to the lift in viewers for the new season of "The Walking Dead" where it recently returned for the second half of its already much-improved third season to even higher ratings than before: 12.3 million viewers. Impressive numbers especially when you consider that it was up against the Grammys on its premier night.


Netflix itself seems to back up the finding by contending that its service gives viewers more opportunities to sample programming in its first window by providing older episodes that let them see what they've missed hence, they are more likely to watch new episodes of those shows when the new seasons return.

The GfK study concurs, stating that more than half of the Netflix subscribers in their focus groups said that it had no effect on their viewing from more traditional sources. But what’s even more interesting is how many respondents said they watched scheduled TV even "more" than they did before subscribing to the service.

Singling out first-run dramas, for example, reveals 22 percent of respondents said they watch more new episodes of dramas on scheduled TV than they did before getting Netflix, with 10 percent who said they watch less (See GfK chart below for more details on viewing patterns.)