Netflix: Such a Thing as Too Much Information
Investors may be better off not knowing how many people watch its shows
By Miriam Gottfried
The Wall Street Journal
Heard On The Street
Updated Dec. 9, 2015 6:32 p.m. ET
Original video-streaming content is the new black. For investors, it may be the new black box—and that might not be as bad as it sounds.
Netflix NFLX -2.19 % is preparing to release 31 original scripted series in 2016, up from 16 this year, plus numerous feature films, documentaries and children’s shows. And many other companies are jumping on the original-content bandwagon.
But measuring the success of these content investments is another story. At an investor conference in New York on Monday, an analyst asked Netflix Chief Content Officer Ted Sarandos what metric investors should be looking at, given a lack of traditional ratings, to gauge its content’s performance. Mr. Sarandos said net subscriber growth was the best measure, although internally the company uses hours of viewing per user.
Later that day at the same event, CBS CBS.A -2.23 % chief Les Moonves took a playful dig at Netflix. When asked how many people had subscribed to Showtime’s online streaming service, Mr. Moonves replied CBS would provide those numbers “as soon as Netflix tells us how many people are really watching ‘House of Cards.’”
As much as Netflix’s investors might also want to know that, there is an important strategic advantage for the company in keeping everyone in the dark. Not only does having all the data allow Netflix to continue to tout the success of its originals, it also means more leverage over media companies in licensing negotiations. If the companies don’t knowing how many people are watching their shows on Netflix, they don’t know how much to charge for it.
That is why Nielsen’s early steps to track viewing on streaming services pose such a threat. For Netflix investors, more knowledge could be less power.
Write to Miriam Gottfried at Miriam.Gottfried@wsj.com
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