This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

If Major Networks Acted Like Netflix, We Would Call Them Frauds

NEW YORK ( TheStreet) -- In May, I asked How Many People Actually Watch Netflix Originals?

Nobody demands this answer from the company. By and large, the media simply accepts Netflix's (NFLX - Get Report) claims that its original programming is successful. There's absolutely no quantifiable nexus between subscriber growth/revenue and the uptake of Netflix originals.

In one breath, Reed Hastings talks about unbridled anticipation for Arrested Development. In the next he refuses to tell CNBC's Julia Boorstin (see story at the link in paragraph one), how many people actually watched the program's rebirth on Netflix.

But, consider this, in its third season on traditional television an average of four million viewers watched each episode with under 3.5 million tuning in for that season's finale. And that was with penetration rates at about three times what Netflix sports today. Do you really think anywhere near 3 million to 4 million subscribers watched the return of Arrested Development on Netflix? Yet, Hastings expects us to accept claims of success without any hard verification whatsoever.

His answer -- we're not traditional television. We don't look at overnight ratings; we'll look at the numbers a year out. That flies in the face of his contention that Arrested was highly anticipated. I guess Reed thinks people wait weeks to watch the Super Bowl. They DVR it. They don't want to talk about what happened the next day at work.

So what about Orange Is the New Black? Looks good to me. It's easily, in my opinion, the most compelling Netflix original yet. But what does that mean?

Over at Time Warner's (TWX - Get Report) HBO, just under four million households, on average, watched each episode of Veep in 2012. It's critically acclaimed. Julia Louis-Dreyfus won a freaking Emmy for her performance. But it was only consumed by 3.9 million households. Contrast this with truly smashing successes such as Game of Thrones, which averages approximately 13.6 million viewers an episode. (Numbers are across all platforms).

Bottom line -- the folks at HBO could not get away with calling Veep a major success like Hastings and Netflix do Arrested Development and likely will Orange Is the New Black (which was renewed for a second season before season one even hit the air). They can only do so -- and not get called out as frauds -- when they accompany such talk with actual numbers. But, for one reason or another, Netflix gets a free pass, which will, ultimately, hurt investors more than 2011's implosion.

You have to ask yourself -- no matter what the coming quarter brings, why does Netflix feel the need to have one of its Wall Street permabulls, BTIGMedia's Richard Greenfield, moderate its earnings conference call? It's a question, along with how many people actually watch Netflix originals, investors should be asking before they keep faith in Hastings' smoke-and-mirrors machine.

-- Written by Rocco Pendola in Santa Monica, Calif.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
NFLX $125.45 1.00%
TWX $69.80 -0.71%
AAPL $117.82 -0.18%
FB $105.47 0.06%
GOOG $750.27 0.28%


Chart of I:DJI
DOW 17,798.49 -14.90 -0.08%
S&P 500 2,090.11 +1.24 0.06%
NASDAQ 5,127.5250 +11.3820 0.22%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs