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Is Netflix the Next HBO If Nobody Watches?

Stocks in this article: NFLX TWX

NEW YORK ( TheStreet) -- Based on the reaction to Monday's If Major Networks Acted Like Netflix (NFLX) We Would Call Them Frauds, it appears disciples of Reed Hastings buy what he's selling -- as is -- with no questions asked.

It's like the guy leads a cult.

When I criticize Netflix for not releasing data on how many subscribers view its original programming (by the way, I'm not alone, Mark Rogowsky at Forbes has a nice piece on the same subject), the intuitive responses roll in.

Netflix doesn't sell advertising so why should it release these numbers? Netflix is on-demand streaming, not traditional television. Netflix doesn't belong to the same "market" as HBO. (HBO is a division of Time Warner (TWX)).

That last one is my favorite because, when convenient, Hastings and his followers get off on making the Netflix/HBO comparison. However, they appear to want it both ways. We're like HBO, but only to the extent that we're comfortable with the comparison. At a certain juncture -- when the comparison becomes even more lame than it was to begin with -- it falls apart and we pull back.

HBO doesn't sell advertising, yet we see its numbers. Both a rating and the number of viewers per episode. Of course, we can't expect the rating from Netflix. At this point, it's just not logistically possible unless it seeks the type of partnership Pandora (P) has with Triton Digital. But we can and absolutely should expect the viewer number from Netflix.

if HBO stopped providing that data, its executives would be trashed. And rightfully so. Because these numbers matter whether advertising is involved or not. From a short-term perspective, the size of a Netflix original audience doesn't mean much. As somebody mentioned on Twitter Monday, if subscribers and revenue continue to grow and churn (which, by the way, Netflix chooses not to report) stays reasonable, that's all that matters to Wall Street. Just like in 2011. That's all fine and good until the bottom falls out.

If Netflix is building the HBO-like original programming powerhouse it claims, audience size absolutely matters. You can't build the type of franchise Netflix says it's aiming for and needs to develop if only a tiny fraction of your subscriber base watches your original content. Not only does it represent a massive investment, but, as quality third-party content becomes more scarce, original programming ends up the cornerstone of the service. If most of your subscribers ignore it, where's the long-term value to the service?

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