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
TheStreet Open House

Is Netflix the Next HBO If Nobody Watches?

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?

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

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
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, 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
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,279.74 +13.75 0.08%
S&P 500 2,010.40 -0.96 -0.05%
NASDAQ 4,579.7890 -13.6380 -0.30%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs