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Netflix Singlehandedly Sucking the Life Out of Journalism

Stocks in this article: NFLX DIS CBS TWX AMZN

It's not that the old guard media doesn't see or comprehend the future. They're simply managing the transition as to keep their businesses as healthy as possible. And, if you look at the performance of big media stocks -- and attendant metrics such as audience size, international growth, revenue and profits -- you'll see that a vast majority of these companies are experiencing their best days ever.

Not only do they participate in streaming, they, by and large, absolutely do dictate the pace. If more than 90% of all viewing happens via traditional television (live and DVR), how much of the pure online variety (on-demand and streaming) do you think Netflix and other online-only entities such as Hulu and Amazon.com (AMZN) Instant Video account for?

A significant chunk of it, as the CBS' Elementary example helps illustrate, must come from the old guard broadcasters. And I highly doubt (and, know, because I ask for and receive the numbers) that TV Everywhere offerings such as HBO GO are going unused. Same with apps such as WatchESPN.

But it's difficult to obtain a clear picture largely because Netflix refuses to allow Nielsen to tag its programming (to derive ratings) and refuses to report how many subscribers actually watch its original programming. But does that mean it's not a question worth asking? I would argue it's a question we not only must ask, but have a responsibility to ask, in the interest of providing readers the most complete picture and investors the best information possible. But we must not simply ask, we must push.

Yet post-Netflix earnings, the fanciful media coverage continues. I can't cite one particular source because, with a small handful of the usual exceptions, each and every entity handled the quarterly results the same way. They accepted the things Netflix said -- uncritically without, it seems, any further investigation -- and not only reported them, but proceeded to gush over them.

Repeatedly, in print and on television, I have seen and heard supposed journalists refer to Netflix originals as "hit" shows and stop short of fully addressing concerns related to Netflix's business because the company "dismissed" them.

Consider the statements NFLX executives made, on the call and in the Netflix shareholder letter, about the number of subscribers who watch Netflix originals and the company's refusal to report this and related data. Again, it's the journalist's responsibility to call this stuff out. But few of the most-widely distributed voices in the media question these, at the very least, suspect and incomplete statements from the Reed Hastings, David Wells and Ted Sarandos trio:

We assess the success of each Original by looking at viewing-to-date and estimated future viewing, relative to cost. So far, we've ordered second seasons of all first season projects, which is quite unusual and exciting for the fans of these shows.

If this is how Netflix assesses success, doesn't it make sense for the rest of us, especially investors, to have some hard insight into these apparently ratings-driven decisions? Probably not, because Hastings appears to believe that he -- and only he -- should decide the type of data reporters, investors and the general public have access to:

I can tell you that as the CEO of Netflix, I focus myself. I don't even look at the churn numbers. Essentially, I'm looking at net adds all the time, because you get various trade-offs, and really what we care about is total growth. And so it's bringing the world in line with how management looks at it, which is in terms of net additions which we do check every week, every day.

Reed Hastings dismisses the importance of churn, so the media follows suit. Excellent, hard-hitting, tireless journalism!

So, Netflix uses viewing numbers to make programming decisions, however, according to Hastings, translated to ratings, they're actually not important:

We said publicly and continue to say publicly, they were not releasing viewing numbers. Our actual ratings would be apples and oranges comparison to what happens on a network. We view the viewing over a very long period of time. We'll tell you though, that you should look at our renewal of a show to a second season as a very positive sign. Because if we're renewing shows that people aren't watching in big numbers then we're creating a huge opportunity cost in our content spend. In other words, we won't have money to spend on things that people watch. So these shows are performing really well for us. They are hitting our numbers with remarkable precision in terms of what we forecasted enough, so that we had confidence to renew Orange Is the New Black, based on our viewing models even a few days before we launched the show.

That last sentence is the most curious, uncontested statement of all. The show never hit the air, but our "viewing models" told us it made sense to renew it. Hastings could be consulting a psychic to make these calls for all we know.

The aforementioned David Carr spits out the lazy talking point: Netflix, the media distribution company with the best handle on viewing numbers, refuses to share them because it doesn't sell advertising. So, David, how do you know Netflix has "the best handle on viewing numbers?" And do you really believe the company "refuses to share" actual ratings or ratings-like data "because it doesn't sell advertising" or are you just repeating that because it's what Reed says?

Again, I'm not asking for consensus on my opinion of Netflix as a business or the company's place in the wider media landscape. Valid opinions exist on the many sides of a multi-faceted, always-evolving and quite complicated issue. I'm just asking journalists to do something that resembles their job.

Ask questions. Seek complete information and report it. Have an original take. Stop regurgitating press releases and such.

Call me crazy, but this, from CFO Wells on Monday's call, is sheer lunacy:

And by the way without giving total, without giving ratings numbers, I would tell you every one of these shows are drawing TV size audiences. So you know that House of Cards is a hit because when you walk in to Starbucks people are talking about it. You know when the show is being spoofed at the White House Correspondents' Dinner and 3,000 people are laughing at the slightest references to the show, you know that people are watching it and you know people are talking about it. So without the precision of a number, you know that these shows are hit too.

OK. So the shows are a "hit" because a horribly-skewed sample of politicians and the Washington, DC-based media knows House of Cards and, well, Netflix tells us they "are drawing TV size audiences."

That really narrows it down.

According to Nielsen, on Monday night, 11.37 million viewers watched Under the Dome on CBS, but a mere 4.1 million saw a How I Met Your Mother rerun and just 537,000 watched the season premiere of Breaking Pointe on the CW. On any given night TV-size audiences number in the tens of millions to the tens of thousands.

But why bother asking the CFO to quantify something a bit more precisely for you? It's much easier to score exclusive interviews and keep everybody happy. You can always just run, hide and, if you have the balls, ask the meaningful questions after the fact. Just like the financial media and Wall Street did when NFLX spun itself to $300 only to implode during what ended up being a fall and winter of discontent in 2011.

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

Rocco Pendola is TheStreet's Director of Social Media. Pendola's daily contributions to TheStreet frequently appear on CNBC and at various top online properties, such as Forbes.
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