For the first time, network and cable TV channels will offer a majority of every episode of the season to consumers who click on the video-on-demand services offered by their cable and satellite operators, according to a survey of the new season's TV shows made available to TheStreet.
That's almost twice as many shows as last year and a big change from prior years, when only the last four or five episodes were available to be viewed on demand.
The industrywide change in so-called in-season stacking of TV shows is a big boon for TV distribution companies such as cable giant Comcast (CMCSA) - Get Report and AT&T's (T) - Get Report DirecTV satellite service, which are fighting to keep subscribers from "cutting the cord" and relying solely on internet service, and for studios and networks whose executives say ratings rise when viewers discover new shows and catch up on prior episodes. (Comcast is a holding in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio. Want to be alerted before Cramer buys or sells CMCSA? Learn more now.)
"It's all about the stacking rights, said Bernard Gershon, a former top Disney (DIS) - Get Report video executive and president of the GershonMedia digital consultancy. "Programmers and [cable and satellite operators] know that to complete with Netflix and others, they have to offer full seasons to hook consumers. Word of mouth and fan reaction has grown viewership, for shows like The Americans on FX or Stranger Things on Netflix."
In prior seasons, Gerson said, when networks and cable operators would only make parts of seasons available, "all they were doing [was] training consumers to go to Netflix or Amazon (AMZN) - Get Report."
Like most cable operators, Comcast lost subscribers in the second quarter, traditionally a weak one for TV distributors. But the decline was its smallest in 10 years, CFO Mike Cavanagh said during the company's earnings call, in part because the program selection it offers on demand through its Xfinity platform reduced the operator's churn rate, or turnover in subscribers.
Last year, Comcast offered a full season of episodes on demand for about one-third of network programs, according a person with knowledge of Comcast's offering, and more than 70% of cable TV shows. This year that number will jump to about 50% of network programs, as all the major networks other than CBS (CBS) - Get Report are providing Comcast with more than half their shows.
CBS saves full seasons of episodes of its network shows for its own CBS All Access streaming service, which has about 1 million subscribers.
In-season stacking increases viewership for TV shows, say executives at networks and studios. A study conducted by one network found ratings on its shows jumped 3% to 11% if viewers had the ability to find the first episodes of a show they just discovered, according to a media executive with knowledge of the study.
In-season stacking, though, can lead to even greater boosts over viewership without video on demand. ABC's Quantico, for example, saw a 29% hike in ratings for viewing within three days of airing when viewers watched it live or ordered up stacked episodes on demand through Comcast's Xfinity service, according to Comcast. USA network's Mr. Robot saw a 75% ratings hike.
Overall, when shows are stacked and promoted, the cable operator said it sees a 49% increase in viewing by the 18- to 49-year-olds who advertisers most want to reach.
Studio executive say the higher ratings mean added advertising sales. But they also say higher ratings means that episodes are more expensive for streaming services such as Netflix and Amazon, who pay as much as $3 million an episode for the highest-rated shows.
"This will impact what Netflix is willing to pay for the shows that are stacked," said Michael Nathanson, an analyst and partner at MoffettNathnson, which has a neutral rating on Netflix's stock.
Netflix shares on Monday closed up 2.6% at $99.05 but are down 13.4% for the year.
Netflix paid $4.1 billion through the first six months of the year for programming, a 41% hike from a year earlier, it said in a filing with the Securities and Exchange Commission, as it bought new shows for new foreign markets it recently opened. In a letter to shareholders, the company also said it intended to tap the high-yield debt market later this year or in early 2017 as it continues to ramp up its production of original content.
Nathanson noted that "Netflix has seen this trend coming and started making more originals on their own, and digging into the debt markets to fund it."
Netflix maintains the stacking rights for all of its original programming, including some made by Hollywood studios. It has the stacking rights for NBC-made comedy Unbreakable Kimmy Schmidt, Sony-produced drama Bloodline and several shows made by Disney's Marvel studio.
A Netflix executive had no comment.
In July, Netflix announced it had signed a multiyear deal with the CW Network, a joint venture of Time Warner's (TWX) Warner Brothers studio and CBS, to stream every episode of its shows starting with the just completed 2015-2016 season. But the deal requires Netflix to wait eight days after the season's final episode before it gets every episode of the relevant CW show.
This article is commentary by an independent contributor. At the time of publication, the author held positions in Disney, CBS, Comcast and AT&T.