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?

Hastings tells us we're seeing great success with original programming. We're just supposed to trust the guy.

As Rogowsky astutely points out, you have other media outlets anointing Netflix "the new HBO" but ...
Let's be clear on something. Netflix has 29 million domestic subscribers, which makes it slightly larger than HBO in the U.S. But the latter accounted for around $1 billion in profits last year while Netflix made all of $17 million. And while we know a hit like Game of Thrones averaged 13.6 million viewers this season between broadcast showings, on-demand and HBO Go because, well, independent ratings data and HBO tell us, we haven't got a clue about anything on Netflix.
Netflix supposedly drives its original programming decisions based on all the user data it gathers from viewers. It claims that it knew House of Cards would be a hit because subscribers love director David Fincher and the actor Kevin Spacey ...
Somehow, it knew to green-light a second of Orange before the first one aired. Now the showrunner for Orange is a woman named Jenji Kohan who created Weeds for Showtime ... Giving Kohan a vote of confidence is fine. But what's the point of having all this viewer data if you're going to just renew a program before anyone streams even one episode?
And it should scare Netflix that she's already planning to turn the story of a woman who served a 15-month prison sentence into an indefinite saga. ""I feel confident that we can stretch this s-- out forever," Kohan said.

Rogowsky nails it.

As usual, at Netflix, there's something fishy going on. A whole bunch of simply don't add up. The refusal to provide data. The decision to renew a show before it airs even though you claim the data you refuse to release drives these types of decisions.

Believe me when I tell you, there's likely more disorder at Netflix in 2013 than there was in 2011. The worst thing that could happen for overzealous investors is a strong earnings report on July 24. If you haven't taken profits yet, you might want to consider doing it on July 25 whether NFLX pops or drops. NFLX permabulls ridiculed me right around this time of the year in 2011 for predicting disaster; learn from our history or get set to repeat it.

-- 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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