The television industry had changed and evolved significantly over the last decade, and most notably due to the rise of streaming. Audiences have more content, channel, and platform options than ever before and as a result, audiences on traditional TV look to be on the decline. Due to this audience fragmentation, Nielsen’s TV ratings no longer provide a holistic view of television audiences, and their new ratings framework, which is said to include comprehensive cross-platform measurement, won’t be available until late 2022 at the earliest. So I wanted to research how declines in the holism of Nielsen ratings have led to industrial shifts in determining programming successes & failures because I want people to understand the symbiotic role that streaming services play in this cultural moment. The key industrial shift here has been the increasingly symbiotic role that streaming platforms are playing in determining renewals and cancellations for network TV programs. First, these platforms serve as a way for long-running broadcast TV programs to find new audiences who then, in turn, begin watching them on linear TV. And second, licensing fees for these programs provide an alternate revenue stream for networks outside of advertising which can incentivize them to renew programs that have become popular on streaming.
In the United States, television has always been an advertising-supported medium. This didn’t necessarily have to be the case, as other countries like the United Kingdom and Sweden initially set up television as public owned to “provide a public good in entertaining and informing” people. But in America, television was a “commercial medium first and foremost” (Gove). As a result, there needed to be a way to measure television audiences in order to set advertising rates. Nielsen Media Research began measuring TV audiences in 1950 using a device called an Audimeter which would record the weekly viewing habits of participating households and then generalize that sample to the entire U.S. population of television households (“Nielsen Audimeter”). That data resulted in the weekly reports which consisted of a ranking of the top programs of the week based on the percentage of people who watched it. These percentages are called ratings.
Over the years, the effectiveness of Nielsen ratings has been challenged again and again by new technologies and new patterns of audience viewing. With only three broadcast networks – NBC, ABC, and CBS – on the air when Nielsen first began measuring audiences, their sampling was quite effective at being able to account for all viewing. Throughout the last several decades though, TV audiences have gradually been fragmenting across an increasing number of programs, channels, and platforms, and as a result, the Nielsen ratings have become much less holistic. Cable networks were the first crack in the unified audience as they offered people alternatives to the “Big 3” broadcast networks. The advent of DVR was another crack as it provided people the ability to not watch programs at the exact time they aired. Nielsen was able to account for both of these new developments by beginning to measure cable networks in 1980 and viewing on DVR in 2005 (“Celebrating Our History”), but the impact both of these had on fragmenting the audience has not gone away.
Just on linear TV (without even looking at the impact of streaming yet), just there are over 500 cable networks airing thousands of programs and Nielsen is not equipped to measure audiences stretched so thinly. According to Philip Napoli (2012), Nielsen’s 25,000 household sample can accurately measure audiences for only 80 out of those 500 networks. And though the remaining 400+ unmeasured networks are all fairly low-rated, they cumulatively account for between 20 and 25 percent of the total television audience (Kosterich & Napoli, 2015; Napoli, 2012).
The rise of streaming platforms is the current generation’s catalyst for audience fragmentation, and Nielsen has struggled with accounting for these audiences (Weiss). Nielsen estimated that in 2019 there were an astonishing 646,152 unique programs (not individual episodes) on all of linear TV, streaming, and VOD combined, and 2019 & 2020 saw the number of available major streaming services nearly double with the addition of Disney+, HBO Max, and Peacock (Porter, 2020b). With more content, channel, and platform options available, audiences have more autonomy in deciding where, when, and how to watch television. This industrial shift is having a major impact on linear television because with this newfound autonomy, there is a sizable decrease in the number of people who watch traditional TV. In the third quarter of 2017, 83 percent of people reported watching TV on a weekly basis, but that number tumbled to just 53 percent by the fourth quarter of 2020 (Stoll). By comparison, 78 percent of households were subscribed to a streaming service in 2020, 55 percent were subscribed to more than one, and 40 percent use a streaming service on a daily basis (“Nearly 8 in 10 households”).
With this, there is a steep decline in cable subscribers as more and more households decide to “cut the cord.” In just the last eight years, more than 20 million households have cut the cord, going from over 100 million paying households in 2013, to under 80 million in 2021 (“Cord Cutting Statistics”). It’s clear that streaming is here to stay, but there is still a place for traditional television. Despite the efflux of traditional cable subscribers, this doesn’t mean that people aren’t watching live TV anymore. As of late-2020, there were approximately 11.5 million households subscribed to one of the major live TV streaming services such as Hulu with Live TV, YouTube TV, Sling TV, Philo, and Fubo (“What Is the Biggest Streaming Live TV Service?”). These are people who either cut the cord or never subscribed to cable in the first place, yet are still watching live TV. Despite this positive sign for TV networks, live ratings for their programs are continuing to decline, and rather than decry the role that streaming has played in this, TV networks should start recognizing the value that streaming can have for them and take that more into account when making renewal and cancellation decisions.
Streaming as a Yardstick for Determining Linear TV Program Renewals
As society ventures further into an increasingly digital culture, streaming platforms have begun to serve an important role in determining a traditional TV program’s success. There is a prevailing view that streaming services are one of the chief catalysts for the decline in traditional TV viewing. Though this is true, it’s also a fairly simplistic way of looking at it and doesn’t take into account the complex and – at times – mutually beneficial relationships that exist between streaming services and TV networks. Streaming platforms such as Netflix rely on having a strong back catalog of acquired programming from broadcast networks. Though Netflix has had a lot of success with original programming, their longest-running original is Orange is the New Black which only has 91 episodes; compare that to the likes of Grey’s Anatomy and Criminal Minds which both have well over 300 episodes. Binge-watching is a unique practice to streaming platforms that keeps audiences engaged and coming back for a long time, so it’s crucial to have long-running programs on the platform. These programs are acquired through licensing deals with distributors which are often production companies that made and own the program. These deals with streaming services have increasingly become more relevant for TV networks in determining renewals and cancellations of their shows.
The licensing process of television programs is immensely intricate and difficult to explain, so quite a bit of background information is required. All television programs – both on traditional TV or streaming – have at least one production company behind them that pays for and owns the show. Most television programs on-air are co-productions between two or more production companies, one of which is usually affiliated with one of the four major broadcast networks (or if not, then usually either Warner Brothers or Sony). The four major networks, NBC, ABC, CBS, and FOX, all each have their own in-house television production company, but this doesn’t necessarily mean that every show from that production company ends up airing on its parent network, and vice versa – not every program airing on a network is actually from that network’s production company.
A few examples to illustrate this point are Law & Order: SVU and Modern Family. Law & Order: SVU airs on NBC and is produced by NBC’s production company “Universal Television” so NBC has ownership stake in the show. On the other hand, Modern Family aired on ABC, but was produced by FOX’s production company 20th Century Fox Television so ABC did not have any ownership stake in the show (this, of course, becomes a bit more murky because Disney did end up purchasing 21st Century Fox in 2019 and acquiring all of its assets, including Modern Family, so they fully own it now).
Until only recently, Netflix and Hulu were essentially the only streaming platforms that production companies could sell their programs to. Netflix is an independent company, but Hulu began as a joint venture between 21st Century Fox, NBCUniversal, Disney, and Warnermedia – meaning that ABC, FOX, and NBC all owned 30 percent of it (Warnermedia owned 10 percent), but none were majority owners (Disis; Lee). Hulu made networks less beholden to Netflix by providing an alternate avenue for them to be able to have their content on a streaming platform. Over time, however, TV networks realized the value of having independent self-owned streaming platforms, and began transitioning to that.
CBS was not part of the Hulu deal and they were first in making their own streaming service – CBS All Access – in the fall of 2014 which later rebranded to Paramount+. Included in Disney’s acquisition of FOX’s assets in 2019 was FOX’s stake in Hulu, and Warnermedia later sold their 10 percent stake to Disney as will NBCUniversal with their 30 percent stake by 2024 (Disis). In a period of just a few years, Hulu will have gone from a joint venture to a wholly Disney-owned platform. Disney also created Disney+ so their content library is currently split between Disney+ and Hulu. NBC launched their own streaming service, Peacock, in 2020, but still have some of their shows on Hulu as they still do own a minority share. And finally, though FOX does not have an exclusive platform of their own, they have a deal with Disney to have their programming also on Hulu. The only major streaming platforms today that are unaffiliated with a TV network are Netflix and Amazon’s Prime Video.
These new network-owned streaming platforms do not mean the end of acquired broadcast programming on Netflix or other non-network affiliated platforms like Prime Video or Apple TV+. By owning both the streaming service and the content, one would think that media conglomerates would have no reason to continue licensing out their programs to the likes of Netflix, but actually isn’t as easy of a decision as it may seem. Networks still have to pay an exorbitant amount of money for the rights to air programs that they already own, and they must weigh the monetary risks and benefits of keeping the program for themselves instead of licensing to another platform.
For example, in 2019 NBC paid $500 million to Universal Television for the exclusive rights to The Office for their streaming platform Peacock beginning in 2021. This is interesting because Universal Television and NBC are both divisions under Comcast, but they’re still required to pay for the program they technically own (Whitten). Since they are two different divisions, the way this works is that one division will pay the other division even though in the grand scheme of things, the money isn’t actually ever leaving Comcast. Another example of this is the show Friends which HBO Max paid $425 million to Warner Brothers for the exclusive rights to for eight years. And again, both HBO Max and Warner Brothers are divisions under Warnermedia. Estimates suggest that Warnermedia took a $1.2 billion hit by licensing the show to themselves rather than to an outside streaming service, but just like Peacock, they view this as a long-term investment for their platform (Middleton). Both Friends and The Office have long been off the air so renewals and cancellations are not dependent on streaming performance, but for current programming, streaming has begun to play a more important role in renewals and cancellations.
As evidenced by The Office and Friends, TV shows can have a lifespan that continues years and even decades after they originally aired on television, so it’s become increasingly important for TV networks to own the programs they’re broadcasting. Streaming services license acquired shows from the production company(ies) that own them, so by owning the program, networks reap monetary benefits through licensing deals even after a show goes off the air. This mentality can be seen in the freshman class of programs of the 2016-17 TV season (the most recent one in which this data is readily available) in which 91 percent of FOX’s new programs came from their in-house production studio, 69 percent for CBS, and 61 percent for ABC (Goldberg).
NBC has been less effective at this because many of their stronger programs such as The Voice and The Blacklist come from outside production companies (Warner Brothers and Sony respectively), but they’ve been able to leverage program renewals through ownership deals and streaming plays a large role in this (Goldberg). For example, in 2013 Sony gave NBC a 25 percent ownership stake in The Blacklist when it first began airing (Andreeva, 2018), but when linear ratings began falling a few years later, and renewal was uncertain, Sony upped NBC’s stake to 50 percent which helped secured the renewal (Andreeva, 2021). NBC desired this increased ownership stake partly because of the show’s streaming deal with Netflix. In 2014, Netflix paid $2 million per episode of The Blacklist for their platform, so with NBC now owning 50 percent of the show, they were seeing increased revenue from this deal and it was in their best interest to continue making more episodes (Kenneally).
Increasing network ownership stake for shows that networks don’t wholly own has been one effective way of securing renewals, but it further underscores the desire for networks to greenlight programs from their own production companies. This way, they can ink similar deals with streaming services and not have to split the revenue. With TV network-owned programming, performance on streaming can also ultimately play a role in determining cancellations and renewals. The program Schitt’s Creek, for example, is partly produced by Pop Media Group for their TV network Pop TV. The show premiered in 2015 to low Nielsen ratings, averaging only 263,000 viewers for its first season and didn’t do that much better in its second (Adalian). But it was licensed to Netflix in January 2017 just prior to the third season, and became an instant hit for the streaming service. Increased popularity due to its presence on Netflix also had an impact on the show’s linear ratings, rising up to 470,000 viewers by its fourth season (Adalian), and close to 1 million by its sixth and final season (Porter, 2020b). These numbers are by no means “huge” in comparison to network TV, but Pop TV is a low-rated cable network and those were some of the best ratings in the network’s history. The retrospective that aired immediately after the series finale in 2020 actually broke the record for most viewers aged 25-54. Pop TV saw a tremendous benefit to having the program on Netflix (Porter, 2020b).
And this phenomenon is not exclusive to programs airing on low-rated cable networks. Long-running currently airing network programs have also found new life due to popularity on streaming platforms. These platforms serve as a place for people to catch up on years’-worth of episodes of a TV program and then, unable to be satiated, they transition to linear TV in order to watch new episodes as they air. Such is the case for ABC’s Grey’s Anatomy which has been on the air since 2005 and though the producers have planned for the show to end for many years now, it “keeps finding new viewers thanks to Netflix binge-watching, and when those viewers get caught up, they watch the new episodes every Thursday night on ABC” (Carbone). This relationship between streamers and networks is not one-sided though because streamers also get a huge benefit from these popular programs, and networks can then leverage these streaming successes for more lucrative licensing deals.
Measuring Streaming Audiences
As has been established, there is a somewhat symbiotic relationship between streaming services and TV networks – networks can get a streaming “bump” for their shows, and streaming platforms have an incentive to have these programs on their service. For example, in 2020, the top three most-watched shows on streaming platforms were acquired programs from broadcast networks – The Office, Grey’s Anatomy, and Criminal Minds from NBC, ABC, and CBS respectively (Hayes, 2021). With streaming services seemingly receiving huge returns from these programs, it’s critically important for distributors to know exactly how much value these programs are to them in order to be compensated fairly in licensing deals. But this is where things begin to get tricky.
Syndication is when cable networks license content from broadcast networks, and these deals work similarly to the deals that happen with streaming services. However, since these syndicated programs still air on traditional TV, Nielsen is able to measure those ratings and as a result, there is full transparency between networks as to how much value these programs are generating. Streaming services, on the other hand, are not subject to this transparency and are notoriously unwilling to divulge viewership figures for their programs. Even when they decide to release data, it’s never able to be compared or contextualized because each platform uses its own unique metrics (Cox). In order to level the playing field and provide accountability during these licensing deals, streaming platforms need to be subjected to unbiased third-party audience measurement just like TV networks are. Nielsen has begun doing just this, and is measuring the audiences on Netflix, Disney+, Hulu, and Prime Video based on minutes of watch-time in a given week. The aforementioned report on the most-viewed streaming shows of 2020 actually comes from Nielsen’s data. Netflix in particular has refuted the validity of these numbers, but in the absence of figures provided by Netflix itself, TV networks have to go off of something, and Nielsen’s numbers are the industry standard.
Underscoring the need for third-party verification of numbers is the notable differences between what Netflix has said about their numbers versus what Nielsen has measured. In a 2019 interview, Netflix’s content chief Ted Sarandos said that “a ranking of the top 25 or top 50 most-watched shows … would be a list dominated primarily by our original content brands” (Hayes, 2019). However, according to Nielsen, ten of the top fifteen most watched shows on streaming services in 2020 were acquired programs, and only five were originals. Disney+’s The Mandalorian was the lone non-Netflix show on this list, so only four of the top 15 were Netflix originals. (Hayes, 2021). Netflix and Nielsen can’t be both correct, and there are arguments to favor either one. Netflix is the only party with full access to their data, but Nielsen has no incentive to report numbers that aren’t at least somewhat based in reality.
As audiences have utilized their newfound autonomy in order to fragment across an increasing number of content offerings, channels, and streaming platforms; they have become increasingly more difficult to holistically measure. Nielsen’s linear TV ratings no longer provide a complete picture of the audience profile, and even though they are planning a full revamp of their ratings by fall of 2022 (Ha), networks must rely on alternate yardsticks for determining programmatic renewals and cancellations. One way of doing this is to recognize the positive impact that streaming services can have increasing attention and viewership for their programs, and leverage this in order to score lucrative licensing deals. Having these programs on streaming services increases their exposure, and in the case of a number of programs over the years, can translate to more viewers who watch linearly. As the industry shifts to this setup, it will also become increasingly important for TV networks to own the programs they air – meaning greenlighting programs from their in-house studios more so than from outside studios. Finally, third-party viewership measurement, whether it be from Nielsen or another emerging company, is crucial in order to ensure that these licensing agreements take into account the tremendous value streaming platforms get from these programs and pay distributors fairly.
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