How Kids Will Help Decide the Future of Television

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Will someone please think of the children? In the ongoing battle for the future of the living room, that’s exactly what Netflix and Amazon are doing. While shows like political drama House of Cards, resurrected sitcom Arrested Development and Amazon’s slate of comedy pilots have hogged all the media attention, the online-streaming services have been spending bundles of cash on programming that skews toward a younger demographic. It’s these kids’ shows that will play a large role in determining who comes out on top in the streaming wars — and just how quickly families with little ones are willing to cut the cable cord.

Children’s programming has been a quietly dominant force in the cable landscape for years. In the first half of 2013, Disney and Nickelodeon had more overall viewers than any other cable channel, with each averaging about 1.7 million viewers on a given day, according to Nielsen. Individual episodes of SpongeBob SquarePants often pulled in more than 5 million viewers during the peak of that show’s popularity in the mid-2000s. Even in prime time, when parents are home from work, kids’ shows hold their own — Disney ranked second among cable channels during the evening hours in the first half of the year.

All of that explains why Amazon and Netflix are now spending hundreds of millions of dollars to scoop up the best kids’ content from cable and to fund production of original shows that they hope will become the next Dora the Explorer or SpongeBob.

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In fact, Netflix’s biggest original-content push so far isn’t the very expensive House of Cards — it’s actually a deal with DreamWorks Animation for 300 hours of brand-new cartoons based on the company’s film franchises like Shrek and The Croods. The first DreamWorks cartoon on Netflix, based on the studio’s upcoming movie Turbo, will launch in December.

The deal builds on earlier moves by Netflix to build a strong kids catalog. The company launched a “For Kids” section on its website in 2011, where navigation is based around cartoon characters instead of specific films, and movie blurbs are written to be easily read by children. At the end of 2012 the streaming service inked an estimated $300-million-per-year deal with Disney for streaming rights to the company’s new films beginning in 2016, meaning Disney movies will be on Netflix and not Starz or HBO. “There’s a very high usage of kids’ content not only on Netflix Kids but on the regular Netflix,” says Netflix spokesman Jonathan Friedland.

Amazon, meanwhile, is also shelling out big bucks for kids’ shows on its Prime Instant Video service. Last month the online retailer announced a multiyear deal with Viacom, estimated to cost hundreds of millions of dollars, that will give Amazon exclusive streaming rights to hit Nickelodeon shows. Though the deal also includes programming from Comedy Central and other Viacom networks, the kids’ content was the main focus. “The data shows that when you put compelling kids’ content on the service, it helps us acquire more Prime members,” says Brad Beale, the director of content acquisition for Amazon Digital Video. “There’s a lot of really good stuff from a partner like Viacom, but kids was a huge driver of the value, no doubt.” Amazon is also rolling out three original children’s shows starting later this year: Annebots, Creative Galaxy and Tumbleaf.

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Combined, these moves could convince more families to drop their expensive cable bill and opt for an online TV fix. Right now kids’ television is a big sticking point keeping people tied to their cable providers. Households with kids are much more likely to have and keep a cable subscription than those without children, says Pat McDonough, senior vice president of insights and analysis at Nielsen. “We definitely see evidence of that,” she says. “The lifestyle of those households [with kids] is more conducive to a cable subscription.”

Kids, for their part, already have some of the habits of a Netflix power user. They love rewatching episodes of their favorite shows, and they were all about “binge watching” — think of the all-day marathons kids’ networks constantly promote — long before it was an industry buzzword. “Kids’ programming lends itself very well to this kind of consumption,” says Dan Cryan, research director for digital media at IHS Screen Digest.

Make no mistake: kids still watch a ton of regular TV. In the first quarter of 2013, children aged 2 to 11 watched more than 112 hours of television per month, according to Nielsen. By comparison, they only watched video through the Internet for only 4½ hours, but that number has doubled since 2011. As more families adopt streaming services — Netflix’s 29 million subscriber base has reached the same level as HBO’s — the online players are hoping they can become as beloved by kids as Nickelodeon and the Disney Channel.

“Kids are already the on-demand generation,” Netflix’s Friedland says. “We want to make the best possible service for them so that they stay with us and we build a relationship over time.”

5 comments
kash06
kash06

"Another big factor will be whether that streaming content can be played on a big screen/projection screen TV.  This stems from my observation that people like to create mini-theaters in their homes.  If the technologies are compatible, than good-bye cable."

The technology is out there and it's completely affordable. There's the Roku box and Smart TVs in a huge variety of sizes. If you want to get "old school" you can hook a laptop or even a desktop CPU into any modern TV or projector you want. We got rid of cable a few years ago and are not going back. If, god forbid, streaming services go away then I'll gladly be TV-free. I recently stayed the weekend with friends who had cable and 98% of what was on made me want to bang my head against the wall. People are paying $100/month for so much junk. 

For $175/year we have Netflix and Amazon Prime, which provide more than enough entertainment and I love how easily we can move across platforms from our Smart TV to PC to Kindle to iPhone. Amazon definitely has room to improve its interface and to add features like next episode auto-play but I think they'll get there. If we actually want to watch a new-release movie, those are free from our local library. (Yep, I'm too cheap for even Red Box.) And above all, I adore living a virtually commercial-free life. 

EricSchatz
EricSchatz

No, not kids. Not a good source of disposable income. It's the teens. PBS experimented with "reality TV" formats but it took MTV to show how to commercialize unscripted programming (more than just game shows anyhow) and the idea spread like a fungus. Whatever milieu tomorrow teens flock to for video content, that's where the future of "television" programming will germinate. Maybe all those webcams on the tops of MBAs will become the CW's program stream.

zhtbarge
zhtbarge

Dear Netflix, My 4 year old is not very happy about your decision to drop nickelodeon, here is a video of how he feels. http://youtu.be/FTuYWSa47Z0

Rhomega
Rhomega

@zhtbarge Why are you addressing Netflix on a Time article?  Also, Nickelodeon might come back when they negotiate on a show-by-show basis rather than bundles.

mrbomb13
mrbomb13

Free market microeconomics will dictate how firms within the industry respond to each other's complementary/substitute goods/services.

From what I see (at 25 years old), cable is entrenched in today's society.  The number of households (both houses and apartment dwellings) that are 'unplugging' is still quite low, and the rate of increase has been insignificant.

It will very likely be 20-25 years before that rate accelerates.  The reason is that the 'kids' of today do not have the purchasing power of their parents (i.e. if the parents prefer cable, than cable will stay).  However, when today's kids become tomorrow's adults (and have children of their own), than society could witness a shift away from cable, and more towards streaming content.

Another big factor will be whether that streaming content can be played on a big screen/projection screen TV.  This stems from my observation that people like to create mini-theaters in their homes.  If the technologies are compatible, than good-bye cable.