Netflix’s Biggest Fans: Kids (and Moms)

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Paul Sakuma / AP

For decades, television has been used as a babysitter by parents desperate to get dinner on the table or for a few minutes of calm amidst the drama of child rearing. But instead of channel surfing, kids today are increasingly surfing the digital library of Netflix to get their cartoon fix.

A streaming Netflix subscrition is a lot cheaper than cable — and as such, according to one analyst, represents a threat to the cable giants of kids’ entertainment.

Sanford C. Bernstein analyst Todd Juenger conducted focus groups interviewing 16 mothers about when and how they allowed their children to watch television. In a report, he found that “content control, commercial avoidance and time management” were their key concerns when finding entertainment for their kids. The moms were worried that the commercials usually associated with kids channels were not only selling them on unhealthy snacks but also lowering their attention spans. Netflix lacks commercials and gives parents more direct control of what’s coming down the content pipe, which moms liked.

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Last August Netflix launched a “Just for Kids” page on its streaming interface, which organizes kids content by character (so a kid can search for Big Bird even if they don’t know how to spell Sesame Street). Over the last two years the service’s TV offerings aimed at children have grown significantly, with hundreds of episodes of children’s staples like SpongeBob SquarePants and Dora the Explorer becoming readily available.

Juenger claims that cable giants like Viacom-owned Nickeloden are dooming themselves by licensing so much of their content to Netflix. The cable channels are scoring easy short-term contracts to allow Netflix to stream their reruns, but they may be undercutting the viability of their cable products and therefore their advertising base. “Viacom and Disney should do everything in their power to steer viewership toward modes with the best long-term economics, namely traditional TV and emerging forms of TV Everywhere VOD,” Juenger wrote in the report.

Nickelodeon has seen a significant slip in ratings in the past year. In March the channel fell to N0. 2 in the number of total daily viewers for a cable network for the first time since 1995. Analysts attribute the slip both to a fall in quality original programming and to services like Netflix, which benefit from the tendency of children to watch the same episode of a show again, and again, and again. The ratings drop for Nick has been so severe that Juenger even suggested that cable companies might consider dropping the cable mainstay. Meanwhile Netflix racked up a one billion hours in viewership in June and is now more widely watched than any cable network, according to some estimates.

Still, Netflix is not thrilled with the idea of being labeled a kids’ service. A company spokesman told The Hollywood Reporter:

“Children’s content is popular, but no more so than sitcoms, movies or serialized dramas. If you ask small groups of young male subscribers how important extreme sports is, they will likely respond that it is more important than kids shows. This report is based on interviews with 16 mothers, not a broad cross section of our members.”

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Still, there’s no denying that Netflix’s children’s programming has been growing while other categories have been in decline. The company’s contract with the premium cable channel Starz ended in February, which meant no more streaming films from Disney or Sony Pictures. Several of the moms in Jueger’s study noted that they’d originally gotten Netflix for themselves but were increasingly using it for the kids due to a “dwindling supply of content for adults.”

Indeed, Netflix faces some tough battles ahead, with competition from everyone from Amazon to Walmart and licensing fees from Hollywood studios and other content providers steadily increasing. Kids’ programming has been a lucrative and so far affordable bright spot. But with Viacom losing viewers of its primary revenue source — cable — it too may play hard-to-get when it comes time to renegotiate with Netflix over SpongeBob.