retail news in context, analysis with attitude

by Kevin Coupe

Interesting piece in Advertising Age that, while it looks at a specific industry, points to how competition - even from unexpected places - can have a negative impact on one’s business.

The story is about how Nickelodeon, the kid-oriented cable network owned by Viacom, suffered from a severe ratings decline in the fourth quarter ... and coincidentally, at the same time, Netflix was enjoying high usage of its “Just for Kids” channel, which allows people to stream family-friendly content. Including, as it happens, content that Nickelodeon licensed to Netflix.

In other words, Nickelodeon may be a victim in part because it is competing with itself ... allowing what should be its proprietary content to become more commoditized.

Now, to be sure, it isn’t like this has had an impact on all cable channels. But it could be that Nickelodeon is more vulnerable because its target audience is more comfortable with alternative methods of obtaining content.

It also should be pointed out that Nickelodeon and Netflix say that they don’t think there is a connection between the cable network’s diminished ratings and the success of “Just for Kids.” But then again, it is in their best interests to deny any connection - Netflix wants Nickelodeon to keep selling its content, and Nickelodeon doesn’t want to admit it may have made a bad business deal. And it may be that in 2012 and beyond, companies like Nickelodeon have to change their business models because there are so many alternative sources of content ... just like a lot of retailers may have to rethink their strategies and tactics because there are so many alternative sources of product.

But consider this a learning moment. No matter what business you are in, you cannot allow your products to become commoditized, and you have to do your best to offer your customers differentiated products and services.

Here’s the instructive sentence from Ad Age:

If kids are indeed seeing more streaming video and less live TV, that could be worrisome for the traditional model. What happens as those kids grow up?

That’s a question that every marketer needs to be asking, because those kids are going to have dramatically different acquisitive habits as they grow up, and it is going to affect every company with which they do business.

It’s an Eye-Opener.
KC's View: