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Can Streaming Cure the CW's Ratings Woes? (And Save ‘Community,’ Too?)

Can Streaming Cure the CW's Ratings Woes? (And Save 'Community,' Too?)

The CW's ratings have slipped to basic-cable status this season. But with a new Netflix deal alone yielding the network $1 billion, who needs Nielsens?

Third in a series on fall ratings gainers and losers.

The CW is down in the ratings this season — and it has something to do with the fickleness of its young audience.

The question is whether its viewers are fickle about the CW's shows, or just how they watch them. It's a question that resonates for anyone who wonders about the future of television viewing.

Also read: The Top Fall Ratings Losers and Gainers, From 'Men' to 'Chuck'

The CW, born five years ago from a union of Warner Bros.' WB and CBS's UPN networks, targets 18-to-34 year old women with a mix of fun, fashion and melodrama.

This season, every one of its returning shows is down — and they dominate TheWrap's list of fall's biggest ratings losers (see chart, below).

Are CW viewers just getting older, and losing interest in who hooks up with who after five seasons of "Gossip Girl"? Or — as the CW argues — are they making that mass transition you've heard so much about, eschewing television for the internet?

The only network born in the digital age is betting big on the latter, staking its future on streaming deals that it says are already paying off.

To support its case that its audience is migrating from the old screen to new ones, the CW notes that at any time 7 percent of its viewers watch shows on its website, CWTV.com.

The streaming deals, announced in October with Netflix and Hulu, have added to the network's financial stability and made it less reliant on ratings. The Netflix deal alone is expected to earn the CW up to $1 billion, providing a fresh revenue source beyond advertising.

The need to provide Netflix and Hulu new episodes gives co-owners Warner Bros. and CBS an impetus to make more episodes, even if their ratings disappoint.

Like many younger-skewing networks, the CW considers itself a 21st century product at the mercy of 20th century ratings tracking.

Many beloved series — the CW's "Supernatural" and NBC's "Community," among them — boast fervent online followings that don't translate into TV viewers. (NBC just forged a Hulu deal of its own for "Community.")

The CW says it reaches out to viewers wherever they are, from their TVs to their iPhones, even if Nielsen doesn't track them.

"This new audience watches things where they want and when they want," said Rick Haskins, the CW's executive VP of marketing and digital programs. "Very early on with the CW, we decided to go where the consumer is."

Also read: Fall Ratings Losers and Gainers: The Complete List

In a painful irony, this season is filled with thriving network comedies, led by young women. And though it aims at that precise demographic, the CW hasn't benefited from the trend — because it doesn't offer any sitcoms. Instead, it focuses on dramas at a time when many aging dramas are down.

One reason the CW dominates TheWrap's list of ratings losers this season is that the young network's ratings were so low to begin with: Small changes are reflected as huge percentage-point losses and gains.

But there's no questioning the downward pattern. TheWrap looked at the start of the season through the week of Nov. 13 and found that every returning CW show was down from the same time period last season, including "The Vampire Diaries," the network's highest-rated series.

"You just wonder how long the network can sustain itself," said Brad Adgate, Horizon Media senior VP of research. "It's headed in the wrong direction, for sure. These are cable numbers."

Fortunately for the CW, the new deals mean less ratings pressure. CBS Corp. CEO Les Moonves told the Los Angeles Times last month that the Netflix deal "essentially makes the CW a profitable enterprise."

Speaking Tuesday at the UBS Annual Global Media and Communications Conference in New York, Moonves said he was reluctant to make similar streaming deals for first-run CBS shows — or as he called them, "the family jewels."

The deals make more sense for a smaller network that sells against a prime internet-using demo, Moonves said. 

The CW's Netflix deal allows streaming of past CW seasons over the next four years. Wells Fargo Securities analyst Marci Ryvicker said it could be worth close to $1 billion, a number confirmed by a person close to the deal who spoke on condition of anonymity.

The same person said Netflix will pay for individual episodes on a sliding scale, topping out at $600,000-$750,000 for the longest-running shows on the network, such as "Gossip Girl." The CW will receive less for new episodes of less proven series.

The CW declined to discuss the terms of the Netflix or Hulu deals, but said the Hulu agreement has already grown its audience.

The five-year agreement allows Hulu Plus subscribers to watch new episodes on Hulu Plus. The shows are available on the free, ad-supported regular Hulu service soon after they appear on the subscription site.

Since the deal was announced, Hulu shows have already had a high number of streams, said Haskins, who declined to go into specifics.

Significantly, he said, the number of Hulu streams didn't cut into TV viewership or streams on CWTV — indicating the shows are gaining new viewers.

Just not television viewers.

Next in this series: What's the Matter With "Glee"?