In what would be a company first, Netflix is reportedly angling to get into original programming. Calling it "the biggest gamble in [Netflix's] 14-year history," Deadline.com's Nellie Andreeva reports that the content distributor has outbid several top cable networks, including HBO and AMC, for a new drama series House of Cards starring Kevin Spacey.
The House of Cards show is a political drama based on a British miniseries, and could air first on Netflix’s streaming internet service. Netflix now has more than 20 million subscribers, compared to 28 million for HBO.
The deal is estimated to be worth more than $100 million, and, according to Adreeva, "could change the way people consume TV shows." Business Insider describes the move as "one way for Netflix to become more of a ‘must have' service and not just a ‘nice to have.'" "Several recent reports have glorified Netflix as a new power player in the film industry, and now, the video streaming giant may be living up to that name more than ever," writes DailyTech.
Netflix has to date specialized in distribution of movies and TV shows, either through DVD disks sent through the mail or through digital distribution video-streaming deals on consumer electronic platforms such as the Xbox 360, the PlayStation 3, the Nintendo Wii, or the Roku box. The House of Cards show, a political drama based on a British miniseries, could air first on Netflix’s streaming internet service. Netflix now has more than 20 million subscribers, compared to 28 million for HBO.
"Clearly, the protracted talks that Netflix has had over the years with Hollywood studios has taught the company that its better to own your own programs rather than just distribute them for someone else," explains VentureBeat. "The move could be an escape route for Netflix, which seems doomed to pay ever-rising fees to content owners."
Like Liberty Media chairman John Malone before her, Adreeva likens Netfix to HBO, which established itself as premium cable movie channel before hitting it big with original series.
Still, "getting into the business of betting on television shows is also a highly risky one for Netflix, a company that has become successful in part by focusing on its areas of expertise, technology and the Internet," writes The Wall Street Journal. As The Journal points out, Netflix already failed once in the realm of original content with its Red Envelope Entertainment unit.
But last August, Netflix agreed to pay about $1 billion over five years to Epix, a pay-TV channel owned by Viacom, Lions Gate Entertainment and MGM Studios. Netflix also grew 63 percent in subscribers from the fourth quarter of 2009 to the fourth quarter of 2010. Netflix now accounts for 20 percent of all digital movie watching, according to market analyst NPD.
COMMENTARY: When I heard about Netflix's strategy to produce its own programs, I thought this was a great idea. This is not only kicking the can down the road, but kicking Hollywood in the derierre. Netflix shows a lot gusto, risk taking and boldness, but at the same time a certain amout of high stakes reck by agreeing to produce two full seasons or 28 episodes and entering a sector fraught with landmines. @charliesheen all but sunk "Two And A Half Men", the highly successful CBS weekly comedy sitcom. CBS cancelled the show until they can sort things out. Charlie has launched a #torpedo by suing CBS for $100 million. That's #winning I don't think something that crazy will happen with Kevin Spacey, who is a straight arrow and well respected class A actor. Excellent choice.
Netflix CEO Reed Hastings showed similar brovado when he confidently proclaimed that his by-mail video rental business model was more efficient, and he would eventually prevail over brick-and-more video rental mega-chain Blockbuster. Blockbuster recently filed for bankruptcy and is in the process of liquidating certain assets in preparation for an M&A by a private equity group.
Courtesy of an article dated March 15, 2011 appearing in MediaBeat
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