Netflix closes deal to run original TV series online
March 21, 2011
There is a new competitor for HBO and Showtime in the television landscape — and, for the first time, it is not a television network. Netflix, the popular online film service, said Friday that it had licensed the exclusive rights to “House of Cards,” a show to be directed by David Fincher, the director of “The Social Network,” and to star Kevin Spacey.
The deal immediately makes Netflix a player in premium television programming.
“House of Cards,” a serialized political drama, will look and feel like a traditional TV show, but it will not be distributed that way. Rather than having its debut at a certain time and date on a TV channel, “House of Cards” will have its debut online, where there are no set show times. It will be marketed through Netflix’s recommendation engine. And it will probably be released in batches, several episodes at a time, since subscribers like to binge on serialized shows.
“Just a couple years ago, this would be completely unheard of,” Ted Sarandos, chief content officer for Netflix, acknowledged in an interview. “It speaks a lot to how quickly this market is emerging and to how quickly Netflix has become a real, legitimate entertainment brand in the eyes of both consumers and content creators.”
The deal, previewed several days ago by Deadline.com, underscored just how muscular Netflix has become in the media business. By licensing “House of Cards,” Netflix is essentially selling itself to Hollywood as an alternative to networks like HBO — and indicating that it is willing to pay high prices for high-quality shows. Netflix would not comment on the value of the deal, but it was believed to be close to $100 million.
“Netflix is the original unbundled TV purveyor — the opposite of a network,” said Terry Heaton, a new media expert and the author of the PoMo Blog. He said the Netflix move was bold and “a big loud knock on the door” for other companies.
Analysts said that through the deal, Netflix was both striving to differentiate its service and to reduce its dependence on films and TV shows licensed from third parties. Netflix has become a target of HBO and that network’s parent company, Time Warner, as well as other major media companies, and it is likely to face much steeper costs for those licenses.
Netflix has more than 20 million subscribers, and it is adding more rapidly, thanks in part to the proliferation of connected screens like iPads.
Ingrid Chung, an analyst at Goldman Sachs, upgraded Netflix to buy from neutral this week. She said in an analyst’s note that about 27 percent of consumers in the U.S. now stream movies and TV shows over the Internet, up from 16 percent at the same time last year. Many do so through Netflix, which Chung said “now has sufficient scale to make it difficult for new entrants, given low price points and expensive content costs.”
Netflix’s stock, which nearly quadrupled last year, closed Friday at $209.40, down $4.50.
A small group of other companies, Hulu, the YouTube division of Google and the Xbox division of Microsoft among them, have also contemplated distribution setups like the one conceived by Netflix and Media Rights Capital, which is producing “House of Cards.”
Asif Satchu, a co-chairman of Media Rights Capital, said he was shocked when he first saw how many subscribers Netflix had amassed.
“They have a distribution platform that could rival the networks’,” he said Friday in an interview.
Netflix is licensing the North American rights to 26 episodes of the show. That is the equivalent of two seasons of a cable television drama. That is a departure from the normal model of TV production, in which one pilot episode is completed before one season is ordered. The production company will retain international, syndication and DVD sales rights.
On Friday, Netflix sought to tamp down talk about the risk it was taking with the show. The company already streams past seasons of hundreds of TV shows, Sarandos said; the difference this time is that “we made a commitment prior to production.”
The show will not have its debut until late 2012, giving the producers ample time to “get the show right,” Satchu said.
For the full story, go to The New York Times.
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