Netflix to Stream Original Series with House of Cards
This is new ground entirely for Netflix. The streaming movie and direct-to-consumer DVD rental company just outbid several significant cable networks, including HBO and AMC to acquire a new drama series called House of Cards. Lest you think this is a small thing - the show is being produced and directed by none other than David Fincher and stars Kevin Spacey (who is also an executive producer). The deal is still "wet", but deadline.com reports that Netflix won the deal by committing to two full seasons of the show up front - something almost unheard of in a cautious industry that works through Pilots and last-minute renewals. If we estimate just $4 million per episode, we're talking a financial outlay of around $160 million or more. With that kind of investment, we're wondering if Netflix is going to want to inject commercials - or bank on the influx of new memberships through popularization of the show.
Back in April, Liberty Media exec John Malone made a reference to Netflix positioning itself as the new HBO. While at the time this seemed a bit premature, we're not so sure now. HBO is behind such hits as Rome, Boardwalk Empire and Luck. They also got behind huge miniseries hits like From the Earth to the Moon, Band of Brothers and The Pacific. So what's the market saying about this move? Well before the announcement, Netflix was upgraded to "buy" by Goldman Sachs even though pressure is being put on it by Amazon.com, VUDU and to come extent iTunes. When Facebook recently announced a a plan to stream The Dark Knight right in its social media network, Netflix shares dropped 6%. I think it's safe to say that any lost faith in the media giant is going to get replenished quickly now.
So Netflix has pretty much jumped into the game, suited up and ready to play. By agreeing to a 26-episode initial series, it's also making a new statement about how these kinds of high-stakes deals may get negotiated in the future. Netflix is clearly more interested in domination than the typical back and forth we're used to seeing. For example, when Amazon.com said it would expand its "Prime" service to include online video streaming, Netflix countered with a $200 million contract with CBS to stream big franchise shows like Star Trek, The Twilight Zone, Twin Peaks, Cheers (and its Frasier spin-off), and Family Ties. Then, Netflix did a $1 billion dollar contract to stream movies from Paramount, Lionsgate and MGM in August.
So will this be Netflix' House of Cards? And more importantly, will it stand up or fall? I know I'm going to check it out.
I imagine that the $10/mo streaming only price isn't far off what HBO charges the cable companies and that seems to pay for their costs. But the elephant in the room are the ISPs. With only a fraction of the country on 2+Mb broadband and with cable companies and AT&T slapping caps (or throttling streaming protocols) on the rest I'm not sure that Netflix's new business model will be allowed to survive.
X-ACT-LEE. I still have no idea why it would be such a horrible business model for media giants to hook up with ISPs in order to allow high(er) speed DL's with the purchase of a certain media package (or vice versa). Either way, provide the enduser/consumer with the media, and a decently efficient way to get it. Terribly difficult math? Till then, YARRHHHH (true pirates know what i mean...)