According to Deadline Hollywood, Netflix has become a content creator (not just distributor) by outbidding HBO and AMC to underwrite the production of House of Cards, a 26-episode drama series directed by David Fincher. Deadline Hollywood says that the deal (probably worth more than $100 million) is for Netflix “probably the biggest gamble in its 14-year history” — and “could change the way people consume TV shows.” Here’s what Netflix gets out of becoming a content producer:
- An opportunity to own the streaming entertainment experience. Netflix can exert more control over its product — not just streaming someone else’s movies but owning the creation, marketing, and distribution of its own entertainment. It’s as it iTunes became a record label.
- New possibilities for pricing and bundling content. It will be interesting to see what kind of premium pricing and/or subscription incentives Netflix will bundle into the distribution of House of Cards.
- Differentiation. Netflix faces competition from new, powerful entrants: Amazon.com, which says it has entered subscription streaming, and Facebook, which announced a deal with Warner Brothers to stream content.
The deal has its risks, too, not the least being Netflix’s two-year commitment to the drama series. If the series bombs, Netflix is stuck. By contrast, Netflix bears far less of a financial burden by sharing content created by someone else.
Another risk comes to the Netflix brand: a poorly received product will tarnish Netflix because the company has a stake in its creation. By contrast, we don’t blame Netflix when we rent a disappointing movie from its library as we know it today; we simply return the movie and try again, or stream something else.
Netflix has hedged its bets by investing into a project whose executive producer and director is the highly regarded David Fincher. Moreover, Kevin Spacey (whose work has been inconsistent in recent years) will star and executive produce.
You can expect more companies to act as publishers for one simple reason: thanks to the proliferation of self-publishing platforms like GoAnimate and YouTube, people have become their own content publishers and expect brands to follow their lead. In effect, Netflix isn’t breaking any ground here — the company is merely following the example set by you and me. But with a lot more risk and reward.