When you’re already the largest American provider of on-demand Internet streaming media, what do you do to secure your #1 spot? If you’re Netflix, then stepping into HBO territory may be your best bet.
Chief content officer Ted Sarandos explains that the company wants to churn out at least five original programs a year with a 5 percent slice of the $6 billion dollar content budget - with $300 million for five shows, Sarandos says the new goal of the company is “to become HBO faster than HBO can become us.”
Sticking to a daring business move made by the subscription-based movie and television show rental service back in March 2011, Netflix debuted their first hour-long political drama, House of Cards, last February. Prior to that, the company acquired two seasons of Lilyhammer and the fourth season of the critically acclaimed series, Arrested Development. Hemlock Grove, based on the horror/thriller novel by Brian McGreevy of the same name, will come out April 19. Orange Is the New Black, a 12-episode series based on Piper Kerman’s memoir, is due for release this summer.
Netflix’s competition is fierce. Other than HBO, Apple, Amazon, Sony and Microsoft are all testing the waters of Internet media streaming and are competing with each other in bidding for the syndicated content that Netflix has been licensed to stream for the last few years. But unlike other companies, Netflix has access to years and years of customer data on what its subscribers like to watch and how often - which makes content creation seem like Mad Libs.
Netflix’s big problem was subscriber retention. Once a customer had their serving of unlimited film and TV show streaming, they tend to cut off the service. “There are lots of people trying [Netflix] every year, yet most of them turn off,” says media analyst Richard Greenfield. “The best way to make its service stisckier is to create high-quality programming that people wan to access on a regular basis.”
Learning from its cable competitors HBO, Showtime and AMC, the rationale behind Netflix’s decision to invest $300 million into original programming in the next three years is to lure in new subscribers that might ultimately become addicted to one of their original series and thus feel the need to be subscribed to their services. Just like The Sopranos earned HBO 4 million subscribers, Netflix is trying to do the same with House of Cards, Hemlock Grove and Orange Is the New Black, among others.
“When we heard about a remake of House of Cards, our ears pricked up because of our own knowledge of the original,” says Sarandos. “Our data showed that there were a lot of people who watched it over the years. And certainly when you start layering in the pools of fans of David Fincher, Kevin Spacey, [and] of political thrillers—all of a sudden you’ve got a very large addressable market.”
Hulu, perhaps the company most similar to Netflix, has also chosen to invest in original programming. The service, which offers ad-supported on-demand streaming of TV shows and movies from NBC, Fox, ABC and TBS, has distributed 25 Hulu Original and Exclusive Series in less than two years. Partnering with Saturday Night Live’s head writer Seth Meyers and Emmy-winning producer and SNL alum Michael Shoemaker of Late Night with Jimmy Fallon, the company plans to release their first animated Hulu Original Series, “The Awesomes” this summer.
The company, a joint venture of NBC, Fox and ABC, boasts only 3 million Hulu Plus subscribers and is available only in the US and Japan.
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