Comments on: Why Netflix is producing original content http://blogs.reuters.com/felix-salmon/2013/06/13/why-netflix-is-producing-original-content/ A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: pozycjoner http://blogs.reuters.com/felix-salmon/2013/06/13/why-netflix-is-producing-original-content/comment-page-1/#comment-54355 Wed, 08 Oct 2014 13:41:55 +0000 https://blogs.reuters.com/felix-salmon/?p=22071#comment-54355 Nice article, thanks

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By: Antiococo http://blogs.reuters.com/felix-salmon/2013/06/13/why-netflix-is-producing-original-content/comment-page-1/#comment-47354 Sat, 15 Jun 2013 14:32:05 +0000 https://blogs.reuters.com/felix-salmon/?p=22071#comment-47354 It’s less about building a catalog and more about becoming known for original content as a brand. Is there really a meaningful number of HBO subscribers that are watching The Sopranos or Six Feet Under in 2013? Probably not. Do people think of HBO as a leader in original programming? Yes but it didn’t happen overnight.

That brings the pressure for Netflix to constantly produce top-level shows. It also means they have to continue to grow their sub base in order to fund these programs and make it to that point at which they are known for original programming. I would argue it can happen a lot faster now than when HBO started out.

It will be interesting to watch the effect of allowing people to ‘binge’. Currently it plays as a pop and fade. But as @hypermark points out, once they have enough series, they can stagger them rather than draw out episodes.

Another issue is whether Netflix continues to spend gobs of cash on series but don’t secure the long-term, exclusive rights (e.g. House of Cards). But that may have been a deal done to jump start originals.

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By: hypermark http://blogs.reuters.com/felix-salmon/2013/06/13/why-netflix-is-producing-original-content/comment-page-1/#comment-47351 Fri, 14 Jun 2013 17:02:11 +0000 https://blogs.reuters.com/felix-salmon/?p=22071#comment-47351 There are four reasons I subscribe to HBO, and NONE of them are their movie library. It’s in descending order:

1. Game of Thrones
2. True Blood
3. Boardwalk Empire
4. Real Time with Bill Masher

This is very harmonious with the Netflix strategy. The key assumption is that they will stagger when seasons of different shows begin so binge viewers can’t simply binge, cancel, binge, cancel.

That requires having the “typical” viewer watch 2-4 series, as in the case of Showtime, Homeland is the **only** content I care about on that channel so I cancel between seasons.

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By: y2kurtus http://blogs.reuters.com/felix-salmon/2013/06/13/why-netflix-is-producing-original-content/comment-page-1/#comment-47349 Fri, 14 Jun 2013 02:28:21 +0000 https://blogs.reuters.com/felix-salmon/?p=22071#comment-47349 Netflix can decide how to spend it’s billions on content. Eventually it will come to the youtube conclusion. It is a far better business model to deliver low cost content to the masses for a low price than best in class content for a premium price. Youtube is free (for now) and survives only on ad rev to support their service. Obviously you have to make some assumptions about what % of Google’s market cap you attribute to Youtube but it’s a safe bet in my mind that if Google spun out Youtube it would be worth more than NFLX even without original content or distribution. The money is in the aggregation.

NFLX could easily stream 90% of the current menu for 10% of their current content budget. The catch is the 10% you would lose are the hit movies and tv shows that all their customers want to watch. That’s why the best 10% of their content cost them 90% of their content budget.

NFLX could flip that coin if they so chose. Producing House of Cards and Arrested development is an attempt at doing just that. They would be far better off spending their money on permanent streaming rights to content than a time limited license. Lets say I am a direct netflix competitor like Comcast. I own content say 30rock, Netflix is willing to pay dearly for it… but only if they can run it forever not just for a year or two. Just because NFLX can play it dosen’t mean Comcast can’t play re-run it, or syndicate it to other parties. Selling NFLX streaming rights to content is incremental revenue that Comcast would just assume collect.

If Netflix simply refused to spend money on time limited licenses they would absolutely lose access to some of their most desired content. They would not however lose all of it; some content owners just wouldn’t refuse millions in revenue. They would pay more money for less new content but they would get off the treadmill of having to constantly replace a billion dollars of licenses that expire. Every month their pool of content would grow. Now that would be a recipe for long-term wealth creation.

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By: realist50 http://blogs.reuters.com/felix-salmon/2013/06/13/why-netflix-is-producing-original-content/comment-page-1/#comment-47348 Fri, 14 Jun 2013 01:14:14 +0000 https://blogs.reuters.com/felix-salmon/?p=22071#comment-47348 I agree with Harpstein1 and Felix. In reply to y2kurtus, I would say that a streaming-only Netflix – owning neither content nor distribution (wired or wireless network) – would be so relentlessly squeezed on margins that it wouldn’t earn enough money to justify its current $12 billion market cap. If Netflix produces its own proprietary content, it at least a has a chance to be worth more than that. (Or, as Felix says, it may fail).

The streaming business model is far worse than Netflix’s dying DVD by mail business model. Lower barriers to entry because a competitor doesn’t have to set up distribution centers. Higher content cost because Netflix can’t rely on the first sale doctrine to acquire streaming rights relatively cheaply.

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By: ballmatthew http://blogs.reuters.com/felix-salmon/2013/06/13/why-netflix-is-producing-original-content/comment-page-1/#comment-47346 Thu, 13 Jun 2013 22:47:41 +0000 https://blogs.reuters.com/felix-salmon/?p=22071#comment-47346 In this environment, it’s not clear that having great content will deliver viewers – or that even excellent content will reach “cultural-touchstone status”. Digital distribution, tablets and SVOD services such as Netflix have gone a long way to increasing the amount of television we can consume, but at some point, there really will be too much good TV to watch. As a result, consumers will no longer need to subscribe to any given service to satiate their appetite for content, however good that service’s shows might be. In this scenario, “free” or embedded services (such as the nascent Amazon Instant Video, Microsoft’s as-yet unannounced Xbox service or Comcast’s StreamPix) may have inherent advantages that Netflix may struggle to overcome. Original content will always drive subscriber gains and is certainly an important signal to the marketplace. At the same time, it’s also moving from a leading differentiator to a cost of playing the game.

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By: MyLord http://blogs.reuters.com/felix-salmon/2013/06/13/why-netflix-is-producing-original-content/comment-page-1/#comment-47344 Thu, 13 Jun 2013 21:07:01 +0000 https://blogs.reuters.com/felix-salmon/?p=22071#comment-47344 Isn’t the question what the buy vs build cost is? What is HBO worth?

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By: Harpstein1 http://blogs.reuters.com/felix-salmon/2013/06/13/why-netflix-is-producing-original-content/comment-page-1/#comment-47343 Thu, 13 Jun 2013 20:44:09 +0000 https://blogs.reuters.com/felix-salmon/?p=22071#comment-47343 @y2kurtus I’m not following your point?

I don’t see Sony ever offering “forever” access to their content. Aside from eliminating their ability to raise rates, I’m sure someone important there thinks they’re going to launch their own NetFlix/HBO at some point.

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By: MatthewBall http://blogs.reuters.com/felix-salmon/2013/06/13/why-netflix-is-producing-original-content/comment-page-1/#comment-47331 Thu, 13 Jun 2013 13:39:27 +0000 https://blogs.reuters.com/felix-salmon/?p=22071#comment-47331 Thanks Felix. You’re right that Arrested Development and House of Cards are just the first step to creating an HBO-style portfolio of content. The problem here, as I discussed in an earlier piece in the series here: http://goo.gl/68Op6, is that the original content space is increasing crowded and its value as a differentiator is diminishing. Since 2002, there was been a 700% increase in the number of new scripted shows premiering in the United States. The 2013-2014 season will likely blow through this 14% compound annual growth rate, as the likes of Hulu, Microsoft (which has been silently hiring broadcast executives) and Amazon enter the original content space, and those with recent success, such as History, transition more fully to the model.

In this environment, it’s not clear that having great content will deliver viewers – or that even excellent content will reach “cultural-touchstone status”. Digital distribution, tablets and SVOD services such as Netflix have gone a long way to increasing the amount of television we can consume, but at some point, there really will be too much good TV to watch. As a result, consumers will no longer need to subscribe to any given service to satiate their appetite for content, however good that service’s shows might be. In this scenario, “free” or embedded services (such as the nascent Amazon Instant Video, Microsoft’s as-yet unannounced Xbox service or Comcast’s StreamPix) may have inherent advantages that Netflix may struggle to overcome. Original content will always drive subscriber gains and is certainly an important signal to the marketplace. At the same time, it’s also moving from a leading differentiator to a cost of playing the game.

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By: KidDynamite http://blogs.reuters.com/felix-salmon/2013/06/13/why-netflix-is-producing-original-content/comment-page-1/#comment-47330 Thu, 13 Jun 2013 12:36:48 +0000 https://blogs.reuters.com/felix-salmon/?p=22071#comment-47330 personal channel check – we took the Netflix free trial to watch the new Arrested Development season in a weekend… but we’ll probably keep the subscription: at $8 there is plenty of content to consume for now… (I watched House of Cards, and now i’m on to non-NFLX-original: Louie

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