Netflix's Exclusive Content Play: Competition for Premium Cable
Netflix is taking a big step to compete directly with premium movie channels like HBO by moving into original programming.
Netflix is in discussions to buy exclusive rights to a series called 'House of Cards,' directed by David Fincher, starring Kevin Spacey.
The deal would distribute the series to Netflix's 20 million plus subscribers before it's available on any other outlet. By promoting original content Netflix would be more than ever, a direct competition to HBO and Showtime, which have used original series like "The Sopranos" and "Sex & The City" to build and maintain their subscriber base.
An exclusive content deal is the ultimate extension of Netflix's model of paying for premium content. Just this past August Netflix paid $1 billion for a five-year deal to distribute content from Epics (a pay-TV channel co-owned by Viacom, Lions Gate , and MGM). This move to pay for exclusive content isn't a total departure for Netflix, as the company is not becoming a content creator itself. Instead the company is just moving up the point at which it starts to acquire content, and when it brings that content to its subscribers.
There have been reports that Netflix could pay as much as $100 million for 26 episodes. Sources tell me that Netflix wouldn't pay that much. But even if it did end up paying that much, it could certainly afford to. An additional 1.1 million subscribers would cover a $100 million plus check. But that's nothing—Goldman Sachs analyst says she expects the company to add between 2 million and four million subscribers PER QUARTER over the next two years.
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