Netflix, Franchises and the Path to Success
The reviews are in: Netflix’s original series “House of Cards” is a hit. But that success is just the tip of a more ambitious strategy — to turn the streaming service into a Hollywood powerhouse and take on the likes of HBO.
House of Cards Makes a Splash
Released in February as an entire season, the Internet buzzed about the political drama, while critics lavished praise on Kevin Spacey’s oily performance as a conniving, duplicitous Congressman who oscillates between deadpan Southern charm and Machiavellian scheming to get what he wants in the viper pit of D.C. politics.
Oscar-winning Spacey is backed by strong performances from Robin Wright as his seemingly Lady Macbeth-like wife and Kata Mara as a young, ambitious political reporter. Meanwhile, David Fincher, famed for directing “The Social Network” and “The Girl With the Dragon Tattoo,” expertly weaves a taut and analytical drama, which holds its own against rival shows.
In fact, you may think you’re watching Showtime or HBO. And that, of course, is precisely the point.
“The goal is to become HBO faster than HBO can become us,” Ted Sarandos, Netflix’s chief content officer, told GQ. House of Cards spearheads that strategy, and uses the quality and strength of the series to build on its first foray into exclusive content, “Lilyhammer,” its quirky mob dramedy.
By all appearances, House of Cards is a hit. Or is it?
It looks and feels like a quality cable drama, but Netflix’s release goes against industry grain, demanding a new stick to measure success and changing the way you watch TV in the future.
The Risks of Being Different
By investing $100 million in House of Cards, Netflix is branching out — from a distribution pipeline to a creator — and taking on HBO, Showtime and others, rivals it once courted as partners to license content to.
But even as Netflix becomes more like HBO, it’s doing business differently. By releasing all 13 episodes at once, Netflix hooks into the binge-watching habit increasingly common with online viewers.
But the move is risky. It forgoes the buildup of buzz TV networks generate by spreading out the show across the year. And the gamble may cost it valuable brand-building opportunities, a stunted fan base or a lack of engagement on blogs and social media, keeping it from reaching the mainstream of entertainment.
Beyond distribution, House of Cards has another glaring absence: no commercials. Netflix instead follows a subscription model to generate its revenue, though the show does follow a television storytelling structure — act breaks that evolved to splice in commercials. House of Cards is ad-free now, but there’s a place within episodes to naturally slot them in. And whether Netflix or another party will fill them, remains to be seen.
Netflix also lacks industry viewer metrics, so it’s tight-lipped on viewer numbers — Nielsen ratings that measure audience patterns and habits. Since Netflix doesn’t serve ads, it doesn’t need Nielsen — but without them, House of Cards remains an entertainment anomaly in the current system.
But that doesn’t mean it’s in the dark. Instead, it uses its own advanced data tracking — where and when viewers click on and off, down to the second — to measure audience response.
But by foregoing Nielsen, Netflix is placing itself squarely outside of the traditional entertainment system — and that’s a very powerful position.
One of the key pieces is syndication, another opportunity Netflix risks losing without Nielsen and advertising track records. Syndication plays a major role in Hollywood’s cash machine, allowing shows to relive multiple lives — and reap advertising, again and again.
Netflix doesn’t own the syndication rights to House of Cards. Media Rights Group, the production company, does, so it would gain any financial benefits from reruns. Netflix is still credited as the original broadcaster, and if House of Cards becomes a zeitgeist show and rebroadcast on another network, syndication will expand Netflix’s reputation as an imprimatur of quality content.
The Big Picture and the Strategy to Success
Netflix is taking a big risk with an original content strategy, but it’s shown a keen understanding of the game, and, if successful, stands to gain significant rewards.
Hollywood likes to throw around phrase “content is king” to differentiate powerhouses from mere players. But “content” isn’t just shows and movies — it’s franchises, or series with the ability to create community, incite debate and generate buzz to compel audiences year after year.
Those franchises keep you subscribing to HBO despite high cable bills — you can’t cut the cord because you just can’t miss “Game of Thrones” and “Girls.” It’s those franchises that add up to large libraries of assets, which can be sold again and again through DVDs, licensing and syndication.
It takes years to build franchises, but Netflix is catching up fast. Aside from House of Cards, Netflix plans to fund five shows a year, including the last season of “Arrested Development” and “Orange Is the New Black,” a prison drama from Weeds creator Jenji Kohan. According to CEO Reed Hastings, it’s becoming a franchise factory.
However, the franchise strategy has wrinkles — it’s very, very expensive. Analysts expect Netflix’s content costs to outpace subscriber revenue eventually. And its subscriber growth isn’t keeping pace with increasing spending. The company may have to raise prices or find ways to cut costs of its expensive DVD-by-mail rental service — changes that prompted serious customer uproar in the past. But the blowback won’t be as drastic the next time around — physical media is becoming an artifact, giving way to streaming as the mainstream.
We’re in the golden age of television — shows today rival films in storytelling complexity, visual panache and intellectual and emotional substance. And House of Cards’ A-list marquee and fine execution shows Netflix is determined to carve out a place in that space.
