The Next Step for Netflix

Luke Burrage

I remember one podcast where Rym and Scott were talking about Netflix, as Scott had invested in them in the stock market game. He said "They did DVD's, and were huge, and then did streaming, and were even bigger. There will be a next step, but I don't know what it will be."

Rym didn't think there could be a next step.

I just read this headline:

Netflix To Enter Original Programming With Mega Deal For David Fincher-Kevin Spacey Series 'House Of Cards'

"Negotiations are still going on, but I hear Netflix landed the drama project by offering a staggering commitment of two seasons, or 26 episodes. Given that the price tag for a high-end drama is in the $4 million-$6 million an episode range and that a launch of a big original series commands tens of millions of dollars for promotion, the deal is believed to be worth more than $100 million and could change the way people consume TV shows."

lackofcheese

That's a ballsy move. I hope for Netflix's sake that the show doesn't suck.

Rym

Rym didn't think there could be a next step.

Not with their technology. I did say they should invest in content that they then stream directly. Bankroll the content independent of advertisers or theaters to guarantee themselves relevancy.

Luke Burrage

Rym didn't think there could be a next step.

Not with their technology. I did say they should invest in content that they then stream directly. Bankroll the content independent of advertisers or theaters to guarantee themselves relevancy.

Oh yeah, now I remember.

Rym

Oh yeah, now I remember.

To be fair, it was a fast and heated argument Scott and I had, which continued well after we cut off the mics. ;^) I wasn't 100% sure if I'd said that on the show or after.

But my full position was that streaming is a fine business model requiring no modification other than incremental improvement. Behind streaming, getting into independent content production is the real next step. The old model of DVD sales, network sales, and ad revenues is too dangerous and relies upon naive consumers. If you bankroll the content yourself AND provide the primary means of accessing it (at surprisingly low cost), nevermind legacy access to a long tail of otherwise economically nonviable media, you're set.

Apreche

I think the problem here is that the cost of content production is much much too high. $100 million dollars to produce 26 episodes is not going to work if you get $7 a month per person. At that rate, you can afford only one show at a time, if that. They need to lower the production budgets if they want to produce an entire lineup of shows. I suggest ponies.

Rym

. $100 million dollars to produce 26 episodes is not going to work if you get $7 a month per person.

Actually, it's probably fine. That's recouped in a couple of years with about a million subscribers. It can also be easily augmented with merchandising, DVD sales, and the like. The key is that these are now secondary revenue streams, above and beyond a core if modest subscription model.

Apreche

Actually, it's probably fine. That's recouped in a couple of years with about a million subscribers. It can also be easily augmented with merchandising, DVD sales, and the like. The key is that these are now secondary revenue streams, above and beyond a core if modest subscription model.

If they wanted an additional revenue stream, I think they would be better off producing movies instead of TV shows. They could profit from the box office sales, then make DVD and/or streaming Netflix exclusive to pump up the subscribers.

Luke Burrage

I think repeating content only available on Netflix is way more of a draw for new subscribers than one-off movies.

Churba

I think the problem here is that the cost of content production is much much too high. $100 million dollars to produce 26 episodes is not going to work if you get $7 a month per person. At that rate, you can afford only one show at a time, if that. They need to lower the production budgets if they want to produce an entire lineup of shows.

Well, I'd be willing to bet that this is their plan - They're blowing a big chunk of change on a big name, big headline, hopefully big rating show to kick the whole deal off - the majority of the rest of the content they produce will be much cheaper, somewhere between Dr Horrible and The Man show.

Rym

somewhere between Dr Horrible and The Man show.

Which is a fine idea. If I were them, I'd tap into video podcasts too. Being the place for long-form video content with reasonable production values can turn them into almost a utility as far as their subscribers are concerned. Everyone has a cellphone and pays their bill; everyone has Internet access and pays their bill: they could make Netflix another "duh, everyone has an account" service.

Churba

Which is a fine idea. If I were them, I'd tap into video podcasts too. Being the place for long-form video content with reasonable production values can turn them into almost a utility as far as their subscribers are concerned. Everyone has a cellphone and pays their bill; everyone has Internet access and pays their bill: they could make Netflix another "duh, everyone has an account" service.

That's a good idea - Rev 3 already does pretty well, without having the reach that Netflix does, nor the subscriber base, nor the resources. If they can take what rev 3 does, and essentially outdo them at it, they'd be rolling it in - I mean, look how popular shows like Scam School, the Young Turks and TechZilla are. They'd definitely want to be acquiring shows before they started making new ones, though, when it comes to video podcasting - same old story, get someone in to show you how to do it, and then when you learn how to do it from them, piss them off and keep doing it on your own.

Apreche

I think that producing their own TV shows is not really going to increase subscriber by a large number. People discover shows by seeing them, and if you can only see them on Netflix, people who aren't already subscribed are unlikely to discover these shows or care about them. However, people who have Netflix are going to be much less likely to unsubscribe if they get hooked on any of these shows. It does look like a possibility that content providers might start to bail out of Netflix soon-ish, so this is important.

Churba

I think that producing their own TV shows is not really going to increase subscriber by a large number. People discover shows by seeing them, and if you can only see them on Netflix, people who aren't already subscribed are unlikely to discover these shows or care about them. However, people who have Netflix are going to be much less likely to unsubscribe if they get hooked on any of these shows. It does look like a possibility that content providers might start to bail out of Netflix soon-ish, so this is important.

Thus the cunning part of the big song and dance around the first show - people will hear about it, and subscribe to check it out. If they like it, they stay, and hopefully if they don't, they will like some other content, and stay for that instead.

Edit - also, they could pick up some good in-production series, for example, DC comics and Neil Gaiman are currently working on a Sandman series which was very nearly dead for a while, if they picked that up, cast it full of tallented unknowns, they'd be making each episode for a song, and raking in plenty of people who'd subscribe just to see it.

Rym

t does look like a possibility that content providers might start to bail out of Netflix soon-ish, so this is important.

Current providers without real revenue streams are going to abandon Hulu/Netflix/whatever rapidly I'd wager. Even Comedy Central seems to have given up on online ads: they play the TV ads now on most episodes of the Daily Show.

zehaeva

How is all of this going to be affected by AT&T setting a limit on their broadband to 150-250GBs? If all the last mile providers start to do this then doesn't that limit Netflix, especially when more and more subscribers turn away from traditional Cable services. Could monthly caps be a way for content providers to limit the damage that services like Netflix and Hulu cause and help funnel people to their own competing services, which don't count towards that monthly cap?

Cremlian

Current providers without real revenue streams are going to abandon Hulu/Netflix/whatever rapidly I'd wager. Even Comedy Central seems to have given up on online ads: they play the TV ads now on most episodes of the Daily Show.

Still SIGNIFICANTLY less ads. Plus with the Daily show if you watch it in the morning sometimes I only get one ad. I think they add more ads as the day goes on :-p

Rym

Still SIGNIFICANTLY less ads. Plus with the Daily show if you watch it in the morning sometimes I only get one ad. I think they add more ads as the day goes on :-p

It's random. They're clearly testing it. If you watch an episode, and it flags itself as "as originally broadcast," You'll get THREE FUCKING MINUTES of ads at multiple junctures. If this keeps up, I'll start pirating the show...

Nukerjsr

The show is really going to have to be good if it costs that much and is Netflix specific. Like, on that HBO/Showtime/AMC level of critical acclaim if it's going to catch on with real fans. Because some of those shows do have a budget in the millions per episode. My favorite show, Breaking Bad for example, is going to use about 3-4 Million Dollars per episode for their 4th Season.

I can see this working in for Netflix though, if you consider the premium networks. They cost about 10 dollars a month, but you have to rely on a specific schedule. Some people do stay onto those networks, particularly HBO, because of three or so wonderful shows on there. Netflix has automatic streaming to LOADS of movies/series that you can watch through several mediums at any time. So this could serve as a serious rival for those premium networks, if they really bring the shows. A David Fincher-Kevin Spacey story sounds pretty awesome, but we'll have to see.

Jason

It's random.

Is that a guess, or from some sort of data? If I were an advertiser, I would want to pay for peak viewing times, which is typically prime time. I know the Internet and time-shifting obfuscate that a bit, but the truth is that your purchasing class is overwhelmingly going to be busy at work from 8 a.m. to 6 p.m., so the good ad money should go to the after 8 p.m. slots, even for streaming media.

trogdor9

If you watch an episode, and it flags itself as "as originally broadcast," You'll get THREE FUCKING MINUTES of ads at multiple junctures. If this keeps up, I'll start pirating the show...

Hahahahaha, this is exactly what I said the first time I got one of these episodes.

KapitänTim

Netflix already tried to make its own content. They had a branch called Red Envelope Entertainment. They decided to close it as not compete with people they were trying to get to provide them content. Instead of making new content why don't they just pick up series that no one has the license to distribute?

George Patches

It's random. They're clearly testing it. If you watch an episode, and it flags itself as "as originally broadcast," You'll get THREE FUCKING MINUTES of ads at multiple junctures. If this keeps up, I'll start pirating the show...

I'll probably just watch it, on TV.

trogdor9

That's a pretty dumb Penny Arcade. I've never once spent any significant amount of time looking for a TV torrent, and that's how I watch all of my shows.

Andrew

Netflix is separating their DVD and Streaming services into two distinct companies. Netflix is now streaming only while Qwikster is their new DVD only service.

beefy

Qwikster has to be one of the stupidest names I have ever heard of. I just don't understand why you would give up that name, it would be like Coke changing their name. I just don't know if Netflix is going to survive all that is happening to it right now. According to CNN they lost 1,000,000 customers since the price hike went live. I wasn't one of them, I still think the instant is worth it. But I'm dropping the mail service now, not worth the trouble to me having to go to 2 web sites to keep up with my que.

ninjarabbi

Ok thats retarded and just ads more hastle for the customer.

On another note, I wouldn't be against Netflix buying hulu and adding all he Hulu plus content to Netflix streaming.

Cremlian

Even though I dropped the physical DVD when they announced the change it is interesting that the Qwikster will now deal in Video games.

Apreche

Even though I dropped the physical DVD when they announced the change it is interesting that the Qwikster will now deal in Video games.

Yes, it is interesting. They are going to charge extra for video games, but depending on how much extra I might go for it. Think about it. Maybe they charge $5 extra per month for video games. So I sign up for that and get Skyward Sword (even though I already pre-ordered it on Amazon). I get the game, beat it, and send it back. Even if it takes me three months, just saved $35.

beefy

I think the game rentals makes a lot of sense. Even if for some reason it doesn't work out, I wouldn't think it would a huge financial loss to them. But I do see this separating the web sites just costing them more customers. As I said above, I just dropped the physical DVD because of it. Not because of the price, I was willing to pay the extra $8 a month for it, even though I didn't use it much. But if I have to have 2 separate ques, it's just not worth the trouble to me. Now I may got back to it from time to time, like when the last season of True Blood comes out. I'll probably sub for a month, that would be more than enough time for me to watch the season them unsub again.

I just have to say again also, that Qwikster has got to be one of the stupidest fucking names they could have come up with.

Apreche

I'm only keeping the physical DVD until I finish the IMDB top 250. Then I'm done with it.