Netflix’s Future Is In Television, Not Movies


Credit: Technorati

There’s been a lot of discussion in recent months about the decline of Netflix’s movie offerings, and the way the service’s television offerings have become more important both to Netflix’s future, and to the culture at large. The service made a splash with its original television series, both the heavily-advertised House Of Cards and its prison drama Orange Is The New Black, which became a cultural phenomenon all on its own. Its competition with Amazon over syndication has heated up. Anne Helen Petersen wrote a terrific piece for the Los Angeles Review of Books about what she termed the “Netflix canon,” the roster of shows that are available through Netflix, and thus are what her students are familiar with, a group of shows that doesn’t include the HBO offerings that have had such an enormous impact on the culture.

And the primacy of television is now showing up in Netflix’s own communications about its future. In yesterday’s letter to shareholders, CEO Reed Hastings and CFO David Wells mention movies just twice, once in a general description of the service, and once in reference to a deal with the Weinstein Company. By contrast, television is everywhere in their discussions of their plans:

While our original series get most of the headlines, a bigger percentage of overall Netflix viewing is generated by our exclusive complete season-after series. During the quarter, we launched new seasons of The New Girl, The Walking Dead, Scandal, Breaking Bad, Revolution and Pretty Little Liars. We also announced that Netflix will be the exclusive home to high quality first-run Pay1 films from The Weinstein Company beginning in 2016. Our kids offering was strengthened during the quarter by adding top rated and award winning Scholastic TV shows, Goosebumps and The Magic School Bus. We also announced an expanded list of PBS shows including Super Why!, Wild Kratts, Caillou and Arthur, as well as all seasons of the critically-acclaimed mystery The Bletchley Circle. …

In 2014, we expect to double our investment in original content (though still representing less than 10% of our overall global content expense). Coming to Netflix next year will be second seasons of House of Cards, Orange is the New Black, Derek and Hemlock Grove as well as the just announced project from Todd and Glenn Kessler and Daniel Zelman, the Emmy and Golden Globe nominated creators of Damages. We’ll also roll out a number of new animated series from DreamWorks Animation. Expect more news on additional new original projects in the months to come.

This focus makes a great deal of sense from a business perspective. Television is a better bet for a subscription service than movies. A user who comes for one movie might watch that movie and cancel the service once they’ve watched it, depriving Netflix of both revenue and a data stream. A user who comes for a single series, by contrast, is at least likely to stay for an entire month, and to watch the show in ways–whether an episode a time on week nights, or in huge gulps during a weekend binge–that give Netflix more information about user behavior.

It’s also cheaper to develop television originals than it is to shoot movies. Netflix can spend $100 million on 26 hours of House of Cards programming, where if it wanted to compete and film blockbusters, $100 million might only buy the company 90 minutes of programming. And the investments Netflix makes in sets for television shows can amortize over years of production if a show is successful. The question of syndication costs is trickier, but the basic equation remains the same–Netflix needs a huge volume of content, and a larger overall investment in a television show may be much more worthwhile for Netflix if the cost per hour is lower. It’s true that on the call with investors, Sarandos suggested he’d be interested in documentaries–which come with a much, much smaller price tag–and movies that Netflix might be able to have first runs on. But he’s not going to get into the hugely expensive sports market. And I’d imagine that whatever movies the company does pursue will have price tags in keeping with their value to the company.

And investing in television rather than in movies might be smarter for Netflix’s bottom line, but it also lets the company appear to be siding with an ascendent form. I don’t think there’s an actual tradeoff taking place between film and television. And creating new incubators for terrific directors like Michelle MacLaren, or competition for acting talent can only be a good thing for both forms. But if you want a lot of content for your money and to ride what seems to be a cresting cultural wave, television is the right place for Netflix, which needs both buzz and plenty of programming hours, to be.