After cornering the home video rental market and all but slaying former rental juggernaut Blockbuster, it seems Netflix has now set its sights on the television industry. With the highly publicized release of House of Cards, the first original television series developed by Netflix, the king of on-demand streaming has introduced itself as an original content provider. And the ripples will be felt for years to come. Netflix could potentially lead the charge in changing the way television works.
Have you ever lost a show to cancellation? If you’re a fan of television, there’s no doubt you’ve suffered through the cut episode orders, the shifting schedules and the abrupt hiatuses that go hand in hand with a TV show breathing its last breaths. So why is that such a common part of life as a television fan?
Let’s take a step back. The way television works is simple enough. Networks have airtime to fill. They sell their airtime to advertisers. Since no one wants to watch 24 hours of commercials, networks buy TV shows. If a show isn’t watched by a lot of people, that means the commercials aren’t being watched. So the show gets canceled.
For years the TV industry has worked off of Nielsen ratings, an antiquated system of counting viewers based on sampling the population. A family in Omaha watches the latest episode of Dancing with the Stars and that means 10,000 or 100,000 Americans watched it. A guy falls asleep with his TV on CBS and suddenly Two and a Half Men is the highest rated show on TV.
You can watch your favorite show religiously but, unless you have a Nielsen box, you don’t matter. And the problem just gets messier when you factor in DVRs and the thorn they put in the side of the networks because a DVR viewing means commercials have been skipped. And skipped commercials mean unhappy advertisers.
What Netflix is doing is delivering a heavy blow to a system that’s been bruised by DVR, DVDs, piracy and next day digital downloads. They are following the model of HBO and other subscription-based premium networks but with one significant difference. Netflix isn’t restricted by scheduling.
All 13 episodes of the first season of House of Cards was posted onto Netflix on day one. Netflix has given the viewer the power to schedule their viewing on their own time. The Netflix app adds an additional lair of control to the viewer, allowing you to watch it anywhere with a strong enough cell signal.
An episode of House of Cards ranges from 46 minutes to 56 minutes in length. Since Netflix doesn’t have to schedule their programming, writers don’t have to work within the confines of writing to commercial breaks nor have concerns about runtime. That gives the writers and editors a freedom that is unheard of in conventional television.
Netflix has much better data to work with, as well. Conventional networks rely on outdated Nielsen ratings to tell them what works and what doesn’t. Netflix can track the exact number of subscribers watching their shows. Not to mention, they can track what is or isn’t working by analyzing exactly when in an episode users pause, rewind, fast forward or quit watching a show. This can give a level of feedback that conventional TV simply cannot mimic.
There’s also something to be said about the cost of this experiment. Netflix paid $100 million for 2 seasons of House of Cards. This isn’t much compared to the massive amounts they spend annually on licensing deals with studios to stream movies.
For instance, Netflix just signed a deal with Disney that gives them first rights with new movies. So instead of HBO or Showtime showing the latest Disney movie when it hits DVD, it’ll be streaming on Netflix. This deal goes into effect in 2016 and is reported to be costing Netflix $300 million per year. That will give them streaming rights to Disney, Pixar, Marvel and Star Wars.
With Netflix premiering five more original series this year (including the highly anticipated return of Arrested Development and a newly announced animated series with Dreamworks), they are clearly not joking around.
Netflix jumping into original programming could change the way conventional television works. If they prove themselves to be competent network executives, the allure and freedom could draw the most talented showrunners in the business to set up shop at Netflix. If it works, Netflix could have the most talented people in television lining up at their door.