7 ms·

Why Netflix is producing original content

68 points by gregpurtell 13y ago

jebblue 13y ago
You know what would really be cool? If Netflix would use that money to get History Channel content, I'd never leave Netflix.
- da02 13y ago
  Are there any particular series/specials you would recommend from The History Channel?
  - dev360 13y ago
    They have amazing history shows - like Pawn Stars and Larry the cable guy... Swamp people too.
    - jebblue 13y ago
      Pawn Stars, American Pickers, Ice Road Truckers and American Restoration are the top ones for me, precedence order. I like more of their shows though, http://www.history.com/shows http://www.history.com/shows
CognitiveLens 13y ago
There's some good observations here, but I would stop short of the claim that "for viewers, this can only be good." It's not good that some great movie libraries have already been stripped from Netflix because the contract renewal was going to be too expensive. It's not good if Netflix goes all-in on original programming and fails, potentially taking the rest of the company down as well. It's not good if Hollywood feels little pressure to make it easier for consumers to access their content because they're getting great contracts with traditional distributors. It's also interesting that this article makes no mention of Netflix's 3 other original series that are not as popular as House of Cards and Arrested Development - Netflix is probably making as many flops as hits at the moment, and that adds an important qualification on the risk/reward calculation of its strategic investment in original series - the headliner shows have to not only justify themselves (as the article describes), but carry the duds as they come along as well.
- roc 13y ago
  If the libraries removed from Netflix are licensed to competitors, it is indeed Good for consumers, provided the barriers between services aren't too steep. [1] It incentivizes providers like Netflix to continue increasing their value proposition and ensures profits are flowing back to creators/library owners commensurate with their value. If Netflix fails, at this point, I don't think it'd be too big a blow. There are plenty of services in the same space and the feeding frenzy for Netflix library contracts would ensure the survivors are offering the same library to the same market. And I'm not sure why you think Hollywood feels no pressure to get their content in front of viewers. Their proper interest is to maximize the return on their libraries, and they can hardly do that if they enable the creation of an 800 lb gorilla in the streaming market that can dictate terms. Should Netflix be the undisputed one-true-service for digital delivery, that would almost certainly become bad for viewers. What incentive would they have to work with MS/Google on enabling federated/integrated search/navigation? What incentive would they have to work with new device makers as they have? Netflix fantastic value proposition is a product of how intensely competitive that space is, due its future up-side. Things that preserve that competition are Good, even if they are bad for Netflix specifically, up until the point they are bad for the entire streaming market. [1] The current division between Hulu, Netflix, ABC, HBO Go, et al. is about as high a wall as you'd want. Different services, same box, same-ish interface/behavior. If you couldn't get multiple services on the same hardware, it'd be too high. And, of course, if you could get XB1/GoogleTV-style federated search/navigation across services, the status quo would be just fine.
- dasil003 13y ago
  > There's some good observations here, but I would stop short of the claim that "for viewers, this can only be good." It's not good that some great movie libraries have already been stripped from Netflix because the contract renewal was going to be too expensive. That's a non-sequitur. That content was going to be stripped regardless of what production Netflix was engaged in. In fact, it doesn't matter if Netflix can magically realize 10x revenue per subscriber overnight, because there is game theory at play here. Big content is happy to make nice marginal payouts from Netflix on the side, but they will do anything to prevent Netflix from consolidating a comprehensive library of A-list content because they already have by far the broadest device reach, and if they get all the content, cable cutting will ramp up overnight and destroy any leverage for rights holders because there will be nowhere else they can go for distribution. > It's not good if Netflix goes all-in on original programming and fails, potentially taking the rest of the company down as well. They have no choice. Big content will never let them win. With their own content at least they have a chance to control their own destiny. > It's not good if Hollywood feels little pressure to make it easier for consumers to access their content because they're getting great contracts with traditional distributors. As long as customers balk at paying $10/month for Netflix while happily shelling out $150/month for cable, Netflix has no leverage. On balance I have to agree with the OA's assertion. Netflix putting some of its money directly to production can only benefit viewers overall. Putting that money to more contracts is not going to move the needle in terms of production from the major studios, to them it's just gravy at this point.
amalag 13y ago
They should tie up with a good content provider. AMC has excellent shows all available on streaming, Breaking Bad, Mad Men, The Walking Dead are of course famous. Other good shows are The Killing, Hell on Wheels. I think if they make partnership they will get a better deal out of it, rather than them creating such content on their own.
- roc 13y ago
  But what would the partner get out of it? Anyone with a track record at this point has far more to gain by letting the streaming providers compete for a license every few years. Netflix might offer slightly better terms than competition would produce in the short-run, but they'd want a longer license term to make up for it. And that, given the growth and promise of the space, would be silly. Consider the 700% licensing fee increases. Would Netflix offer a 700% premium over a 3-year license in exchange for a 6-year partnership -- with who-knows-what restrictions on future licensing of content produced under the partnership? They'd need to find a producer with a track-record for quality, but that was also cash-strapped and needed someone to share future production costs to stay in business or to make some wild expansion gamble. Which would only raise the question of why a producer with a track-record would have trouble finding another partner. Plus the nature of Hollywood is that it doesn't make too much sense to partner with AMC to get new content, based on their success in hiring successful creatives, when you can just hire successful creatives directly. What, after all, has AMC brought to The Walking Dead, beyond hiring a successful creative and providing a time-slot? Their input into the situation has seemed to be the 'tweaking for profitability' consideration that requires little industry acumen (AMC was remarkably ham-handed in this case) and that Netflix might not even see the same need for in the first place.
nitid_name 13y ago
We're slowly but surely collapsing back to the channel model of content. The bundling the cable services were forcing on us to support ESPN (which accounts for something like $15-20 in your TV bill) and then topping with the a la cart channels (HBO, Showtime, etc). Now, we have a few a la cart providers that stand on their own with original content (in addition to licensed content). My big fear is that the a la cart streaming channels will eventually start running commercials in the manner of Hulu. Throw in ISP bundling of streaming services, and voila, we're back to Cable Television... only since it's on demand, we can't DVR through commercials.
- replicatorblog 13y ago
  There are a lot of economic breakdowns showing that a la carte pricing doesn't do much to reduce cost. Chris Dixon did a quick breakdown: http://cdixon.org/2012/07/08/how-bundling-benefits-sellers-and-buyers/ http://cdixon.org/2012/07/08/how-bundling-benefits-sellers-a... Also, I'm not sure the fallback to channels is a bad thing. I've been spending a lot of time in the YouTube ecosystem and finding good regular series on a topic is a HUGE challenge. If there was a well curated food channel or educational channel on YouTube I'd pay to subscribe — It's a huge time suck searching, especially using the current tools.
  - talmand 13y ago
    The comparison provided in that link doesn't work for me, much for the same reasons someone pointed out in the comments. The conclusion is that bundling benefits both the consumer and the company. The consumer gets both channels cheaper than separately and the company generates more revenue even with cheaper pricing per channel. This completely ignores the fact that I don't want the sports channel AT ALL. Therefore, instead of paying $11.70 for both channels, I'm paying $9 for the one I truly want. Now expand that over hundreds of channels, including the dozens of sports channels I don't want, and let's see how it breaks down. From the current lineup of channels that I saw the last time I looked I would expect I would only want at most a dozen channels. Compare that to the amount I currently pay would be of huge benefit to the cable company because currently I pay nothing for cable TV as I'm a cord cutter. I haven't paid for cable TV in three years because of their stupid bundling pricing, how did that benefit the company?
confluence 13y ago
At the end of the day capitalism always comes back to bridges, trolls, control, volume, monopoly and power. NFLX can only continue to exist so long as it stands in between people and the things they desperately want. If the good they sell is non-exclusive however, then they are only one amongst many competing trolls all controlling similar bridges to the same exact island. In such conditions, prices will invariably fall to the lowest cost distributor, and costs will invariably rise to the worst managed ones, squeezing one's margins to shit. It sucks to be one of the 10 different bridges that people can choose between to cross over to get the stuff that they want. It's also why being an airline sucks. Competition sucks. Hard. It also makes you a bitch to both your clients ("I'm switching right now unless you give me a better phone deal!") and to your suppliers ("So you need my content yesterday? Pay me X billion right now or you can go get fucked.") To make money long term you need to either be the lowest cost producer for non-exclusive goods, or the sole controller of exclusive goods. You can make money both ways, but the former is much, much, much harder. NFLX, and every other company in existence, is either going for volume or for monopoly. That is why they are producing original content. It's because volume sucks. It's also why startup success is largely luck based. Imagine a million different trolls, building a million different bridges, to a million different islands. Now imagine that upon one island a scarce metal is accidentally discovered and some random dipshit idiotic troll has just somehow, through sheer chance, managed to acquire exclusive control of the resource. Now, if you want to get that metal, you are going to have to pay that troll, and the more people want it, and the more desperately they need it, the fatter the troll will get. Stand between people and the things they desperately want and you'll never go hungry. But you might get some indigestion. Fuck competition. Become one with your inner troll; charge people through the nose for what they want, and then charge them again, and again, and again. And then when they can't take it any more, kill the product, and make another one. Rinse and repeat. In AAPL we trust; all others bring shitty margins. Previous comments on competition and monopoly here: https://news.ycombinator.com/item?id=5253747 https://news.ycombinator.com/item?id=5253747
- maratd 13y ago
  > Fuck competition. Become one with your inner troll What a morbid way of looking at things... and it's not terribly accurate, either. You can make a very good buck on volume, even with fierce competition and extremely tight margins. So you can't charge a whole lot for the toll because there are a dozen other bridges? Boo hoo! Have you thought of selling coffee to your clients as they pass? You can easily make up margin on the up-sell or cross-sell. Something that anybody who worked in consumer electronics retail already knows. And that type of retail is extremely low-margin and competitive. The guy across the street and on the internet has the same exact widget as you. This is something that Netflix isn't doing. Yet. And there's quite a bit of margin there. Oh and here's a little bit of insight, once you have a "bridge" you can point it at any "island". It's super easy, almost like copy and paste. How many countries have access to Netflix? There's plenty of opportunity in volume and you serve the greater good. Not every company has to be a hipster love fest like APPL, where you pay through the nose for substandard hardware. That's just as crass as children refusing to wear anything but brand name clothing. Volume capitalism is beautiful because it mercilessly lowers the price of goods, allowing access to all. And you can make quite a profit too!
buren 13y ago
The main issue is, in my point of view, fragmentation. If you'd like to watch both HBO and Netflix series, then you'd have to subscribe to two services.
- notatoad 13y ago
  I don't think it's really a big deal. $8 for the new season of Arrested Development or Game of Thrones is a perfectly reasonable price to pay. It only seems like a tough price to swallow because netflix advertises themselves as a place to find all the content you want to watch.
cookiecaper 13y ago
The real reason Netflix is producing original content is short and simple: current copyright law make Netflix completely beholden to the big six media companies, and if these people, for whatever reason, feel they don't need/want/like Netflix anymore, Netflix will be over. It can only operate as an appendage of the major media corps. We caught a brief glimpse of this with the Qwikster debacle, where licensing costs imposed for streaming forced Netflix into a new model that was very poorly received, and ultimately had to be rolled back due to public panic. Netflix are beginning to chip away at that bondage by producing original content, and giving people a reason to use Netflix that can't be taken away arbitrarily by external forces. Netflix could be a great champion of copyright reform ... if that wouldn't cause all their content providers to immediately drop NF in retribution, that is.
- shmerl 13y ago
  Does Netflix release that original content DRM free? They claimed that their interest in DRM is driven by media companies. So let them prove it by releasing their own content DRM free.

68 points by gregpurtell 13y ago

You know what would really be cool? If Netflix would use that money to get History Channel content, I'd never leave Netflix.

da02 13y ago
Are there any particular series/specials you would recommend from The History Channel?
- dev360 13y ago
  They have amazing history shows - like Pawn Stars and Larry the cable guy... Swamp people too.
  - jebblue 13y ago
    Pawn Stars, American Pickers, Ice Road Truckers and American Restoration are the top ones for me, precedence order. I like more of their shows though, http://www.history.com/shows http://www.history.com/shows

CognitiveLens 13y ago

There's some good observations here, but I would stop short of the claim that "for viewers, this can only be good." It's not good that some great movie libraries have already been stripped from Netflix because the contract renewal was going to be too expensive. It's not good if Netflix goes all-in on original programming and fails, potentially taking the rest of the company down as well. It's not good if Hollywood feels little pressure to make it easier for consumers to access their content because they're getting great contracts with traditional distributors. It's also interesting that this article makes no mention of Netflix's 3 other original series that are not as popular as House of Cards and Arrested Development - Netflix is probably making as many flops as hits at the moment, and that adds an important qualification on the risk/reward calculation of its strategic investment in original series - the headliner shows have to not only justify themselves (as the article describes), but carry the duds as they come along as well.

roc 13y ago
If the libraries removed from Netflix are licensed to competitors, it is indeed Good for consumers, provided the barriers between services aren't too steep. [1] It incentivizes providers like Netflix to continue increasing their value proposition and ensures profits are flowing back to creators/library owners commensurate with their value. If Netflix fails, at this point, I don't think it'd be too big a blow. There are plenty of services in the same space and the feeding frenzy for Netflix library contracts would ensure the survivors are offering the same library to the same market. And I'm not sure why you think Hollywood feels no pressure to get their content in front of viewers. Their proper interest is to maximize the return on their libraries, and they can hardly do that if they enable the creation of an 800 lb gorilla in the streaming market that can dictate terms. Should Netflix be the undisputed one-true-service for digital delivery, that would almost certainly become bad for viewers. What incentive would they have to work with MS/Google on enabling federated/integrated search/navigation? What incentive would they have to work with new device makers as they have? Netflix fantastic value proposition is a product of how intensely competitive that space is, due its future up-side. Things that preserve that competition are Good, even if they are bad for Netflix specifically, up until the point they are bad for the entire streaming market. [1] The current division between Hulu, Netflix, ABC, HBO Go, et al. is about as high a wall as you'd want. Different services, same box, same-ish interface/behavior. If you couldn't get multiple services on the same hardware, it'd be too high. And, of course, if you could get XB1/GoogleTV-style federated search/navigation across services, the status quo would be just fine.
dasil003 13y ago
> There's some good observations here, but I would stop short of the claim that "for viewers, this can only be good." It's not good that some great movie libraries have already been stripped from Netflix because the contract renewal was going to be too expensive. That's a non-sequitur. That content was going to be stripped regardless of what production Netflix was engaged in. In fact, it doesn't matter if Netflix can magically realize 10x revenue per subscriber overnight, because there is game theory at play here. Big content is happy to make nice marginal payouts from Netflix on the side, but they will do anything to prevent Netflix from consolidating a comprehensive library of A-list content because they already have by far the broadest device reach, and if they get all the content, cable cutting will ramp up overnight and destroy any leverage for rights holders because there will be nowhere else they can go for distribution. > It's not good if Netflix goes all-in on original programming and fails, potentially taking the rest of the company down as well. They have no choice. Big content will never let them win. With their own content at least they have a chance to control their own destiny. > It's not good if Hollywood feels little pressure to make it easier for consumers to access their content because they're getting great contracts with traditional distributors. As long as customers balk at paying $10/month for Netflix while happily shelling out $150/month for cable, Netflix has no leverage. On balance I have to agree with the OA's assertion. Netflix putting some of its money directly to production can only benefit viewers overall. Putting that money to more contracts is not going to move the needle in terms of production from the major studios, to them it's just gravy at this point.

amalag 13y ago

They should tie up with a good content provider. AMC has excellent shows all available on streaming, Breaking Bad, Mad Men, The Walking Dead are of course famous. Other good shows are The Killing, Hell on Wheels. I think if they make partnership they will get a better deal out of it, rather than them creating such content on their own.

roc 13y ago
But what would the partner get out of it? Anyone with a track record at this point has far more to gain by letting the streaming providers compete for a license every few years. Netflix might offer slightly better terms than competition would produce in the short-run, but they'd want a longer license term to make up for it. And that, given the growth and promise of the space, would be silly. Consider the 700% licensing fee increases. Would Netflix offer a 700% premium over a 3-year license in exchange for a 6-year partnership -- with who-knows-what restrictions on future licensing of content produced under the partnership? They'd need to find a producer with a track-record for quality, but that was also cash-strapped and needed someone to share future production costs to stay in business or to make some wild expansion gamble. Which would only raise the question of why a producer with a track-record would have trouble finding another partner. Plus the nature of Hollywood is that it doesn't make too much sense to partner with AMC to get new content, based on their success in hiring successful creatives, when you can just hire successful creatives directly. What, after all, has AMC brought to The Walking Dead, beyond hiring a successful creative and providing a time-slot? Their input into the situation has seemed to be the 'tweaking for profitability' consideration that requires little industry acumen (AMC was remarkably ham-handed in this case) and that Netflix might not even see the same need for in the first place.

nitid_name 13y ago

We're slowly but surely collapsing back to the channel model of content. The bundling the cable services were forcing on us to support ESPN (which accounts for something like $15-20 in your TV bill) and then topping with the a la cart channels (HBO, Showtime, etc). Now, we have a few a la cart providers that stand on their own with original content (in addition to licensed content). My big fear is that the a la cart streaming channels will eventually start running commercials in the manner of Hulu. Throw in ISP bundling of streaming services, and voila, we're back to Cable Television... only since it's on demand, we can't DVR through commercials.

replicatorblog 13y ago
There are a lot of economic breakdowns showing that a la carte pricing doesn't do much to reduce cost. Chris Dixon did a quick breakdown: http://cdixon.org/2012/07/08/how-bundling-benefits-sellers-and-buyers/ http://cdixon.org/2012/07/08/how-bundling-benefits-sellers-a... Also, I'm not sure the fallback to channels is a bad thing. I've been spending a lot of time in the YouTube ecosystem and finding good regular series on a topic is a HUGE challenge. If there was a well curated food channel or educational channel on YouTube I'd pay to subscribe — It's a huge time suck searching, especially using the current tools.
- talmand 13y ago
  The comparison provided in that link doesn't work for me, much for the same reasons someone pointed out in the comments. The conclusion is that bundling benefits both the consumer and the company. The consumer gets both channels cheaper than separately and the company generates more revenue even with cheaper pricing per channel. This completely ignores the fact that I don't want the sports channel AT ALL. Therefore, instead of paying $11.70 for both channels, I'm paying $9 for the one I truly want. Now expand that over hundreds of channels, including the dozens of sports channels I don't want, and let's see how it breaks down. From the current lineup of channels that I saw the last time I looked I would expect I would only want at most a dozen channels. Compare that to the amount I currently pay would be of huge benefit to the cable company because currently I pay nothing for cable TV as I'm a cord cutter. I haven't paid for cable TV in three years because of their stupid bundling pricing, how did that benefit the company?

confluence 13y ago

At the end of the day capitalism always comes back to bridges, trolls, control, volume, monopoly and power. NFLX can only continue to exist so long as it stands in between people and the things they desperately want. If the good they sell is non-exclusive however, then they are only one amongst many competing trolls all controlling similar bridges to the same exact island. In such conditions, prices will invariably fall to the lowest cost distributor, and costs will invariably rise to the worst managed ones, squeezing one's margins to shit. It sucks to be one of the 10 different bridges that people can choose between to cross over to get the stuff that they want. It's also why being an airline sucks. Competition sucks. Hard. It also makes you a bitch to both your clients ("I'm switching right now unless you give me a better phone deal!") and to your suppliers ("So you need my content yesterday? Pay me X billion right now or you can go get fucked.") To make money long term you need to either be the lowest cost producer for non-exclusive goods, or the sole controller of exclusive goods. You can make money both ways, but the former is much, much, much harder. NFLX, and every other company in existence, is either going for volume or for monopoly. That is why they are producing original content. It's because volume sucks. It's also why startup success is largely luck based. Imagine a million different trolls, building a million different bridges, to a million different islands. Now imagine that upon one island a scarce metal is accidentally discovered and some random dipshit idiotic troll has just somehow, through sheer chance, managed to acquire exclusive control of the resource. Now, if you want to get that metal, you are going to have to pay that troll, and the more people want it, and the more desperately they need it, the fatter the troll will get. Stand between people and the things they desperately want and you'll never go hungry. But you might get some indigestion. Fuck competition. Become one with your inner troll; charge people through the nose for what they want, and then charge them again, and again, and again. And then when they can't take it any more, kill the product, and make another one. Rinse and repeat. In AAPL we trust; all others bring shitty margins. Previous comments on competition and monopoly here: https://news.ycombinator.com/item?id=5253747 https://news.ycombinator.com/item?id=5253747

maratd 13y ago
> Fuck competition. Become one with your inner troll What a morbid way of looking at things... and it's not terribly accurate, either. You can make a very good buck on volume, even with fierce competition and extremely tight margins. So you can't charge a whole lot for the toll because there are a dozen other bridges? Boo hoo! Have you thought of selling coffee to your clients as they pass? You can easily make up margin on the up-sell or cross-sell. Something that anybody who worked in consumer electronics retail already knows. And that type of retail is extremely low-margin and competitive. The guy across the street and on the internet has the same exact widget as you. This is something that Netflix isn't doing. Yet. And there's quite a bit of margin there. Oh and here's a little bit of insight, once you have a "bridge" you can point it at any "island". It's super easy, almost like copy and paste. How many countries have access to Netflix? There's plenty of opportunity in volume and you serve the greater good. Not every company has to be a hipster love fest like APPL, where you pay through the nose for substandard hardware. That's just as crass as children refusing to wear anything but brand name clothing. Volume capitalism is beautiful because it mercilessly lowers the price of goods, allowing access to all. And you can make quite a profit too!

buren 13y ago

The main issue is, in my point of view, fragmentation. If you'd like to watch both HBO and Netflix series, then you'd have to subscribe to two services.

notatoad 13y ago
I don't think it's really a big deal. $8 for the new season of Arrested Development or Game of Thrones is a perfectly reasonable price to pay. It only seems like a tough price to swallow because netflix advertises themselves as a place to find all the content you want to watch.

cookiecaper 13y ago

The real reason Netflix is producing original content is short and simple: current copyright law make Netflix completely beholden to the big six media companies, and if these people, for whatever reason, feel they don't need/want/like Netflix anymore, Netflix will be over. It can only operate as an appendage of the major media corps. We caught a brief glimpse of this with the Qwikster debacle, where licensing costs imposed for streaming forced Netflix into a new model that was very poorly received, and ultimately had to be rolled back due to public panic. Netflix are beginning to chip away at that bondage by producing original content, and giving people a reason to use Netflix that can't be taken away arbitrarily by external forces. Netflix could be a great champion of copyright reform ... if that wouldn't cause all their content providers to immediately drop NF in retribution, that is.

shmerl 13y ago
Does Netflix release that original content DRM free? They claimed that their interest in DRM is driven by media companies. So let them prove it by releasing their own content DRM free.