Netflix's High Risk-Reward Content Scenario
The Daily Beast’s Nick Summers tells the story of how Netflix Chief Content Officer Ted Sarandos landed House of Cards, the upcoming original series from Academy Award-nominated director David Fincher, as the result of an “unheard-of commitment”: two full seasons and a rumored price tag of $100 million. Netflix has since gone on to acquire four more original series, most of which will debut in 2013.
“They had better be good,” Summers quips, citing competition from the likes of Hulu and Amazon, not to mention cable TV stalwarts like HBO and Showtime. He also points out that Netflix’s content suppliers are getting stingier too -- in some cases taking their streaming distribution in-house, or demanding that their content be available on rival platforms. “I was becoming increasingly concerned that the people who were selling to us wouldn’t want to sell to us for long,” Netflix’s Sarandos says. Which is precisely why the company is doubling down on original content.
All told, Netflix is spending a massive $3.7 billion to acquire and create content over the next five years. “That kind of sums up the Netflix story,” says Piper Jaffray analyst Michael Olson, who favors the stock. “There are major risks, and major opportunities. From the Wall Street perspective, it’s one of the most black-or-white stories out there. You’re totally on board, or you think that the story is totally unraveling.”