Our take on Netflix and House of Cards

There's been a lot written about Netflix's first foray into original programming. My favorite so far is Rebecca Greenfield's Post for the Atlantic Wire which attempts to delve deep into the economics of the $100 million dollar original series. Most interestingly, she cites sources that claim Netflix will likely run cash flow negative for the foreseeable future. I'm not so sure about that, but it's interesting to think about nonetheless. Just as interesting to me is what Netflix does (if anything) to monetize their content off their platform. Syndication, second-window and international distribution are HUGELY important in the cable and network TV models. I'm not sure that Netflix can (or wants) take advantage of those lucrative revenue sources. I ultimately think this will be a big challenge for Netflix when competing with the HBOs of the world (it's tough when a competitor is also a supplier). Still, Netflix is making the right move with their first of soon to be many original series. I've been impressed by the quality of House of Cards (I'm 6 eps in already) and I can't wait for more.  The best part, IMHO, is the all-at-once distribution model.  Andrew Wallenstein at Variety recently panned the model as bad for business. He believes that binge viewing will result in a whole lot of flaky, quick to leave subscribers. The crux of his argument: viewers will ultimately spend less time with Netflix because they are binge viewing a show for a few days versus over the course of months.

He couldn't be more wrong. First, I think that House of Cards will just be one more reason for many people to opt into Netflix, which already had a compelling collection of content to begin with. Second, I'm willing to bet that Netflix looked really closely at their subscriber turnover (people who sign up and then drop the service quickly) before embarking on their "groundbreaking" release strategy. I'm sure they know, as I'm assuming, that most people will sign up and stay signed up. Netflix is 1) cheap, 2) easy to quit if you want (making it the massively favorable alternative to expensive, unfriendly contractually restrictive cable), and 3) offers way more than just House of Cards. I think people will sign up for the show, and stay for the rest. Or at least enough people will.

I'm extremely excited to see Netflix (and Amazon) blowing up the model and testing out this radical approach. It's not perfect, but it's exactly what our industry needed to more forward sustainably.