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Netflix Eying Original Cable Series

15 Mar, 2011 By: Erik Gruenwedel



Netflix apparently has dug deep into its wallet, reportedly spending as much as $100 million to outbid pay-TV networks for an original scripted series starring Kevin Spacey and directed by Oscar-nominated David Fincher (The Social Network).

The series would be a remake of British drama series “House of Cards,” according to DeadlineHollywood.com. Losing suitors include Time Warner’s HBO and AMC, among others.

The Los Gatos, Calif.-based online disc rental pioneer, which has driven subscriber growth past 20 million on the back of its streaming service, has aggressively sought to upgrade digital content selections beyond dated TV shows and movies.

In addition to charging lower-margin disc subscribers $1 more ($2 more for Blu-ray) per month than streaming-only members, Netflix has spent incremental revenue gains targeting license agreements offering fresher material, including day-after episodes of “Saturday Night Live” from NBC, ABC and Relativity Media, and the recent $200 million non-exclusive deal with CBS for reruns of “Frasier,” “Family Ties,” “The Twilight Zone,” “Star Trek,” “Twin Peaks” and “Cheers,” among others.

Netflix shares rebounded after a near 20% decline in recent weeks following separate reports suggesting the rental service’s streaming service is dominating paid online video consumption.

Michael Pachter with Wedbush Morgan Securities in Los Angeles heralded the possible deal.

“They need to spend $1 billion or so on content, so 10% of their costs on original programming is an appropriate risk to take and see if it works,” Pachter said. “Their growth at this pace is unsustainable unless they start to take market share from HBO/Showtime, and the biggest obstacle to overcoming those two is the lack of original programming. It might make sense for Netflix to try to compete head on.”

In a research note, Goldman Sach analyst Ingrid Chung said initial fears regarding Amazon and Facebook’s entry into streaming and VOD, respectively, was “more muted than we first feared.”

“We believe that the demand for video streaming could be big enough to sustain multiple business models and competitors,” Chung wrote in a note, according to MarketWatch.

Chung said the percentage of consumers streaming videos would rise to 27% this year, compared to 16% last year. Time spent watching streamed content will increase to 4.3 hours in 2011, compared to 3.4 hours last year.

The NPD Group said Netflix accounted for 61% of all online video consumption in January and February.

A Netflix representative was not immediately available for comment.
 


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