Analyst: Netflix Content Cancelations Reflect Growing Pains7 Jun, 2017 By: Erik Gruenwedel
Netflix’s cancellation of original programs "Sense8" and "The Get Down," underscores the reality the subscription streaming video pioneer’s programming decisions are subject to the same viewer capriciousness network broadcasters contend with, said Wedbush Securities analyst Michael Pachter.
With more than 60 original shows currently streaming and plans to have 1,000 hours of original content available by the end of the year, yanking six original series is hardly a sign of failure at Netflix’s Beverley Hills, Calif.-based content headquarters. Yet, the aforementioned content brought to four the number of series canceled in the past seven months.
While the SVOD behemoth refuses to disclose viewer data for any programming — new or licensed — the end of “Hemlock Grove” after three seasons; “Lilyhammer” (three); “Marco Polo” (two); Golden Globe Award winner “Bloodline” (three); music-driven drama “The Get Down” (one); and “Sense8” (two); reveals Netflix’s “growing pains” with original content, according to Pachter.
“I think it is likely to rise to 20% to 30% of all of their shows eventually,” he said.
Netflix CEO Reed Hastings last month told the Code confab in Rancho Paolo Verdes, Calif., he believes programming departures indicate an unwillingness to accept the status quo.
“You should have more things that don’t work out. The drive toward conformity as you grow is more substantial. As a leader, you want to drive people to take more risks,” Hastings said.
With Netflix expected to spend $6 billion on original content this year, reported single-episode costs for “The Get Down” ($12 million); “Sense8” and “Marco Polo” ($9 million each); and “Bloodline” ($7 million); dwarfed reported costs from $1.5 million to $3.5 million for broadcast and pay-TV shows.
Indeed, Pachter, who questions Netflix's burgeoning streaming content obligations, which topped $15 billion in the first quarter, finds it interesting the SVOD service hasn’t yet taken a write-off for content investment.
“They’re quick to capitalize spending on originals and slow to amortize or charge-off content when canceled,” he said.