Streaming The Small Screen

Netflix Subscribers

Alyssa sees Netflix focusing more and more on television instead of movies, noting that subscribers are more likely to stick around for a longer series, and that the TV format allows for the production of more content for less:

Netflix can spend $100 million on 26 hours of House of Cards programming, where if it wanted to compete and film blockbusters, $100 million might only buy the company 90 minutes of programming. And the investments Netflix makes in sets for television shows can amortize over years of production if a show is successful. The question of syndication costs is trickier, but the basic equation remains the same–Netflix needs a huge volume of content, and a larger overall investment in a television show may be much more worthwhile for Netflix if the cost per hour is lower. It’s true that on the call with investors, [Chief Content Officer Ted] Sarandos suggested he’d be interested in documentaries–which come with a much, much smaller price tag–and movies that Netflix might be able to have first runs on. But he’s not going to get into the hugely expensive sports market. And I’d imagine that whatever movies the company does pursue will have price tags in keeping with their value to the company.

Derek Thompson comments on the remarkable growth of Netflix’s subscriber base:

[M]ore Netflix consumers are clearly good news for Netflix consumers. If Netflix can get one to two million more people to pay $7.99 for its service each quarter, it doesn’t have to raise prices on existing customers. Indeed, Netflix hasn’t changed its monthly fee ($7.99) for the last two years, which means streaming TV is actually getting cheaper each year in inflation-adjusted terms. That’s amazing. Even more amazing is Hastings spending hundreds of millions of dollars (amortized over who-knows-how-long) on new contracts with Disney and exclusive rights to shows like “House of Cards” and “Orange Is the New Black.” If it needs 1-2 million more customers each quarter to keep revenue and net income targets, then so far, so good …

(Chart from Zachary Seward.)