) spent a significant amount of money to produce the first season
of House of Cards, the company's first original series. Several
reports estimate that the company spent as much as
on the first 13 episodes. The next season is believed to be just
as expensive. Unlike other TV shows, Netflix does not plan to
release the ratings for House of Cards. In a
letter to investors
, co-founder and CEO Reed Hastings explained why.
"Linear channels must aggregate a large audience at a given
time of day and hope the show programmed will actually attract
enough viewers despite this constraint," he wrote. "With Netflix,
members can enjoy a show anytime, and over time, we can
effectively put the right show in front of members based on their
viewing habits. Thus we can spend less on marketing while
generating higher viewership.
"For linear TV, the fixed number of prime-time slots mean that
only shows that hit it big and fast survive, thus requiring an
extensive and expensive pilot system to keep on deck potential
replacement shows. In contrast, Internet TV is an environment
where smaller or quirkier shows can prosper because they can find
a big enough audience over time. In baseball terms, linear TV
only scores with home runs. We score with home runs too, but also
with singles, doubles and triples."
Procera (a real-time analytics company) found that, on one
unnamed broadband network,
11 percent of Netflix subscribers
watched at least one episode of House of Cards. On another
unnamed broadband network, the company found that two percent
watched one episode on the Saturday following House of Cards'
Only 1.3 percent of those subscribers tuned in for a second
episode, indicating a drop of more than 30 percent. This is
among new TV pilots
, particularly those that receive a ton of media attention. A
one-time decline should not be enough to hinder a show's
long-term success. However, continuous declines will likely
lead to cancellation
Reed is right in his belief that "smaller or quirkier shows
can prosper" online. However, House of Cards is anything but
small. Even if it cost half of what is currently being estimated,
Netflix still spent an enormous amount of money to produce the
) is taking a different approach. Instead of paying top dollar
for top talent, the company
to lure newcomers and existing Hollywood talent. The company
to option a series for its development slate. If the series goes
into production, Amazon will pay $55,000 to its creator and up to
five percent of net merchandising receipts from toy and T-shirt
licensing. The produced series will then be distributed via
Amazon Instant Video.
Amazon will surely spend more than $65,000 to produce a new
series. However, it seems unlikely that any of the
greenlit sitcom pilots
will cost $50 million.
(c) 2013 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.
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