Netflix Takes Another Step Towards Becoming The Next HBO

Netflix Subscribers

Netflix is in talks with large cable providers to add its movie streaming service to their cable offerings, according to a report in Reuters.

Coupled with the recent release of Netflix’s first original series, the move reiterates that Netflix is trying to become the next HBO

It’s a risky strategy. For years HBO’s competitive advantage has been a widely praised slate of original programming. Its programs garnered 104 Emmy nominations last year—54 more than its next closest rival.

Netflix released its first original series “Lilyhammer” in February starring former “Sopranos” actor Steven Van Zandt. So far is has received decidedly mixed reviews. Nonetheless, even if it flops is should not be an immediate cause for concern. Not many people remember HBO’s first foray into original programming these days, the eery “Tales From The Crypt.”

However, two huge tests of this strategy are due to arrive over the next year or so. Later this year Netflix is supposed to release “House of Cards,” a blockbuster series starring Kevin Spacey and produced by David Fincher. However, there have reportedly been clashes with Fincher over an already formidable $100 million budget that may even force the cancellation of the series. 

In 2013, Netflix will host the re-boot of cult sitcom “Arrested Development.” The show already has a sizable built-in audience and a star studded cast—in other words, it will be difficult to justify a flop. Together these two series will be used as something of a barometer for the success of Netflix’s original programming strategy. If they both flop it may not be the end of the world, but it will be increasingly difficult to convince viewers it has a grasp on the format.

There is one other glaring complication to this strategy. Comcast and Verizon have both started their own video streaming services this year—it is difficult to imagine a world where either of them agree to host a rival service on their cable offerings.

On the other hand, the whole thing may just be a smoke screen for what is really a goodwill entreaty from Netflix. It’s no secret that online video is a major contributor to a telecom company’s bursting bandwidth levels. Time Warner Cable recently launched an optional usage-based broadband pricing system in Southern Texas that could point to greater prevalence of pay-for-what-you-use packages in the future. Widespread adoption of the usage-based model would be a disaster for Netflix because it discourages consumers from maximizing their video consumption. Finding their way directly onto cable packages would head off this crisis before it arrives.

THE BOTTOM LINE

  • Netflix has a long way to go before they can match HBO’s content programming.
  • Netflix’s original programming doesn’t have to set the world on fire right away, but viewer patience does have limits.
  • Online video faces both competition and threats from the cable companies—transformation into a premium channel of sorts is a painful but necessary transition.

 

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