Wednesday, April 6, 2011

Netflix builds on success with move to fund original TV series

EL SEGUNDO, USA: US subscription video provider Netflix Inc. is in talks to finance its first original television content, supplying a missing hallmark component offered by rivals in pay-TV territory, and adding luster to an already commanding lead in 2010 of the total video rental market, according to IHS Screen Digest research.

“House of Cards” will be the first original TV series developed by Netflix. Netflix last year controlled 34.8 percent—the largest single slice—of US spending dollars in the rental of physical video, up from 25.7 percent in 2009.

Based in Silicon Valley, Netflix not only was the leader in the subscription video model, it also was well ahead of rivals operating in the other video rental modes via traditional brick-and-mortar locations or kiosks. Netflix’s one-third share of market was nearly double that of Blockbuster Inc., which shuttered many stores in the wake of its September bankruptcy and ended up owning 19.9 percent of the video rental market in 2010. Netflix also maintained a strong lead over fast-growing kiosk leader Redbox, operated by Coinstar Inc., with 18.9 percent share of market.

By the end of 2010, Netflix was estimated to have attained revenue of $2 billion for the year—a level not seen by former No. 1 Blockbuster since 2006, the peak year for video rentals.

A move into acquiring exclusive content is the logical next step for Netflix, as the company tries to differentiate itself even more to the viewing public, IHS believes. And though risky, the development of exclusive TV content by Netflix is a cheaper alternative than in competing for exclusive pay-window rights.

In addition to its fledgling effort at TV production, Netflix is emphasizing its “Watch Instantly” streaming option to subscribers.

Together, these moves by Netflix can be seen as a concerted attempt by the company to retain current customers and attract new subscribers in the face of stiffening competition for consumer entertainment spending.

A TV series of its own also could be the “short head”—the breakout success or bestseller—that drives customers to the “long tail” business of Netflix and its gargantuan library of some 117,000 streaming and rental titles. By possessing original content, Netflix could be in the same league with cable TV rivals like HBO and Showtime for attracting and driving audiences to its services.

“House of Cards” will be a 26-episode series directed by David Fincher, whose most recent directing effort, “The Social Network,” was nominated for multiple Academy Awards. The political drama is based on a series first aired by the BBC in the 1990s.

Source: IHS iSuppli, USA.

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