Netflix has come a long way since its days as the Pony Express for DVDs. The red envelopes have morphed into a full-bore TV station in the cloud. Traditional TV— un-streamed, with commercials and strict start times—has been put on watch. Next, Netflix will use its rising clout to upend premium cable channels. “The goal is to become HBO faster than HBO can become us,” said Ted Sarandos, Netflix’s Chief Content Officer, in the February 2013 issue of GQ.
Netflix and HBO each excel at the other’s kryptonite. Netflix reigns supreme in U.S. subscribers, online girth, and stock price. HBO has a firm grasp on the international sphere, profits and revenue, and budget for original programming. HBO pockets around $1.7 billion annually (Netflix’s best quarter yielded $100 million), allocates eight times more money than Netflix does on original content, and attracts two-and-a-half times as many subscribers outside the U.S. Netflix, on the other hand, surpassed HBO for U.S. subscribers at 31 million and counting, and accounts for an estimated 30% of Internet down streaming during peak hours. The company’s stock price hovers around three times the value of Time Warner, HBO’s parent company. Put the rivals together and it’s a match made in syndicated TV heaven.
Yet there still may be a plot twist in the Netflix story. The company’s trademark disruptive approach—releasing full seasons at once, foregoing ratings, keeping user data private, and paying top dollar for licensing deals—feeds viewers appetites for the silver screen and the small screen, but it poses problems for a sustainable business model. Four recent articles go behind the scenes to examine the ins and outs of Netflix and assess the chances of a fairytale ending. Feel free to binge read.
Nicole LaPorte charts Netflix’s rise from an obscure DVD service to Hollywood’s Silicon Valley nemesis. The company threw out the rulebook on its way to becoming an entertainment juggernaut, says LaPorte, but in reality it is more traditional than it appears.
Columnist and contributor Ken Auletta tackles the fickle ecosystem of TV—from the early days of black and white to viral YouTube clips. Auletta interviews top-level executives, including CBS CEO Leslie Mooves and Netflix CEO Reed Hastings, to locate unique threats for different players. Netflix’s two big hurdles are broadband access, which is priced and controlled by cable companies, and live events, such as rights to lucrative sports leagues.
Releasing entire seasons at once has potential hazards, writes Daniel Frankel. If viewers are on different episodes, it can subdue steady social media buzz and water-cooler talk. Not to mention spoiler alerts (even President Obama is concerned) and the flow of production. “Will viewers of shows like House of Cards be willing to wait until the entire season is written, shot, edited and encoded?” asks Frankel.
Patty McCord helped shape the culture and work environment at Netflix before she left the company to pursue consulting. In this frank article, McCord highlights five points Netflix’s values are built on and explains the rationale behind radical employee initiatives, like taking vacation whenever you want and giving fired employees massive severance packages.
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