What Netflix Wants Next (Hint: Not In-Season TV Shows)


Given the implausibility of Netflix (NSDQ: NFLX) paying top dollar for current primetime series, the next logical question is, what does the company want in its TV collection? There’s a much more realistic possibility, though it has its own set of complications.

First, forget that New York Post report suggesting Netflix is making a run for in-season episodes of big hits like Fox’s Glee. As we explained Thursday, Netflix won’t get those shows while they’re still fresh. What’s more, Netflix has plenty more lower-hanging fruit to pick from before it even dreams of drawing from the top of the tree.

So put yourself in Netflix’s shoes and ask: What kind of shows would the TV industry actually be willing to do a deal on without derailing its gravy train, the syndication marketplace?

There’s a pretty logical subset of shows to target: serialized dramas. These are the densely plotted one-hour shows like AMC’s Mad Men that don’t get anywhere near the millions per episode that procedural dramas like CSI get in syndication because their episodes can’t air out of order. They also don’t stay on the air long enough to reach over 100 episodes, a total that guarantees buyers really pay through the nose.

If Netflix scooped up serials, it could actually find itself in the position to be something of a saving grace to the TV industry that too often gets burned gambling on these shows only to make nothing on the back-end. Fortunately for Netflix, on-demand consumption actually lends itself to serialized episodes and the number of episodes is irrelevant.

The smart money says this is where Netflix will be shopping to keep its momentum going in TV, which the company recently signaled accounts for half of its streams.

But there could be a hitch. If you think of the seller that has the most to offer Netflix in serialized shows, it’s HBO. But look inside the trove of shows Netflix currently offers for streaming and you’ll notice there’s nothing from the pay-TV king even though rivals like Showtime have licensed their programs.

While top-shelf fare like The Sopranos may be too rich for Netflix, there’s plenty of other memorable series going back to the likes of Deadwood or Oz to more recent fare like In Treatment that would make a perfect fit.

The content restrictions that further drive down the value of these shows in traditional syndication are not an issue on Netflix, so what’s the hold-up? Given all of HBO’s shows are pretty expensive to produce, you would assume any of the profit participants involved would want HBO to put them up to the highest bidder in all available windows.

But take a step back and consider the rivalry brewing between Netflix and HBO. Time Warner (NYSE: TWX) has been especially hostile to Netflix in recent days, with CEO Jeff Bewkes and executive vice president Olaf Olafsson publicly questioning the movie service’s ability to maintain its recently discounted $8 subscription fee for the long term. Netflix fired a shot across the cable colossus’ bow earlier this week by snaring its first deal in the pay-TV window, albeit a small one, with FilmDistrict.

Which raises the point Bewkes was making. If Netflix continues to go for bigger and bigger programming deals, they’re going to have to raise the price point to cover the kind of costs HBO has–the kind that translate to charging the consumer roughly double what Netflix does per month.

When moguls take the time to throw jabs, it’s worth wondering what’s making them feel so defensive. Understand the stakes here: HBO is not going to do anything to give up the slightest advantage to Netflix, even if means making money off the kind of streaming deal any other programmer in its shoes would make.


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