Many were surprised to learn this week that Netflix is wading into the expensive waters of original content with its efforts to license House of Cards, a new series by David Fincher. However, being a simple content aggregator in an era of rising distribution costs puts the company in an increasingly precarious position, and because of this shifting landscape, Netflix is doing what it needs to do to survive by offering original content.
Why is it necessary that Netflix go into original content? Three reasons:
- Being an aggregator of online video content isn’t enough. The days of simple aggregation are dead since the slumbering giants are asleep no more. That means Netflix won’t be able to get content deals on the cheap, and some content it won’t be able to get at all.
- Netflix’s real business is audience aggregation. While people think Netflix is a content aggregator, it’s actually an audience aggregator; it offers lots of types of content to build a large aggregate user-base.
- Netflix core principle is adapt to survive. While some may see Netflix as having a few core principles that have made it successful, its number one principle is adapt to survive. The company is, much like Apple, the leader who others follow, and they Netflix understands (before others do) that moving beyond simple aggregation of online distribution rights of other’s content makes it vulnerable in a world where rights are getting harder to obtain.
In fact, I think Netflix will double-down on original content, because in many ways, it is following the path both basic cable and premium cable (HBO and others) went down in order to survive: to offer content that others don’t. It has now realized that having something to offer everyone, including original content, is a smart strategy to add subscribers by differentiating from the other aggregators.
However, I don’t think Netflix should simply amass a bunch of HBO-like megadeals like the one for House of Cards, because, quite simply, it can’t afford to. Instead, it should follow a multipronged original content strategy:
- Hunt out Winning Web Series. In 2009, Netflix proved its not afraid to work with directors to create orginal webisodes. It should continue to either develop small, original web series or hunt down strong ones it can buy exclusive distribution rights for.
- Create an Indie Studio. When Amazon created a small online studio that looked to incent indie moviemakers to send in scripts, pitches and test films, I am sure Netflix took notice. It’s the same exact thing Netflix should do since it, unlike Amazon, has a large installed base of video subscribers.
- Create Reality TV Shows. Sure, reality TV is seen by some as a blight on television in general, but it is also one of the most popular and cheapest types of shows to produce. If Netflix struck deals with unique personalities that have strong followings, it could create original, “day-in-the-life” content similar to a show like Keeping Up With the Kardashians. With a collective audience exceeding 20 million, I have no doubt many celebrities would be willing to sign such a deal.
- Offer Exclusive Extras. Exclusive access to a vault of outtakes is like manna for the true fan. Netflix could negotiate to take content off the cutting room floor and from the vault to offer bundles of extras that may not be headed for Blu-ray. One example: There are years of test takes from Saturday Night Live that have never been offered online or through DVD. That’s the perfect type of extra that would work for Netflix (or, more likely, Hulu).