Earlier this month, folks were predicting the demise of Netflix. All it took was Facebook inking a deal with Warner Bros. to stream a single movie over the social-media platform and the stock took a hit.
Now Netflix is fighting to maintain its market dominance with a move to distribute a TV series directed by David Fincher and starring Kevin Spacey, according to a report in The Wall Street Journal. The Journal said Netflix is in "advanced talks" for a deal that would help it compete against pay-TV channels like HBO, Showtime and Cinemax.
The reported original programming is a political series called House of Cards that's based on a British miniseries. Apparently, Netflix has been working below the radar to strike deals for original programming from Hollywood production companies. Deadline.com reported that Netflix could pay more than $100 million for 26 episodes.
An Inevitable Step
"I think it was an inevitable step. I thought that we would see Apple's iTunes make a move like this first, not so much for TV shows but music," said Phil Leigh, senior analyst at Inside Digital Media. "I thought Apple might get behind a rock group and basically compete with the record labels. But it looks like Netflix is making the move first by coming out with a TV show."
Leigh likens Netflix's big move to the early evolution of cable systems. When cable operators first entered urban markets, they focused solely on providing access to existing networks. But, Leigh noted, there was such a hunger for additional content that the cable systems started developing their own networks.
How will Netflix make an original program a success? Netflix has something the early cable systems didn't. "Netflix has a different way of promoting its programming," Leigh said. "They've got everybody's e-mail address, and that's pretty powerful."
Digital Video Heats Up
On Tuesday, NPD reported that Netflix's share of digital-movie units -- downloaded or streamed -- reached 61 percent between January 2011 and February 2011. NPD cites Netflix's largest competitors right now as Comcast, DIRECTV, Time Warner Cable, and Apple. Comcast has eight percent of the market, while DIRECTV, Time Warner, and Apple are in a three-way tie for third at four percent.
But Hulu is also fighting back. Hulu inked a deal with Microsoft to give its customers a month's worth of streaming-TV service when they download Microsoft's new browser, Internet Explorer 9. Customers also have to download a taskbar to host Hulu Plus. That's hardly enough to ward off Netflix, but every little bit helps in the battle for eyeballs.
And a two-year-old streaming-video company made some noise this week by offering new-release films. Zediva will stream movies for $1.99 each, beating iTunes' price. Consumers can also buy a 10-pack of movie rentals for just $10. The company is slashing costs by buying DVDs and using place-shifting technology rather than negotiating licensing rights with movie studios.