The Economics of Netflix's $100 Million New Show

The Economics of Netflix's $100 Million New Show

(Interesting look from the corporation's vantage point.)

I think that if Netflix wanted to model after HBO, they would have been better off starting with a different kind of proprietary programming. House of Cards is limited in potential compared to, for example, Game of Thrones:

1. No built-in audience. It is based on a British show which ran a quarter-century ago, and of which virtually no American is aware. That pedigree was hardly worth paying the rights for.

2. No ancillary merchandising possibilities: No gamers are clamoring for a House of Cards video game, and there aren't a lot of kids who will see the romance in owning a Kevin Spacey action figure.

3. Limited direct merchandising possibilities: Why do I need the House of Cards DVD? I can watch any or every episode any time I want to. While this kind of unlimited access is more convenient than HBO's model, and may therefore have stronger subscriber appeal, the buck stops there, with subscriptions, whereas HBO makes some extra dinero by selling DVDs and Blu-Rays.

Some of these same objections apply to another proprietary Netflix project, the new episodes of Arrested Development. On the other hand, #1 above does not. That show has a cult following and lots of pent-up demand. It will bring some new subscribers to Netflix, but I don't know if it will bring enough to generate a profit.