"Netflix makes 0 additional marginal dollars from an existing subscriber watching an extra hour of video. What they care about is producing something "must see" for a particular niche that would convert a non-member into a paying member."
Netflix makes 0 marginal dollars on a hit show, but for Netflix, this isn't about the marginal dollar. This isn't even about adding more subscribers per se. This is an attempt to preserve subscribers in the face of a rapidly diminishing content library.
As I mentioned in the article, a lot of the networks and movie studios are raising their rates on Netflix, or pulling their libraries altogether. In the long run, Netflix risks becoming a "dumb pipes" commodity business, no more special or different from Amazon, iTunes, and all the rest, if it doesn't have something exclusive to keep viewers interested.
That's why they're betting the farm on original content. HoC won't appeal to everyone, but it signals to Hollywood and to tastemakers that Netflix is a serious buyer, and that it's in town to buy a lot more where that came from. Hollywood has a strong signaling / social proof system in place, and moves like this are often great ways to break the ice and establish credibility in a town that will shut up and listen to money. :)
"That means a rabid fan base and buzz is far more important than broad popularity. That's why shows like Arrested Development and Orange is the New Black have been so good for them, because they have an in built audience they can bring reliably."
Correct, and I don't see us in any disagreement here. This is what I mean about Netflix's home-field advantage in "audience development." Netflix knows its niches better than networks know theirs, and furthermore, it can afford to be in the niche game, because it's not dependent on mass advertisers. This is a significant advantage Netflix can draw upon.
Netflix makes 0 marginal dollars on a hit show, but for Netflix, this isn't about the marginal dollar. This isn't even about adding more subscribers per se. This is an attempt to preserve subscribers in the face of a rapidly diminishing content library.
As I mentioned in the article, a lot of the networks and movie studios are raising their rates on Netflix, or pulling their libraries altogether. In the long run, Netflix risks becoming a "dumb pipes" commodity business, no more special or different from Amazon, iTunes, and all the rest, if it doesn't have something exclusive to keep viewers interested.
That's why they're betting the farm on original content. HoC won't appeal to everyone, but it signals to Hollywood and to tastemakers that Netflix is a serious buyer, and that it's in town to buy a lot more where that came from. Hollywood has a strong signaling / social proof system in place, and moves like this are often great ways to break the ice and establish credibility in a town that will shut up and listen to money. :)
"That means a rabid fan base and buzz is far more important than broad popularity. That's why shows like Arrested Development and Orange is the New Black have been so good for them, because they have an in built audience they can bring reliably."
Correct, and I don't see us in any disagreement here. This is what I mean about Netflix's home-field advantage in "audience development." Netflix knows its niches better than networks know theirs, and furthermore, it can afford to be in the niche game, because it's not dependent on mass advertisers. This is a significant advantage Netflix can draw upon.