Netflix May Offer Original Programming: Change of Heart for CEO Reed Hastings?

In what would position Netflix as an even bigger threat to the major cable players, the company might soon offer original programming, according to Deadline Hollywood. The streaming TV and movie powerhouse has reportedly outbid networks from HBO to AMC for the rights to the David Fincher and Kevin Spacey series House of Cards. Nellie Andreeva calls it "probably the biggest gamble" in the company's history, and reports that while negotiations are still ongoing, Netflix has offered to commit to two seasons of the drama series in a deal that could be worth more than $100 million.

If Deadline's report is true, this would mark a shift toward exclusive original programming, content Netflix CEO Reed Hastings has implied the company would not venture toward.

"Generally, I'm a believer in circle of competence," Hastings told investors in January. "When we start taking creative risks—that is, reading a script and guessing who might be good to cast in it—it's not something that, fundamentally as a tech company or a company run by a tech CEO like myself, we're likely to build a distinctive organizational competence in."

"We think that we're better off letting other people take creative risks, and get the rewards," he added.

Still, during that same earnings call, Hastings also boasted of the huge increase in Netflix subscribers—up to some 20 million—more subscribers than Starz and Showtime, and not far behind HBO. All these premium channels feature original series (True Blood, Californication, etc.) to help boost subscriptions. Would it be such a surprise if Netflix were to follow suit in the digital world?

That's the topic I broached with Steve Swasey, VP of corporate communications, when I visited Netflix headquarters last month. Even then, Swasey repeated the company's core focus on licensing longer-tail films and TV. "We don't need the original content," he said. As Swasey reminded me, years back Netflix dabbled in licensing, distributing, and producing its own content under a division called Red Envelope Entertainment. The five- to six-person team, referred to as an "internal studio" by Netflix, was tasked with scouring film festivals, acquiring titles, and finding exclusives for the streaming and DVDs-by-mail company. But in 2008, Netflix abruptly disbanded the Red Envelope division. "It just wasn't core to our business. It was a distraction, it wasn't material, and it was taking a lot of time and energy—and we weren't seeing that much value," Swasey said.

Instead, Netflix has focused its efforts on striking deals with studios and content owners—Epix, Relativity Media, ABC and Disney—and distanced itself from "taking creative risks," as CEO Reed Hastings recently phrased it.

It's important to note that if these reports are true, Netflix would still be licensing the content—not producing it. However, with licensing deals in the past with content owners like Epix or ABC, much of the content had already been seen either in theaters or on TV. But licensing two seasons of a never-before-seen show? Investing in the talents of David Fincher and Kevin Spacey for an original series? That would arguably be much more of a "creative risk," something Hastings has told investors he's not interested in taking.

Netflix declined to comment for this story.

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