Is Netflix Becoming a Television Station?

By Megan McArdle

The Wall Street Journal says that Netflix is in talks to distribute an original television series starring Kevin Spacey and directed by David Fincher.  The company seems to hope that it can follow the path blazed by HBO and AMC, becoming a destination for original shows as well as other peoples' content.


This is a major strategic shift for the company, which right now is a high-volume purveyor of relatively cheap content.  Diversifying this way could represent the next evolution in digital entertainment, but it's also risky.  (A&E was producing some great original content in the 1990s, but eventually abandoned the strategy and retreated to its core business of rebroadcasting Law and Order reruns.)  The competency required to be a DVD distributor don't really overlap that much with the competencies required to identify and support successful television programming.

Moreover, how much does this really get Netflix?  They already have a huge subscriber base--how many people will add on a subscription in order to watch a single original show?  Moreover, airing original content puts Netflix directly into competition with the people it buys content from.  I doubt that a single show is going to have much effect, but if Netflix moves more firmly into the content space, other providers are going to be watching with a gimlet eye.

On the other hand, Netflix has proven itself an extraordinarily nimble and visionary company, repeatedly moving to cannibalize its own sales before competitors do it for them.  If this succeeds, the company will be even more firmly established as the king of digital content.  And at that point, competitors may have to deal with them, whether they like it or not.

This article available online at:

http://www.theatlantic.com/business/archive/2011/03/is-netflix-becoming-a-television-station/72555/