Netflix doubling down on exclusive content

CEO Reed Hastings: "If it's not exclusive and on cable and other services, it's pleasant to watch but it's not reinforcing why customers should stay with Netflix."

Netflix CEO Reed Hastings Hector Vivas/Latin Content/Getty Images

Netflix CEO Reed Hastings wasn't specific in terms of numbers about the financial impact of the simultaneous, exclusive release of 13 "House of Cards" episodes last quarter, but he is doubling down on original content.

"We are focused on moving toward more and more exclusive content," Hastings said Monday during Netflix's first-quarter earnings call. "If the content is not exclusive and it's on cable and on other services, it might be pleasant to watch on Netflix, but it's not really reinforcing customers to stay with Netflix."

Competitors, including Amazon and Hulu, are following the same path, which is good news for the content producers and viewers. Amazon Studios just debuted 14 original, exclusive pilots, some of which will be funded for full seasons.

Regarding negotiations to acquire original content, Hastings said, "The only noticeable change is Hulu and Amazon bidding more aggressively. It makes the content owners happier and prices to us higher." That said, Hastings said that Netflix is spending less than a double-digit percentage of its total revenue on original content. Shows such as "House of Cards" and "Hemlock Grove" are reported to cost in the range of $3.5 million to $4 million per episode.

In his letter to investors, Hastings wrote: "The launch of 'House of Cards' provided a halo effect on our entire service." The original series, starring Kevin Spacey and Robin Wright, clearly contributed to the positive financial results. Netflix added over 3 million streaming members in the first quarter, including 2.03 million domestic subscribers, beating the forecast of 1.3 million to 2 million new subscribers.

Some analysts predicted that "House of Cards" would lead to lots of people signing up for Netflix for a free trial month to watch the 13 episodes, and then abandon the service. According to Netflix, less than 8,000 people came and went without paying the $7.99 per month fee.

Netflix

Netflix just launched 13 episodes of "Hemlock Grove," a supernatural thriller, and is bringing back the quirky, cult comedy " Arrested Development. " in May, after a seven-year hiatus.

Hastings described the debut of "Hemlock Grove" as "fantastic," with even more new subscriptions in the first couple of days than "House of Cards" garnered when it was first released. "We are feeling very good about our original strategy including the release strategy of being focused on all episodes at once," he said.

In addition, Netflix has several new original shows in production, including "Orange is the New Black," a dramedy from the creator of the hit cable show "Weeds"; "Derek," a comedic look at life in a senior center from Ricky Gervais; "Turbo: F.A.S.T." (Fast Action Stunt Team), in collaboration with DreamWorks Animation; and "Sense8," a science fiction thriller from the Wachowski siblings, who created the Matrix trilogy.

Given the rising cost to acquire original content and the goal to have more exclusive content, it might follow that Netflix would be in a position to raise its pricing. Hastings said he had no plans to change the current pricing structure. "We are pretty happy with the current $7.99 price," he said.

 

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