A New Hope for Production Companies in the Digital World: Netflix

Screen Shot 2015-08-06 at 3.13.17 PM (Vox.com)

These days, with the invention of DVR and streaming services such as Hulu or Netflix, less and less people are spending money to view shows on cable at a certain time. This poses a problem for Networks and Studios alike, because traditionally Studios depend on Networks to license their shows, sponsored by advertisers, to air at certain times to audiences. Without audiences tuning in at certain times, advertisers don’t invest as much money, Networks have less money to spend, and Studios produce less shows. (The diagram above explains the whole scenario.)

net(Slate.com)

This digital era of on-demand content is more of an issue for Networks, though, because, luckily, Studios have a new hope– Netflix. Netflix is a great distribution option for Studios creating original content because of two reasons: More Money and More Creative Freedom.

Originally, Netflix bought licenses to share content online, but did not produce their own content. As it became more important for Netflix to keep subscribers interested, Netflix began investing in original content. For example, they spend approximately 4 million dollars per episode on shows such as House of Cards and Orange is the New Black. This is way more money than Networks would normally spend on a show. In an article titled “How Netflix is Cashing in on Orange is the New Black” Remy Merritt writes, “Netflix’s strategy has been one focused on production, rather than marketing; while broadcast television networks spend hundreds of millions on advertisements and promotion, Netflix has shared that it prefers to spend the majority of its production budget on hiring, casting and filming.” In other words, as a Studio you get more creative freedom with your content and you can focus on making really high-quality entertainment. Last year alone, Netflix received 14 Emmy nominations for three of it’s original series, proving that their content is high quality, award-worthy entertainment.  Plus, you receive much more money to produce your show than you ever would with a Network-type deal.

But what happens in a few years if your content is no longer popular and attracting awards like it used to? Netflix does not own your content, so you, the Studio, still have options for syndication. Literary agent Peter Micelli explains, “They’ll [Netflix] pay a large percentage of the budget for it. They control it for four years exclusively and then you can turn around to re-sell to a linear cable channel.” This means that even if Netflix chooses not to stream your content anymore, you can still look for other avenues of distribution. 

In conclusion, if you are looking to start a production company creating content for television, following the traditional studio system is not your only option. Look for other options, and explore every avenue to find the best distribution solution for your content.

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