Netflix Gets Original Programming -- Watch Out, Networks

Last Updated Mar 16, 2011 9:44 PM EDT

Netflix (NFLX) has taken a big step beyond partnering with television and movie studios into competing with them. The company is reportedly in talks to pick up a drama series called House of Cards starring Kevin Spacey, outbidding several cable channels in the process, according to Deadline Hollywood.

The deal could be worth more than $100 million, though a WSJ report suggested that the figure was significantly less. However, that's mere distraction. The real significance is that a last grip that traditional studios and networks had on the video entertainment business is now gone. The Internet barbarians are through the gate, and there's no way for executives to put things back into their old comfort zone.

This is a big bet for Netflix, whose net income for all of last year was $160.9 million, and there's no telling whether it will ultimately pay off. Instead of ordering a pilot, and then maybe a handful of episodes with an eye on ratings to see whether to extend into a full season, it sounds as though Netflix may commit to two seasons. Furthermore, Media Rights Capital, which produced the series, could later let it be broadcast or sold on DVDs.

That's right, streaming would become the first release of choice, with DVDs and even traditional broadcast television becoming aftermarkets. Traditional purveyors of television programming have just been tossed into the back seat, and that's not the only evidence:
The Internet industry is out-thinking, out-innovating, and out-maneuvering the television and movie companies. It puts into high relief why carriers are pushing to limit bandwidth. Someone actually suggested to Congress that bandwidth limitations reduce video piracy. Absolutely, if piracy means another company snagging your business.

And that's where all this could end up. House Republicans already have a bill to repeal net neutrality. That would mean carriers could put the brakes on downloads, making it economically impractical for people to get video through these other mechanisms and forcing them to continue doing business through traditional channels.

Related: Image: Courtesy, Netflix
  • Erik Sherman On Twitter»

    Erik Sherman is a widely published writer and editor who also does select ghosting and corporate work. The views expressed in this column belong to Sherman and do not represent the views of CBS Interactive. Follow him on Twitter at @ErikSherman or on Facebook.

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