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:
- Major League Baseball is testing Facebook's promotion power by offering some pre-season game streaming over the social network.
- Netflix already originates 61 percent of all digital movies.
- Not even DVDs are safe. Zediva streams new releases by pairing each customers with a movie copy playing on a DVD drive in the company's office, with the programming streaming to that one customer. The users essentially rent DVDs from the company.
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.