Netflix CEO Reed Hastings is feeling pretty good and he hasn’t been afraid to show it. Last year Hastings’ company surged past HBO in terms of U.S. subscribers, and last week the company announced its paid domestic subscriber base grew above 30 million for the first time. So in a conference call with analysts, Hastings engaged in a little bit of corporate trash talk, suggesting that HBO chief Richard Plepler’s HBO Go password is “Netflix Bitch.”
While these corporate pissing matches are highly entertaining, they shouldn’t overshadow the fact that we are on the precipice of a fundamental change to the entertainment landscape. To see where things are going, it’s worth looking at how TV got to this point – and how Netflix is following HBO’s path even as it tries to crush the cable network in the race to a new entertainment future.
For a solid 30 years of its existence, the machinery of television production rested largely with three networks (ABC, NBC and CBS, for the kids at home). For the bulk of that time, and for a considerable bit afterwards, “Television” was the agglomeration of what are now considered four separate functions: Production (making shows), Distribution (airing the shows), Innovation (upgrading to color, upgrading to HD etc.) and Curation (“We will show this family friendly sitcom. We will not air this show about singing cops.”).
By the late ‘70s this integrated model began to break down into its distinct components and the emergence of HBO was a big driver in that move. Initially, HBO served almost exclusively as distribution and curation. Though it did produce a few original programs, even in the early days, the bulk of the cable network’s subscriber base was made up of people looking to view movies in their own homes. HBO selected movies made by outside producers and distributed them directly to their subscriber base.
This is largely the place that Netflix (and to a lesser degree Amazon) found itself in a little over a year ago, and the similarities in development do not stop there
HBO’s first forays into original production were first centered around live events. Sporting events, stand up specials and filmed concerts could all provide content at a relatively low cost. Eventually, HBO began to make inroads to niche areas such as children’s programming (“Fragile Rock”), sketch comedy (“Kids in the Hall”) and the tongue-in-cheek horror anthology series “Tales from the Crypt” which could revel in the freedom to show blood and breasts in equal measure. But it was three shows in the ‘90s that really put HBO original programing into the forefront of the cultural conversation and provide a road map for the new networks to follow.
Airing from 1992 to 1998, “The Larry Sanders Show” was The Velvet Underground of cable television shows. Though never a giant ratings success, it was the kind of edgy, intelligent adult comedy that the proved there was a deeper avenue for adult television shows that didn’t just mean dirty words and nudity. It launched the careers of a generation of comedians and set the tone for comedy for the next decade.
HBO’s real breakthrough came with “Sex and the City” and “The Sopranos.” With those two shows, the cable giant went from being a distribution network with a few quality original products to the producer of the best shows on television. This kick-started a run that includes such milestones as “The Wire,” “Deadwood,” “Six Feet Under,” “True Blood” and “Game of Thrones.”
Now, a little over a decade after their start, Netflix has taken the same steps away from being a content distribution network and towards being a content production network. There is some amusing symmetry here. If “The Sopranos” revealed the mafia to be a bureaucracy run by venal and weak men, “House of Cards” reveals the bureaucracy to be a kind of mafia, run by venal and weak men.
“Orange is the New Black,” on the other hand shows the adventures of a tiny blond woman as she navigates a complicated and dangerous new world with the help of her lady friends. Replace Mr. Big with Jason Biggs and there you go…
The Business Insider piece suggests that Amazon might have the upper hand over Netflix due to its greater leverage in licensing content from other providers, but this focuses on the distribution arm of the network and not the production. As the methods of consuming pop culture become increasingly decentralized, the question will not be “who has the best library of other people’s content?” but “who produces the best content?” There, HBO still has the upper hand. And Amazon’s original offerings have so far failed to garner as much buzz as Netflix’s.
HBO has also announced plans to decouple its HBO Go product from cable subscriptions, and it is not impossible to imagine that a “television channel” in the traditional sense of the word, will cease to exist in the next decade or two. There is already mountains of evidence that people are watching less TV, and the younger the demographic the greater the likelihood that they are tuning out.
The obvious precedent for this is in the music world. As content producers are increasingly able to directly distribute their product, the need for traditional distribution networks (labels, in this case) is becoming increasingly unclear. If a viewer can watch any show they want at any time they want, why would they need to turn to Channel 4 at 8 p.m. on Thursdays?
In this future scenario, where distribution and production can be collapsed into a single branch, it’s worth remembering that the other two functions, innovation and curation, will continue to have a place. It should not be underestimated the degree to which Netflix’s last-ditch negotiations to acquire AMC programming boosted the service. It’s hard to imagine Nextflix succeeding in bringing “House of Cards” and “Orange is the New Black” to market without the subscriber base that wanted to binge-watch “Mad Men,” ”Breaking Bad” and “The Walking Dead” over the summer of 2012.
A catalog of material was instrumental in keeping viewers watching Netflix in the same way that a stable of new “zeitgeist” shows is instrumental for HBO to keep and attract subscribers. But what will happen if the coolest shows are no longer on HBO but on one of the more high-tech challengers intent on capturing its throne?
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