Netflix Watch Instantly Selection

If Netflix is successful, some of the biggest TV shows might not be on TV anymore. The latest news out of Netflix HQ in Los Gatos has the company paying what may be a nine-figure sum to acquire two seasons of House of Cards, an original series being developed by David Fincher and Kevin Spacey.

At Deadline.com, TV Editor Nellie Andreeva says Netflix scored the deal by making an unheard-of 26-episode commitment to the show — almost certainly more than competitors like HBO and AMC would have been willing to bankroll from day one. (Fincher will direct the first episode.)

Note that Andreeva hedges her bets by tacking on this clause: “Negotiations are still going on …”, so if this much-ballyhooed deal actually falls apart, well, never mind.

At Movie City News, Dave Poland runs the numbers and says Netflix is spending $3 per customer per year on House of Cards — a dramatic shift in strategy for a company that has previously built its appeal on breadth of selection, rather than exclusive content. (Netflix had previously experimented with original and exclusive content in its now-defunct Red Envelope Entertainment division.)

Poland sees the House of Cards acquisition as a sign that Netflix execs may have determined that they will not be able to continue spending crazy money licensing movie libraries for streaming from the likes of Starz, which controls the Disney and Sony libraries, and EPIX, which reps Paramount, MGM, and Lionsgate. Time will tell, but if the Starz deal does expire, Netflix will lose a huge chunk of its most popular studio content — and it will need a new business model to fuel growth. As Poland puts it, “The cost of content is the threat.”

The news arrived along with market-research firm The NPD Group’s announcement that Neflix served up 61 percent of all downloaded or streamed digital movies in January and February. Comcast came in second, with an 8 percent share, followed by a three-way tie in third place among DirecTV, Time Warner Cable, and Apple. (It would be incorrect, however, to say that Netflix has a 61 percent share of the market — NPD’s figures measure “digital movie units,” not dollars spent. Because of its all-you-can-eat subscription plan, Netflix revenues from streaming are likely lower than its competitors on a per-movie basis. It’s still the 600-pound gorilla in the business, though.)

Even more interesting is NPD’s observation that digital video delivery now accounts for fully 25 percent of “home video volume.” Again, it looks like we’re talking here about the number of movies served to consumers, not the number of dollars spent.

So Netflix has the brand name that resonates with 21st century viewers, the technical infrastructure (servers and bandwidth) to back up their streaming ambitions, and the customer base to prove it. With a watch-instantly subscription to Netflix starting at $7.99, it doesn’t seem like a stretch to think that consumers might pay for the service just to get access to exclusive content.

Personally, I hold on to my subscriptions to HBO and Showtime solely for access to original programming like Dexter and True Blood (the party’s at my house every Sunday night — come on over), and I have to pay a sizable sum for basic cable service before HBO and Showtime will consider taking my money. And considering how much people routinely pay to catch up with favorite series through iTunes and the like, eight bucks a month for on-demand access to four episodes of House of Cards seems like a pretty good deal — assuming the show’s a hit. And with what Netflix is thought to be spending on it, it had better be.