What The Surprising Figures From Netflix’s Second Quarter Report Mean For TV Broadcasting

Screen shot 2013-07-26 at 11.35.48 AMWhile Netflix reported second quarter earnings that exceeded industry professionals’ estimates, company shares fell in value by nearly 5½ percent. In hopes of explaining the seemingly incongruent information, some analysts have pointed to the spike in number of online subscribers; asserting that it was the result of the fourth season release of “Arrested Development” and premiere of “House of Cards” -both of which are shows that are only available online. We asked Zintro experts to discuss how the growth of companies that offer online streaming will affect various facets of the television business.

Rex Widerstrom, a professional broadcaster with television production expertise, asserts that “The cost of operating terrestrial broadcast networks has long meant the television channels, which traditionally produced the bulk of their own content, have become simply broadcasters of content produced independently. As a result, there was a decline in the amount of scripted drama and comedy, which are more expensive to produce, and a rise in ‘reality’ programming and contests in which all the talent, bar the judges, perform for free.”

“Cable channels such as HBO and Showtime began to realize there was an unmet demand for programming that challenged intellect and displayed high production values. In response, we saw the emergence of series such as The Sopranos, Breaking Bad, Dexter and others; their success inevitably encouraging other producers to enter the market. According to Widerstrom, “For an operator such as Netflix, one competing in an increasingly diverse marketplace, the old vertical integration model of producing original content and then using exclusivity to leverage viewer numbers is viable again because those viewers will pay directly instead of the broadcaster having to hope high ratings will drive ad revenues enough to recoup production costs.”

“Netflix is both a follower of these previous trends and a pioneer in its own right in that it is the first major player to monetize the production of quality programming delivered on an internet-only platform. Its success with series such as House of Cards is being keenly watched by independent producers and, no doubt, by other internet operators. Already numerous ISPs have experimented with bundling unmetered video content produced by third parties with broadband plans to entice sign-ups and build customer loyalty. However, this content is usually material such as movies, which are available first on other platforms.”

Ultimately, Widerstrom thinks “The success of Netflix will encourage many of these ISPs to consider the value of producing their own content and delivering it exclusively to subscribers which can only be good for program makers and the audience: whose options -particularly in scripted drama and comedy- will widen as a result.”

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By Gabriela Meller 

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