Even in the Realm of Distribution, Content Is King
Once upon a time, there were three television networks that dominated the entertainment landscape. ABC, CBS and NBC competed with each other by offering original comedies and dramas and in effect formed a monopoly on American viewership in an age of limited choices. That changed during the 1970s with the advent of cable and a multitude of new channels. The networks—which were later joined by FOX and, to a smaller degree UPN, The WB and CW—still dominated, however, as the majority of these secondary upstarts were forced to rely on syndication and re-runs to fill their time slots and thus could not compete with the newer offerings of their larger counterparts.
With the number of growing choices being offered, cable channels eventually had to find ways to distinguish themselves from each other, let alone try to compete against the Big Boys. HBO, one of a handful of subscription channels that offered the latest motion pictures after their initial theatrical runs, therefore began experimenting with original television shows in an effort to separate itself from the likes of Showtime. Such productions as Sex and the City and The Sopranos not only raised the level of subscribers but transformed HBO into a legitimate rival to the networks in terms of quality programming. Showtime quickly followed with its own exclusive series, including Dexter and Weeds. Recycling movies may have launched both HBO and Showtime, but it was the original content that fully established them as television giants.
Non-pay cable channels eventually decided to take the same route as their subscription brothers and sisters in an effort to likewise set themselves apart from the pack and add a level of legitimacy. AMC had the most success when the former American Movie Classics transformed itself into a destination for fans of quality television with such critically acclaimed shows as Breaking Bad, Mad Men and The Walking Dead, but other channels have also triumphed with original programming. FX, for instance, is no longer the syndication home of The X-Files and Buffy the Vampire Slayer but the residency of It’s Always Sunny in Philadelphia and Justified. USA Network, meanwhile, went from game show reruns to the place where characters are welcomed with the likes of Burn Notice and White Collar.
“I’m not sure what FX’s identity would be if it didn’t have any original programming,” John Landgraf, president of FX, told Broadcasting & Cable in July 2010. “I don’t think it would be a brand that both advertisers and viewers would know very much about. So even though we could make more money theoretically if we didn’t make original programming, we would have a weaker channel from a branding, ratings and ad sales standpoint, and a far weaker channel from an affiliate sales standpoint.”
Although content is king, as the adage goes, modes of distribution is often considered to be the power behind the thrown. Whereas in the “once upon a time” days of a simple three network television environment that was literally broadcasted over the airwaves, today’s world of cable channels needs a pipeline of some sort to bring content into one’s home. While the competition for viewership on the screen may be fierce, the same is true behind the scenes within the distribution industry. Add the growing ability in recent years to watch video online via the Internet and the need to stand out has become just as important for distributors as it is for cable channels. While HBO, Showtime, AMC and FX were able to distinguish themselves with original programming in the past, the same may hold true in this area as well.
Cable providers came to dominate the industry in the 1970s but the 1990s saw the advent of satellite television and an alternate means of distribution. In order to separate itself from the likes of Comcast, DirecTV not only forged exclusive alliances with such popular sports leagues as the NFL and NASCAR but likewise delved into original television programming. In 2008, for instance, the satellite provider signed a deal with NBC to co-produce the critically acclaimed but ratings challenged Friday Night Lights for a third season. The agreement called for DirecTV to not only share the costs of production but granted them the rights to air the new episodes four months before they became available on NBC. The arrangement continued for two additional seasons before Friday Night Lights ended its series run in 2010.
In January 2011, meanwhile, DirecTV announced that it was producing two additional season of the cancelled FX drama Damages. The Glenn Close-starring series was also critically acclaimed but struggled to find viewers as well. Whereas the continuation of Friday Night Lights was a partnership between DirecTV and NBC, seasons four and five of Damages are exclusive to DirecTV. “We didn’t say, ‘Let’s go rescue shows,’” executive vice president Derek Chang told USA Today. “We said, ‘Let’s go find quality programming that’s going to resonate with our audience.’”
The words sound eerily similar to those of Netflix chief content officer Ted Sarandos a mere two months later when he announced that the video rental company was producing its first original television drama, House of Cards. “Our goal remains to constantly expand our selection of previous seasons of popular TV shows and we may bring more exclusive series to Netflix in the future, if an opportunity arises that has the key elements a show needs to be successful—great storytelling and great storytellers,” he wrote on the Netflix website.
Netflix was initially founded in 1997 as an alternative to brick-and-mortar video rental stores like Blockbuster by offering DVDs through the mail, without due dates or late fees, at a flat monthly rate. As streaming became more viable in the Twenty First Century, the company expanded the convenience level of its service by delivering video rentals over the Internet. The move in effect drove its main competitor into bankruptcy—Blockbuster’s assets have since been purchased by DirecTV rival Dish—and established itself as a dominant player in the online streaming business.
The transformation that Netflix has gone through has many television industry insiders worried. “Hollywood has the content and they don’t want to lose control of the content,” NPR Digital Culture correspondent Laura Sydell remarked in March 2011. “They’re looking at, for example, the music business—iTunes, right? iTunes is basically the go-to place for music and, therefore, Apple has a stranglehold on the music industry. So, Hollywood doesn’t want to let Netflix take over and be the major source online—the only source online—for content.”
Many of the networks and cable channels have thus limited the availability of their content on Netflix in the hopes of limiting the company’s influence on the changing winds of video distribution. HBO, for instance, has so far refused to license any of its original programming to the rental giant. Netflix, for its part, has gone on a “spending spree” as of late, securing the exclusive rights to a number of shows, including the critically acclaimed AMC drama Mad Men.
In many ways it is the same strategy utilized by start-up cable companies like AMC, FX and USA Network in decades past when they purchased the exclusive syndication rights to popular and critically acclaimed shows like Buffy the Vampire Slayer and Law and Order. While such moves helped established these channels in their initial start-up phase, it wasn’t until they began offering original programming that they fully distinguished themselves. The recent deal by Netflix to produce its own original series, House of Cards, appears to be a similar strategy.
The drama is based upon a British miniseries of the same name, stars Kevin Spacey and is directed by Academy Award-nominee David Fincher. House of Cards was considered a hot commodity in Hollywood when it first went on the market but Netflix was able to outbid AMC and HBO with a two-season, $100 million offer. Unlike DirecTV’s agreement to produce Friday Night Lights and Damages, the investment by Netflix is for a television series that has not already established itself with American viewers or critics—a gamble of sorts despite the high-pedigree of the talent involved.
Netflix is no longer a video rental service, however, but a combination of cable channel and mode of distribution. Its main competitor is no longer Blockbuster but other online streaming companies like Hulu. While the convenience of its service was able to separate it from the former, Netflix needs a different business plan to compete against the latter.
“What used to be called ‘reruns’ on television is now called Netflix,” GigaOM quotes Comcast CEO Brian Roberts as telling the Wall Street Journal, alluding to the fact that in the every-going battle for online viewing supremacy, reruns may not be enough. Just like AMC needed Mad Men and FX needed It’s Always Sunny in Philadelphia to truly establish themselves as major players in the industry, Netflix may likewise need House of Cards to separate itself from Hulu. Having a mode of distribution is obviously important but even in today’s changing television landscape, content will always be king.
Anthony Letizia (April 11, 2011)
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