Belying the “flix” in its name, Netflix is now primarily an Internet streaming service for television shows, not feature films. TV series now account for more than half of all Netflix viewing. That helps to explain why this Wednesday — when motion picture classics like Scarface and newer hits like Toy Story 3 will vanish from the streaming service — is not the doomsday it was once expected to be. The vanishing films are from Starz. Its three-and-a-half-year-old deal helped Netflix persuade millions of people to sign up for streaming, hastening the company’s leap to digital distribution from physical DVDs.
It became clear about a year ago that the deal would not be renewed. By then, though, Netflix was bulking up on old TV episodes and, in a direct challenge to HBO, beginning to distribute its own original shows for the streaming service.
Analysts say the prioritising of TV partly explains why the company has been able to retain about 21.7 million streaming subscribers in the US — totaling one in four households that have broadband — despite complaints about an inadequate feature film selection. It’s a transition that Netflix has made rather successfully in the last six to 12 months, in stark contrast to its botched plan to spin off DVD-by-mail into a separate company called Qwikster last fall.
The new movies provided by Starz account for just 2 percent of all viewing, Netflix says, down from 8 percent a year ago — illuminating the fact that the company has spent lavishly on new streaming titles that subscribers want to watch. (“I would contend Netflix spends wisely rather than lavishly,” a Netflix spokesman, Steve Swasey, says in response.) Many new titles are full seasons of TV series like Mad Men and Lost that Netflix executives call “26-hour movies.”
The pivot to TV reruns was necessitated in part by the tightening of the movie spigot by movie studios. Fearing that Netflix might grow too popular, the studios “have decided to dramatically raise prices” for films and shows, says Youssef H Squali, a managing director, Jefferies & Company. “The company is being forced into offering more (older) TV content as it’s cheaper,” he says. The company’s next challenge is to come up with original shows — instead of reruns — that subscribers will latch onto, mimicking the HBO model.
Reed Hastings, Netflix’s chief executive, told business school students in Manhattan last week that the company would try a couple of dozen original series in the coming years, but did not specify a timeframe; Netflix had previously said that five such series would premiere by the end of 2013. A show from Norway, Lilyhammer, had its American debut on Netflix earlier this month, and a drama made just for Netflix, House of Cards, will debut later in the year.
Still, there is a persistent undercurrent of criticism about Netflix’s actual movie selection, and it was highlighted this week by the Starz disappearance. Only four of the 50 top-grossing films of 2011 were currently available for streaming on the service.
Earlier this month, Netflix secured rights to The Artist, which won the best-picture Oscar at the Academy Awards ceremony on Sunday. It has earned just $32 million at the box office to date and will become available on Netflix in less than six months, the company said Monday.
Netflix declined to comment on exactly what proportion of total viewing that TV episodes make up, but its executives put the number at 50 to 60 percent last fall.
©2012 The New York Times
