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Originally featured on BroadcastEngineering.com
Feb 8

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2/8/2012 8:03 AM  RssIcon

Netflix was launched in 1997 with a single purpose: to replace the home video store. Now with almost 25 million subscribers in the United States and a revenue of $3.2 billion last year, the service is moving beyond feature films.

The "Los Angeles Times" reported this week that when Netflix began more than 80 percent of the discs shipped were feature films. Now, the newspaper reports, more than 60 percent of the 2 billion-plus hours of video content streamed by Netflix in the last quarter of 2011 was originally made for television.

Not only that, Netflix has premiered its first original series, a crime comedy called "Lilyhammer," starring Steven Van Zandt of "The Sopranos" fame.

"It's been a fundamental shift in our business, but it wasn't by design," Ted Sarandos, Netflix's chief content officer, told the Times. "The rise of TV viewing has happened in a really organic way."

The newspaper reported that the transformation has been driven partly by a fundamental shift in the way television is now consumed in an on-demand age. It offers viewers a way to view one episode after another of addictive series such as "Gossip Girl" or "Mad Men."

"We have found that what differentiates our service is the ability to sit down, pick a show and dig in," Sarandos told the newspaper. "People will watch six or eight episodes in one sitting."

Over time, Netflix has become one of the entertainment industry's largest customers of television reruns, including serialized dramas. This has resulted in a major increase in revenue for television programming, especially since dramas usually bring in less money in reruns than sitcoms and police dramas.

"This is all great news," Bruce Rosenblum, president of Warner Bros. Television Group, told the newspaper. "Netflix gives studios a bigger appetite to take risks because we know now there is more upside for these shows."

Along with being a top buyer of television programming, Netflix is also now competing with cable outlets. It has also has committed to broadcasting "House of Cards," a political drama starring Oscar winner Kevin Spacey; a new comedy from the creator of "Weeds;" and new episodes of "Arrested Development," a comedy that Fox canceled six years ago.

While movie executives remain wary of Netflix for its low-cost fare, TV executives are pleased to do business with a new source of business. "Netflix is a new buyer that's adding value that didn't exist before in the television business," Steve Beeks, president of Lionsgate, an independent studio, told the newspaper.

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