Can Netflix’s House of Cards survive its $100 million bet?

Netflix: House of Cards

(C) Netflix

This week House of Cards was made exclusively available on Netflix, the online subscription based video streaming service.  This bold move from a television aggregator that delivers content through a relatively low cost subscription model, to being a content producer (and one with deep pockets – House of Cards alone cost over $100 million to make), does have the potential to compete with both producers and distributors of broadcast content.

Netflix says it will be producing a minimum of five original series each year to entice audiences to subscribe to its service.  Potentially a game changer, Ted Sarandos, Netflix ‘s chief content officer, told GQ ‘The goal is for us to become HBO faster than HBO can become us’.

But does the research data support this move?

Last year, we asked nearly 1,000 internet users what they thought of online video services and found that although over a third would consider using Netflix, a much lower proportion had ever tried the service.  Will exclusive content be enough to attract those that like the sound of the service to actually subscribe?  It’s early days yet, but we found that quality of content was the biggest perceived barrier for considerers compared to those who had taken the plunge.  Subscribers were much more likely to rate Netflix content as high quality compared to those who like the idea but have never actually used the service.

However, the biggest issue overall – for those who are in the market for online video but don’t use Netflix – is the perception that it cannot be viewed on a television.    In nearly every article and piece I have read on Netflix’s foray into content production, the service is called an online streaming service.  And while I suspect that most of the readers of this blog will scoff and understand that of course you can get Netflix through your laptop plugged into your TV or through your PS3, Wii or XBox, I would think it’s unlikely that you’re representative of the population.  While it may be hard to believe, aside from cost, the biggest reason people don’t want to use video streaming services is because they don’t think they can watch them on their TV.  Perhaps Netflix needs to divert some of its budget into raising awareness of these services to ensure that video streaming remains a social, family event.

This can be particularly important if Netflix (and potentially other services) continue to launch whole series in one go, encouraging what has been coined ‘binge viewing’.  There is an argument that this encourages subscription and a stronger tie to the service, but the longer term effects on revenue models for Netflix remain to be seen.  Will more revenue come through product placement, while subscription levels remain the same?  Or will tiered subscription be introduced where subscribers pay more for exclusive content on Netflix?  All of that remains to be seen.

Whatever happens, the future for online video looks rosy; but the key will be in ensuring universal access on what my mum calls ‘the proper telly’.

This article was wriiten by Sarah Gale, Senior Research Director at Ipsos MediaCT. Follow us on Twitter.