March 16, 2011 -- First Netflix vanquished Blockbuster, and now it seems to be setting its sights on premium cable.
Netflix is reportedly close to inking a deal to distribute an original television series, a move that would put the video streaming service in direct competition with cable channels like HBO.
According to Deadline.com which first reported the news on Tuesday, Netflix outbid HBO and AMC for the rights to stream "House of Cards," a series starring actor Kevin Spacey and directed by David Fincher, who helmed last year's "The Social Network." The drama is to be adapted from a series of British political novels subsequently developed as a BBC TV miniseries.
Netflix declined to comment on the report, though an industry source close to the negotiations confirmed the company's interest in "House of Cards."
"They're sort of taking a page out of the playbook that HBO and Showtime used," said Sam Craig, director of the Entertainment, Media and Technology program at NYU Stern School of Business.
Facing Competition, Netflix Seeks to Differentiate
When HBO started operating in the late 1970s and early 80s, it simply showed full-length movies. As competitors like Showtime, Starz and others began doing the same thing, the network moved into original series to differentiate.
While Netflix now dominates the streaming business, delivering six in 10 streaming movies in January and February according to NPD group, a number of competitors have cropped up, including Amazon Prime, Apple's iTunes and Hulu's premium offerings.
"Netflix has sort of gone to the place where streaming and delivery of traditional DVD's is pretty much a commodity and they're getting a lot of competition. So I think it's essential that they develop distinctive content," said Craig.
To secure "House of Cards," Deadline.com reported, Netflix has committed to two seasons or 26 episodes at a cost of more than $100 million. If those figures are correct, it would be an enormous bet that bucks the usual Hollywood practice of requiring a pilot episode before committing to a series.
Netflix Deal Would Be First Big-Budget Web Series
While low-budget original web series have been around for years, "House of Cards" would be the first big-budget project delivered exclusively online.
Bob Thompson, a professor of popular culture at Syracuse University, said that the series has the potential to become a milestone for a delivery system still in its infancy, just as "Amos 'n' Andy" helped popularize radio in the 1920s and Milton Berle's "Texaco Star Theater" variety show drove television sales in the 1950s.
"I suspect that great series are eventually going to be distributed by these alternate systems," Thompson said, explaining that streaming original programming is most likely an inevitability. "Whether 'House of Cards' is really going to be the one that makes the breakthrough, we'll have to see how good it is."
A move into original programming would represent the latest shift for a company that has shown itself quick to adapt. Netflix began mailing DVDs to homes in 1997, but after dominating the DVD rental market, it has in recent years become a web-streaming giant with 20 million subscribers. Last December, Netflix replaced the New York Times on the S&P 500.
While the company has dismissed in the past suggestions that it might develop original programming, there's no question that improving its streaming service is Netflix's priority.
"By far, the majority of our delivery and our service is now streaming," Netflix co-founder Reed Hastings told ABC's Nightline in January. "Streaming is everything."