In a note to shareholders Monday that accompanied its first-quarter earnings report, Netflix CEO Reed Hastings and CFO David Wells wrote that the House of Cards decision “was driven by a desire to test a new licensing model using a small portion of our content budget.”
“We want to confirm our theory that because we are click-and-watch rather than appointment viewing, we can efficiently build a big audience for a well-produced serialized show,” they say in the letter. “We’ll license two or three similar, but smaller, deals so we can gain confidence that whatever results we achieve are repeatable.”
House of Cards, produced by Media Rights Capital, will star Kevin Spacey and some episodes are expected to be directed by David Fincher. Instead of airing on TV, Netflix has commissioned 26 episodes and will stream them to its customers beginning in 2012 at an estimated cost of $100 million.
Netflix added 3.3 million domestic subscribers during the quarter, giving it 22.8 million in the U.S., enough to tie it with Comcast as the biggest media-subscription business in the country. Sirius XM Radio boasts 20.2 million and Microsoft’s Xbox Live has 30 million, though the company hasn’t said how many are free and how many are paid.
To read my thoughts on the House of Cards deal from when it was announced, head here. As a Netflix devotee, I'm hyped to see them making this move.