Netflix’s new show House of Cards represents a $100 million investment: is it even possible that they can make that pay? The Atlantic has a terrific article The Economics of Netflix’s $100 Million New Show which considers the economics behind the program and reveals another interesting tidbit.
At $100 million for 26 episodes House of Cards is definitely at the expensive end of production at an average of $3.8 million an episode. According to the article, Netflix would need to get:
520,834 people to sign up for a $7.99 subscription for two years to break even.
And Netflix wants to do that five times a year? Apparently there is sufficient upside to Netflix’s growth, particularly in non-US markets, to fund that out of expected normal growth. If this show tips the balance for enough subscribers, it makes good sense to Netflix. Remember too, that Netflix also pays a lot of other content that’s had a life before Netflix.
In fact, one of the more interesting data points for me, is that Netflix pays $1 million an episode for the exclusive streaming rights to Mad Men, a show notably produced for around $2 million an episode. Netflix are paying half the production cost for the streaming rights – not cable, nor broadcast, just streaming.
Ultimately the article wimps out and leaves the question of whether or not House of Cards will draw sufficient new subscribers to make it worthwhile for Netflix, leaving the article with an unsatisfactory “We won’t know”.
What else is interesting is that Netflix have released all episodes in series one at the same time. As expected people are binging on episodes, which is another indicator that television viewing patterns are disrupted.