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Netflix Originals: How Do They Stack Up Against HBO and Showtime?

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We examine the ratings of Netflix's original content.

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The Sopranos changed television dramas.

Tony Soprano, played by the late James Gandolfini, became the model for a new generation of dark antiheroes embroiled in complex plots and suffering from internal struggles.

We have Don Draper, the identity-faking, womanizing adman at the center of Mad Men.

There's Dexter's Dexter Morgan, who analyzes blood spatter for the Miami Police department by day and kills by night.

And now there's Frank Underwood, protagonist of the Netflix (NASDAQ:NFLX) original series House of Cards, which takes an extraordinarily cynical look at Washington, DC, politics. Frank Underwood, played by Oscar-winner Kevin Spacey, schemes, lies, and trades news tips for sex with an up-and-coming reporter.

And, oh yeah -- spoiler alert -- he also murdered an underling and made it look like a suicide.

As it turns out, all this dark stuff is pretty well-made.

I've spent some time looking at data from Metacritic.com, which compiles critical reviews to calculate average scores for movies, video games, TV shows, and music.

Metacritic's list of the highest-rated individual seasons of television shows is stacked full of recently made dark cable television dramas like Breaking Bad and The Wire.



Of the top 50 rated seasons of televisions, a full 21 are post-Sopranos dramas or The Sopranos itself.

That's quite remarkable as some legendary TV shows like Seinfeld and ER failed to hit the top 50.

Therefore, Netflix is cracking a vitally important television category. In fact, on Thursday, House of Cards made Emmy Awards history: It was the first online-only show to compete for the top Emmy Award categories after being nominated for nine Emmys, including Best Drama, Best Director, Best Actor, and Best Actress.

In total, Netflix earned 14 Emmy nominations -- pretty good for an upstart.

What's also interesting is where House of Cards' first season ranks in terms of critical acclaim relative to other TV dramas.

I compiled a chart showing the season-one ratings of the big-name TV dramas from the past decade. Note that Netflix Originals have been marked in orange:



So with the success of House of Cards, Netflix is now competing not only with streaming video service providers like Amazon.com (NASDAQ:AMZN) and Hulu, but also with TV powerhouses HBO and Showtime.

Based upon critics' reactions, House of Cards ranked higher than Six Feet Under and Breaking Bad -- pretty impressive. And Netflix's new prison series, Orange Is the New Black, ranks even higher.

Is Netflix original content moving the needle for the company?

It's far too early to say yes.

In Q1 2013, when House of Cards debuted, Netflix added 2.03 million domestic streaming subscribers, up from 1.74 million the year before. However, in the year before, Netflix changed its accounting methodology for counting subscribers by removing 300K members whose payments were on hold from the subscriber list, which flowed through the net additions number. So the numbers were actually roughly flat year-over-year.

Unfortunately, we can't really make a seasonal comparison that would be more revealing. The idea is that if Q1 2013 showed a better seasonal trend from Q4 2012 than we saw in Q1 2012, we'd have more evidence that there was a House of Cards-specific bump.

However, in Q4 2011, Netflix added just 223K domestic streaming subs, as that was the period during which the company was suffering from a mountain of bad press, courtesy of poorly implemented price increases and rebranding. I published an extensive timeline of the lead-up to that quarter, which you can read here. In fact, in Q3 2011, Netflix actually lost subscribers.

Therefore, we can't make a proper seasonal comparison based on the publicly available numbers.

Note, however, that the company's flat year-over-year subscriber gains shouldn't necessarily be considered bad. This is because Q1 2012 had the benefit of being the quarter during which Netflix went back to its old plans.

But at the end of the day, Netflix's push into original content is a smart move.

It's not exactly HBO (NYSE:TWX) yet in terms of the quality and breadth of programming, but it's a good direction.

Exclusive content adds value to any platform, whether it's a smartphone or video game console or TV channel, and it has obvious benefits in terms of subscriber retention and marketing.

Additionally, producing and owning content gives Netflix a quality core content base from which to build its library. The company will always be dependent upon licensed content, but it's important to have some base offerings that give some level of predictability, and give Netflix an identity.

Remember, without anything original, Netflix would be at risk of getting smashed by anyone willing to pay just more money to get better content.

And in that case, Netflix would really be nothing but a house of cards. (See what I did there?)

See also:

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Twitter: @Minyanville

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No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

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