Netflix Wants You to Go on a Binge

We're now just a week away from when Netflix (Nasdaq: NFLX  ) will drop the Lilyhammer on its subscribers.

The video service giant's first original series stars Steven Van Zandt as a mobster sent to Lillehammer in Norway after ratting out a mob kingpin. The inaugural season will play out over eight episodes.

I can't be the only one that figured that when Netflix begins rolling out its original programming -- Lilyhammer next week, House of Cards later this year, and the Arrested Development revival next year -- that the new episodes would be dispensed in weekly installments.

It's the way that traditional television does it. It's the way that Time Warner's (NYSE: TWX  ) HBO -- Netflix's closest match on the premium end and the gold standard of original series airings -- does it. Why should Netflix veer from the formula that works?

Well, we should all know by now that Netflix isn't afraid of taking chances. Instead of milking Lilyhammer through eight weeks of social buzz and cliffhanger chatter, Netflix is making all eight episodes available on Monday after the Super Bowl. Who needs a trickle when you can have a deluge right now?

"Netflix's brand for TV shows is really about binge viewing," CEO Reed Hastings explains during last week's conference call. "It's the ability to just get hooked and watch episode after episode. It's addictive. It's exciting. It's different."

Binge thinking
"Our release strategy for original content emphasizes that brand strength, which is to be able to get hooked and pour through those episodes rather than get strung out. And we're not particularly focused on a single show for driving retention. It's the expectation of more and more shows that really drives retention."

Interesting.

It's hard to question Hastings after delivering better than expected quarterly results last week. However, is this really Netflix's smartest strategy?

Stretch out Lilyhammer over eight weeks and you'll have viewers locked in for at least two months. What's the point if someone can just go through the entire series over a lazy Sunday? Perhaps more importantly, what becomes of the social nature of television?

When Dexter throws viewers for a curve, everyone's talking about it the next day at the office. When The Office pushes the sit-com envelope, Twitter's giving the move some viral mojo that same night. What will happen when one co-worker is done with all eight episodes by next Tuesday? Will it still be relatable to the person that doesn't get around to it until the summer lull?

None of this would matter come April. Everyone would have access to all eight episodes. However, the buildup between now and then -- the kind of buzz that would woo ex-subscribers back to see what they're missing -- is gone under Netflix's approach.

Fresh vs. frozen
Why is Netflix reinventing the reel?

The flick flicker has boxed itself into the anti-fresh model. It had no problem telling Time Warner to take 28 days before sending it new DVD releases because it believes -- or wants its customers to believe -- that Netflix subscribers couldn't care less about content that's brand new to DVD.

Now that the Time Warner delay is apparently doubling to 56 days -- a move that Dish Network's (Nasdaq: DISH  ) Blockbuster and Redbox parent Coinstar (Nasdaq: CSTR  ) are embracing as a way to save some serious dough over buying discs through third-party distributors -- Netflix is painting this as a non-factor to its users.

"DVD consumers -- including hybrid and DVD-only -- continue to be weighted toward catalog," Hastings explained during last week's call, pointing out that just 30% of its shipments are new-release oriented.

That's funny. It's always the brand new releases that aren't available for a long time in my Netflix queue.

Netflix also proudly wears the "re-run TV" insult as a badge, preferring to negotiate with studios for past seasons over the current shows that many couch potatoes covet.

Is it really such a surprise that it would blow its first shot at original programming by assuming that's it just another season for customers to stream through?

Back to the future
Netflix is still the undisputed champion here, but the competition is getting smarter. HBO is giving premium subscribers more ways to consume its content on the go. Even Netflix concedes that Amazon.com (Nasdaq: AMZN  ) will begin charging for its unlimited video service in a model that will undercut Netflix on price.

Well, if original content is one of the selling points for Netflix over Amazon, why not milk it in a way that can keep its couch potatoes active and talking about fresh content as it's spooned out over time? At least for two glorious months, isn't that what Netflix is paying up for in breaking from tradition by nabbing first-run content?

For a company that's bending over backwards to grant users in this country the ability to share viewing habits on Facebook it doesn't seem to have a firm grasp on the nature of viral buzz.

I'm not unloading my shares. I'm clinging to my bullish CAPScall in Motley Fool CAPS. I just think that Netflix is putting the hammer before the lilies this time.

Motley Fool co-founder David Gardner has been a fan of Netflix as a disruptor for nearly a decade, but there's a new Rule-Breaking mutli-bagger that he's getting excited about these days. Learn more in a free report that you can check out now.

Longtime Fool contributor Rick Munarriz has been a Netflix subscriber and shareholder since 2002. He does not own shares in any of the other stocks in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.

The Motley Fool owns shares of Amazon.com. Motley Fool newsletter services have recommended buying shares of Amazon.com and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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  • Report this Comment On January 30, 2012, at 9:41 PM, eugooglizer wrote:

    But...aren't you helping NFLX (long, btw) accomplish exactly what it wants when it releases <i>Lilyhammer</i> - buzzing about it? If they release it piecemeal, they're just like everyone else. If they do it all at once they differentiate themselves. It also looks like they don't care about nickle and diming their customers for once!

    I applaud.

  • Report this Comment On January 31, 2012, at 12:20 AM, anonMotley wrote:

    "Stretch out Lilyhammer over eight weeks and you'll have viewers locked in for at least two months."

    Most likely not. Unlike regular TV where viewers would need to subscribe for two months to record every episode if they wanted to watch them all at once, potential Netflix subscribers would just have to wait out 8 weeks until they were all online anyway.

    So instead of having customers wait 8 weeks for them to be all online, why not just give them all the episodes at once to begin with.

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