What "Orange Is the New Black" Reveals About Netflix's Programming Strategy

Three Fools take to the Internet to discuss why "Orange Is the New Black" is so important to the streaming sensation.

Jun 11, 2014 at 6:12PM

Season two of Orange Is the New Black is already here, and season three is on the way. Netflix (NASDAQ:NFLX) ordered the follow-up in early May, a month before the new season debuted here in the U.S. Why didn't Netflix's chief content officer wait to see how viewers responded to the new episodes? What makes this show so special that Netflix had to have more?

Guest host Alison Southwick puts these questions to Fool analysts Nathan Alderman and Tim Beyers in this episode of 1-Up On Wall Street, The Motley Fool's Web show in which we talk about the big-money names behind your favorite movies, toys, video games, comics, and more.

Tim says that Orange Is the New Black wouldn't have worked on a broadcast network because it doesn't have the mass appeal advertisers crave. Instead, Netflix is cultivating a small but passionate following in hopes that word will spread and lead others to subscribe. (The strategy seems to be at least partially working: Illegal downloads jumped tenfold following the season two debut.)

Orange Is The New Black June

Orange Is the New Black will be back for a third season on Netflix. Source: Netflix.

Positive buzz for Orange Is the New Black and similar originals is even more important abroad, where Netflix is rapidly expanding. Good reviews, awards, and positive word of mouth are necessary to convince would-be members that Netflix's library is worth paying for. Sarandos is apparently paying close to $4 million per episode to make sure they see Orange Is the New Black meets their standards.

Nathan agrees, saying the show doesn't pretend to appeal to a wide audience. And yet Netflix can do that because its overall library does appeal to wide audiences, allowing the company to take risks with original programming such as Orange Is the New Black as well as House of Cards and Hemlock Grove.

The strategy has paid off nicely. Netflix's worldwide streaming membership has grown from 26.48 million in the first quarter of 2012, when Lilyhammer debuted, to 48.35 million in the most recent quarter. Almost a clean double, and decent circumstantial evidence that Sarandos is right to want more stories starring the ladies of Litchfield prison.

Now it's your turn. Click the video to watch as Alison puts Nathan and Tim on the spot, and then leave a comment to let us know your take on Orange Is the New Black and Netflix stock. You can also follow us on Twitter for more segments and regular geek news updates!

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Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team and the Motley Fool Supernova Odyssey I mission. He owned shares of Netflix at the time of publication. Check out Tim's web home and portfolio holdings or connect with him on Google+Tumblr, or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.

The Motley Fool recommends and owns shares of 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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Feb 1, 2016 at 4:54PM

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