Throughout its history, Netflix (NASDAQ:NFLX) has been disciplined with its business even as it evolved from a DVD-by-mail provider to a streaming service and now a producer of original content. At the same time, the company has resisted diversions that could have added new revenue streams like video games, sports, and commercials.
More than competitors like Time Warner's HBO and Amazon, Netflix has been dedicated to serialized, binge-friendly content like dramas, thrillers, and sitcoms that users can enjoy now or years in the future. The company believes that such content has greater lifetime value than news or sports that generally lose relevance once they air.
However, in a change of course, Netflix now seems poised to make a significant step into news coverage.
Netflix is planning to make a news-magazine similar to 20/20 or 60 Minutes, according to Marketwatch. The source from that report said, "Netflix have spotted a hole in the market for a current affairs TV show encompassing both sides of the political divide and are seeking to fill it."
Interest in news has spiked since the 2016 election with newspaper subscriptions for national papers like The New York Times, The Wall Street Journal, and The Washington Post surging as millions of Americans felt the need to be more informed about the changing political environment. Since the election, New York Times stock has more than doubled. Meanwhile, 60 Minutes is the longest-running primetime show on television and finished in the top ten in Nielsen ratings for a record 23 seasons in a row, though that streak ended in 2000.
News programs also often have the added benefit of being low-cost as they can often be filmed in a single studio with little more than a panel of talking heads commenting on recent events.
Netflix will likely take a different approach to differentiate its offering from existing shows, but the company has already shown interest in the news and talk space. The company first experimented with a Chelsea Handler talk show and has given similar platforms to David Letterman, who's making a six-episode interview program. Similar talk shows from comedians Michelle Wolf, Hassan Minhaj, and Norm McDonald are on the way as well, not to mention the possibility of a collaboration with former President Barack Obama.
The law of diminishing returns
Netflix's increasing attention to news and talk makes sense considering the company is set to spend $8 billion on content this year and produce 700 hours of original entertainment. After all, Netflix will only attract so many new subscribers with crime dramas like Narcos and Ozark, or reboots like Fuller House, Queer Eye, or Arrested Development. American viewers who enjoy such programming are likely Netflix subscribers already so adding more of the same has diminishing returns.
That leaves us with the bigger gaps in the Netflix streaming buffet -- sports, news, and even game shows are nearly non-existent in its library. I speculated before that Netflix could eventually move into sports, and if it seeks lifetime value from similar content, it can focus on major issues like the gun control debate, which has dominated recent news cycles and is likely to do so again.
HBO has had success with such a model, featuring news shows such as Real Time with Bill Maher and Last Week Tonight with John Oliver, as well as boxing and sports content. Amazon has also showed interest in sports by streaming Thursday Night Football.
Netflix has forecast a long-term subscriber base of 60 to 90 million in the U.S. As the company enters the bottom end of that range, it will need to experiment with new kinds of content to attract late adopters. News coverage is a good place to start.