Netflix (NASDAQ:NFLX) took a risk when it began producing original television content. It was a calculated risk, sure. But with its first original series carrying a price tag of $100 million for 26 episodes and several of the series to follow also paying a premium to draw in major Hollywood talent, there was still a gamble involved.
The gamble turned out well for Netflix. Not only have most of its original programs been well-received, but the $100 million price tag for House of Cards seemed well justified when the streaming program made history by winning three Emmy awards. Netflix has effectively established itself not only as a streaming service, but also as a source of quality original content. So where does the company have to go from here?
Let's go to the movies
It looks like Netflix is going to start releasing original movies alongside its original series content. The company will debut an award-winning documentary titled The Square as an exclusive on the service in the coming months, and additional documentaries will follow. Given that documentaries are one of the most popular categories for content providers such as HBO, it makes sense that Netflix would use the category as a starting point for exclusive film content as well.
Netflix may not be satisfied with simply acting as a distribution point, however. Along with talk of documentary releases, Chief Content Officer Ted Sarandos indicated during the company's recent third quarter earnings call that the company was open to other film types as well. Even that might not be enough to satisfy the company's ambitions, however.
Speaking to Film Independent, Sarandos also stated "What we're trying to do for TV, the model should extend pretty nicely to movies. Meaning, why not premiere movies on Netflix, the same day they're opening in theaters? And not little movies — there's a lot of ways, and lot of people to do that [already]. Why not big movies? Why not follow the consumers' desire to watch things when they want?"
Brand new competition, or more of the same?
If the statements by Sarandos can be taken at face value, Netflix might be looking to become a first-run distributor for theatrical content as well as a distribution option. This would allow the company to offer consumers a choice in their entertainment options: they could go to the local movie theater for the full cinema experience, or watch select movies from the comfort of home on opening night.
Of course, not everyone would be pleased with that idea. Theater owners such as Regal Entertainment Group could see Netflix as a threat to its operations. Regal and other theater owners have successfully fought proposals that would allow new movies to be screened at home before, such as when Comcast's Universal Studios shelved a $60-per-disc trial of same-day home releases back in 2011.
This wouldn't be the first time that Netflix has run afoul of Regal and other cinema owners, however. Regal's success depends on consumers wanting to come to theaters to see movies, something that is increasingly threatened by people who are willing to just wait and "Netflix" films later. If Netflix tries to enter the cinema space, Regal could push back by refusing to screen the films in its theaters or pressuring other studios to maintain its screening exclusivity (which is the same general tactic that killed Universal's trial.)
Netflix has been smart about its projects so far, choosing different genres and finding relevant talent to make shows that will bring in viewers. It should come as little surprise, then, that the company would strike a deal with Disney when it came time to add superheroes to the Netflix lineup. Disney, of course, owns Marvel Studios, creator of the No. 3 top-grossing film of all time (The Avengers) and the top-grossing movie of 2013 (Iron Man 3.)
Disney and Netflix have announced a deal consisting of no fewer than four series based on Marvel properties, culminating in a mini-series that ties the four together. Given that Disney's Marvel Studios productions take place within a shared cinematic universe, this could also open the door for crossovers with ABC's Agents of S.H.I.E.L.D. series or even big-screen appearances for the Netflix-exclusive characters if they prove popular.
There have been times in the past when it seemed that Netflix might be running out of tricks to draw in new subscribers. With the quality of its original programming and the deals it has made to secure more popular content, its growth seems to be on more solid ground now. It remains to be seen whether the company will be able to successfully make a push into theaters, but even if it remains tethered to the TV, it's likely that original content will still be a major draw.
John Casteele has no position in any stocks mentioned. The Motley Fool recommends Netflix and Walt Disney. The Motley Fool owns shares of Netflix and Walt Disney. 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.