'Cards' pact a bid to differentiate from streaming competitors

Netflix wants a TV series to call its own in order to stand out in an increasingly competitive field.

The online streaming service is looking to make the Kevin Spacey drama “House of Cards” its first effort at having the exclusive first window on a TV series after subsisting on licensed film and TV since its inception.

A source familiar with the negotiations cautioned that Netflix wouldn’t be financing the production or maintaining creative control, responsibilities that remain with “Cards” producer Media Rights Capital. But “Cards” is still a first for Netflix in that it is obtaining exclusive streaming rights to a TV program.

While not quite the full-fledged dive into original programming long awaited from Netflix, it’s a potentially gamechanging gambit considering the company is prepared to commit upfront to two 13-episode seasons.

Michael Pachter, an analyst with Wedbush Securities who follows Netflix, praised the move as a step necessary for the Los Gatos, Calif.-based company to pull even with established pay-TV services and to differentiate itself from a pack of aspiring rivals in the streaming arena.

“If Netflix ever hopes to be close to what HBO offers, they need original content,” he said. “Streaming everything isn’t enough when there’s comparable offerings coming from Amazon.”The drama would star Spacey and be exec produced by David Fincher along with Spacey and his TriggerStreet Prods. partner Dana Brunetti. Fincher is expected to helm the pilot seg for the series, written by Beau Willimon, which had been aggressively shopped to cable buyers (Daily Variety, March 4).

While Netflix is coming off a fourth quarter in which its subscriber base skyrocketed to more than 20 million, its high-flying stock has taken some lumps in recent weeks over concerns about potential rivals. In addition to Amazon Instant Streaming, Netflix saw Facebook pop into its rearview mirror last week, when news of the social network’s deal to distributing Warner Bros.’ “The Dark Knight” via Web streaming sent Netflix stock tumbling almost 6%.

Netflix shares were up 8% at close of trading Tuesday to $217.11; news of the possible “Cards” deal broke after the market closed.

Netflix declined to comment on the particulars of the “Cards” deal. A spokesman would say only: “As opportunities avail themselves for different types of programming, we’ll consider them.”

Netflix may have also calculated that a gamble on “Cards” was acceptable given that streaming licensed programming isn’t a much cheaper option. A deal struck in December to obtain rights to a range of broadcast and cable series from Disney-ABC Television Group cost Netflix an estimated $100 million-$150 million, according to Pachter.

“A year’s worth of Disney content like ‘Lost’ is worth a lot,” said Pachter. “It’s a prudent expenditure given the size of the Disney deal.”

Netflix is essentially ripping pages from the same playbook as pay TV networks like Showtime and Starz, which built their businesses on the back of licensed content before transitioning into original series that have helped burnish their brand identities.

Netflix had sworn off any effort to field original product since shuttering its Red Envelope Entertainment division, which went head to head with established film players in bidding for independent pics for a two-year stretch beginning in 2006.

It’s unclear whether “Cards” represents a one-off experiment or the first in a slate of programs for Netflix.

The move to snap up “House of Cards” may also reflect the fact that there isn’t much more top-tier programming out there for Netflix to grab. Executives including Turner Broadcasting’s Phil Kent had publicly indicated the industry was prepared to play defense against Netflix by protecting streaming rights they might have otherwise sold. Netflix was never able to lay a hand on streaming rights to HBO’s stable of original series going back to “The Sopranos” and “Six Feet Under,” and no wonder given that Time Warner CEO Jeff Bewkes has spoken out several times about neutralizing Netflix.

The company was positioning itself as a supplement to TV’s traditional syndication business, buying up serialized dramas like Warner Bros.’ “Nip/Tuck” that wouldn’t fetch significant coin among stations and cablers who lavished top dollar on longer-running series sporting episodes with stand-alone storylines.

Netflix’s most recent TV deal with CBS didn’t even include previous seasons of its current programming. Instead, the company got nonexclusive rights to older library titles ranging from “Star Trek” to “Cheers.”

While Netflix has been known, for most of its 13-year existence, for its film library, the company has reported that TV fare has driven the growth on the streaming side of its business.Not that Netflix is any slouch in the movie business. Research firm NPD Group released figures Tuesday indicating that Netflix has sewn up a whopping 61% of the digital movie market.

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