“Arrested Development” couldn’t be less descriptive of the current state of that show or of Netflix, which has revived it.
That’s because the streaming service’s deal to license new episodes of the Emmy-winning comedy sent a strong signal to both consumers and the media business that recent troubles won’t slow its progress.
As Variety first reported Friday, 20th Century Fox Television and Imagine Television awarded Netflix exclusive rights to the first window for “Arrested Development,” which will return in 2013.
Pact may represent Netflix’s most audacious deal since giving Hollywood notice in March that it was ready to jump into theoriginal programming business in a big way when it ordered a 22-episode adaptation of the BBC drama “House of Cards” set to premiere next year.
Bringing back a cult favorite could restore some goodwill toward a company that desperately needs it given the massive decline in market capitalization Netflix has experienced after a pair of disastrous decisions to raise its prices and restructure its business (the latter was reconsidered).
For Netflix, making a bold programming deal right now might have seemed unlikely. Just last week, JPMorgan analyst Douglas Anmuth indicated that a meeting with Netflix left him with the impression the company was done spending on more programming until signs of growth returned after 800,000 subscribers exited in the third quarter.
And CEO Reed Hastings declared on its third-quarter earnings call an intent to retrench in other areas, including a freeze on international expansion beyond the territories already announced. But on the very same call, Hastings made clear Netflix was willing to spend its way out of crisis, estimating content costs for 2012 could more than double over the previous year to $3.3 billion.
There’s been no shortage of bold deals on licensing existing content: Netflix bought its way into the pay-TV window courtesy of DreamWorks Animation and inked a broad output deal for out-of-season series from the CW that could cost the company $1 billion.
However, those deals cemented the impression that Hollywood was putting Netflix in its place. Congloms could cash Hastings’ checks and crow about the incremental revenues on their earnings calls, but only on the back of library content that wouldn’t present a threat to their existing business interests, from cable distribution services like Comcast to pay channels like HBO.
Nevertheless, Netflix needed to buy “Arrested” in order to differentiate its service given that the studios from which it buys content are striking more and more deals for the same content with aspiring rivals in the SVOD category like Amazon and Hulu Plus. No wonder Netflix has been increasingly willing to fork over big bucks even on the syndication front, having sown up exclusive rights to the kind of serialized programming that thrives on its service, like AMC series “Mad Men” and “The Walking Dead.”
But when Netflix snaps up an original program, it solidifies its “frenemy” status. Yes, the company is writing a check to the studio component of a conglom’s business. But such a move raises the question whether Netflix improves its standing among consumers as a purchase option that comes at the expense of existing multichannel services — a prospect even Netflix itself dismisses, perhaps to maintain its fragile detente with its buyers.
Getting more original programming than “Cards” was probably inevitable once Netflix hired former Playtone exec Peter Friedlander last month to spearhead licensing efforts like “Arrested.”
Salvaging a show that comes with a built-in aud — albeit one too small to survive on TV — may be a safer strategy than creating a new property. It’s a strategy Netflix was always expected to follow though isn’t pioneering; DirecTV resurrected FX’s “Damages” earlier this year.
What remains to be seen for “Cards” or “Arrested” is whether Netflix can put the kind of marketing weight behind the series to rejuvenate its service. It’s a challenge many new-media brands from Yahoo to AOL have yet to conquer as they up investments in original programming. YouTube is also facing it again with sudden urgency given its own ambitious content play last month to launch 100 new channels featuring premium content.