APIn March, we reported that Spotify is out pitching potential partners on a plan to offer a streaming video service with premium, original content.
Now we know why.
Netflix reported earnings last night, and they have investors going gaga.
The company's stock is up 25%!
Many credit the "House of Cards thing" for Netflix's success.
Briefly, here is the business case for a show like House of Cards on Netflix or Game of Thrones on HBO:
- The show costs a lot of money to produce.
- But that's OK, because the money goes toward making the product good and bringing in star actors and star directors.
- The quality and the star power are generate buzz, which will cause people to sign up for subscriptions for Netflix or HBO.
- (Think about the people who started paying for Showtime this year for "Homeland.")
- Those new subscribers are too lazy to quit Netflix, HBO, or Spotify after they finish watching the show they signed up for. So they stay members for 10 years, paying $120/year or more.
- (Yesterday, Netflix CEO Reed Hastings said only 8,000 people quit Netflix after watching all of House of Cards. Netflix has 30 million subscribers.)
- Over a long time, millions of people paying $120/year more than recoups the cost of making the high quality show.
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