May 25, 2013 in Business

Series strategy helps Netflix’s fortunes rise

Michael Liedtke Associated Press
 
Associated Press photo

Actors Will Arnett, left, and Jason Bateman, from the revived series “Arrested Development,” hold chocolate-covered frozen bananas at the Bluth’s Original Frozen Banana stand in the Times Square section of New York on May 16, 2013. Season four of the series will premiere Sunday on Netflix.
(Full-size photo)

Streaming-friendly

In the new episodes, viewers will get updates on the characters, one by one. Although that was done because of difficulties booking all the actors at once, it ended up allowing for a nontraditional viewing experience, one more fitting on Netflix than a traditional network. Viewers, for instance, will be able to pause an episode on one character to watch the same scene from another perspective.

SAN FRANCISCO – Netflix is hoping this weekend’s release of the resurrected TV series “Arrested Development” will draw more subscribers to its Internet video service.

The award-winning show about the dysfunctional Bluth family returns Sunday, seven years after Fox canceled the series. The revival coincides with Netflix’s own resounding comeback from a customer backlash over price increases and shareholders’ worries about rising expenses. The adversity had raised doubts about the company’s management and future.

Now, Netflix is winning back subscribers and investors with a bold attempt to establish its $8-per-month service as a home entertainment powerhouse that rivals the broadcast television networks and premium cable channels such as HBO.

“Arrested Development,” a comedy that won six Emmy awards during a critically acclaimed three-year run, is the third exclusive series from Netflix Inc. this year. It’s part of Netflix’s effort to add more original programming to a selection that consists primarily of old TV series and movies.

With 29.2 million U.S. subscribers – far more than the 21.9 million TV subscribers that leading cable provider Comcast Corp. has – Netflix has already reshaped home entertainment.

The service is encouraging more people to forgo cable and satellite TV service and rely on Netflix to watch popular TV series a year or more after they originally were shown. Netflix also is empowering viewers to watch an entire season of a TV series in a matter of days instead of months.

Netflix CEO Reed Hastings isn’t done disrupting things yet. He is spending more than $2 billion annually, including about $200 million to finance original programming that can be watched on traditional computers, smartphones, tablets, video game consoles and Internet-connected TVs.

By expanding its library of content, Netflix is hoping people will decide to spend their idle time on its Internet video service rather than play video games, fraternize on Facebook, surf TV or watch a DVD. (Netflix started out as a DVD-by-mail rental service, but it is phasing that out in favor of Internet streaming.)

“We want our members to choose Netflix in these moments of truth,” Hastings wrote in a recent essay.

By bringing back “Arrested Development” this weekend, Netflix is also trying to prove that people still want quality entertainment when the weather is nicer and the days are longer. That runs counter to the philosophy of broadcast TV networks, which for decades have started the new seasons of their top TV series in September and stopped showing new episodes just before Memorial Day.

BTIG Research analyst Rich Greenfield believes the scarcity of compelling choices on broadcast TV at this time of year is bound to help Netflix draw more viewers to “Arrested Development.” In a recent analysis posted on BTIG’s blog, Greenfield predicted that the total number of hours watched on Netflix in June might even surpass the Fox broadcast network for the first time.

If that were to happen, it would be an ironic twist, given that Fox canceled “Arrested Development” in 2006 amid the protest of the series’ fervent fans. “Arrested Development” had low ratings during its run, but the viewers who did watch loved it. Others discovered the show later on DVD or Internet streaming, both of which have been available through Netflix.

The first three seasons of “Arrested Development” were watched by so many subscribers that Netflix knew another season would be well-received by its existing audience and likely lure new subscribers, too.

Like Netflix’s previous series, all 15 new episodes of “Arrested Development” will be released simultaneously to allow viewers to watch the show however they want. “Arrested Development” is scheduled to be available at 12:01 a.m. Sunday, meaning Netflix subscribers could conceivably devour the entire season before grilling on Memorial Day afternoon.

Netflix’s departure from TV’s traditional one-episode-per-week strategy has been well received by subscribers who have watched the service’s previous forays into original programming.

February’s release of “House of Cards,” a political drama that stars Oscar-winning actor Kevin Spacey, helped Netflix add 2 million more U.S. subscribers during the first three months of the year, more than analysts anticipated.

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