Ken Auletta: The networks, increasingly in coming years, they’re going to be threatened by people skipping their ads and therefore reducing some of their--a good part--of their revenue. And people not wanting to watch things that a network scheduler says you have to wait until 10 o’clock on Thursday night to watch this show. They’re not going to have the patience for that anymore, because they’re being taught by vehicles, like platforms, like Netflix, not to have to wait anymore. So what can the networks do that’s original? They can do sports which is very expensive, and networks can afford Reed Hastings, and Netflix can’t afford that. But a broadcast network can.
So they can do sports. They can do live special events. Look at the Academy Awards; a billion people around the world watch that. That’s extraordinary and you get huge ad rates for that. They can do reality shows, you know. They can do live events. Again something that some of these newer platforms--digital platforms can’t do. And that increasingly is the view of many people of what will happen to networks. The networks will do fewer series and more live events.
The question then is who does the series? Series are pretty expensive to do. Netflix does, you know, series but only two percent of their budget are originals. So where will the money come from to do--to support the kind of expensive programming? That is a question. Now in HBO which is the most profitable of all these on-demand networks, HBO did 1.8 billion dollar’s worth of profits last year. That’s huge. A lot more than Netflix did. And unlike Netflix they own all of their own shows. You watch the Sopranos. You watch Game of Thrones. That’s owned by HBO. So forever they can repeat those shows and they receive the money because they own it.
Netflix doesn’t even own House of Cards. They rent it. So for a couple of years, several years, you’ll be able to watch House of Cards on Netflix. But then the owners of the studio that owns "House of Cards" could decide to sell it to someone else. And so that’s a vulnerability that a company like Netflix has and a company like HBO doesn’t have.
One of the advantages that Netflix has--they have some disadvantages and we’ve talked about them. They don’t own their own programming for instance. And to expand overseas it’s very expensive and so their profit margins are very small compared, to say, HBO's profit margins. On the other hand, a writer comes to them and they say to the writer or director, they say we’ll give you a commitment. We’ll give you a two year commitment and you won’t have to test it.
And, by the way, instead of writing a show that’s 40 or 42 minutes long, which is, after you subtract the commercials for an hour drama--that’s what network drama is. Yours will be a whole hour. So dear writer, what writer wouldn’t like to write a longer series, a series where he or she doesn’t have to constantly recap and build up for the commercial break and then build down and then build up for another commercial break. But, in fact, can write as if they’re writing chapters of a book that people could read consecutively. So I can build characters, the writer says. I can actually create the complexity that you see in a novel that you often don’t see in an hour drama.
Directed/Produced by Jonathan Fowler, Elizabeth Rodd, and Dillon Fitton