The new TV: More and more, the net is changing the way we watch television

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Ted Sarandos, the chief content officer of Netflix, says he’s not trying to kill TV.

At this point, though, does anyone believe him?

Cable companies, at least, seem suspicious. Last year, Showtime backed out of offering its TV shows on Netflix’s popular video-streaming service, perhaps realizing that Netflix was stealing potential cable subscribers. Later in 2011, Starz followed suit.

These shifts could have spelled disaster for Netflix, the beginning of the end of its entire business model. By that time, however, the model had already changed.

The HBO-ification of Netflix had begun — and just in time for the under-30 "millennials" who have been cutting the cord with cable TV. More and more college-age television consumers watch TV on their 42-inch (or bigger), HD flat screens, streaming programming through their video game consoles.

A look at shows in the works for Netflix and its rivals, such as YouTube, the online video-delivery service Hulu and even newcomers like Amazon suggests a revolution is under way that will force traditional TV to make a gradual exit from the production of original programming.

In short, "watching TV" is going to take on a whole new meaning.

Within the next 15 months, a huge slate of original drama series, comedies and other shows are scheduled to premiere on Netflix (one show, "Lilyhammer," starring Steven Van Zandt, has already debuted). No amateurish YouTube videos are these — the series include a David Fincher-produced show starring Kevin Spacey, a horror series by director Eli Roth, and the revival of critics’ darling "Arrested Development," among others.

To give you some idea of the quality: "House of Cards," the Fincher series, has a budget of close to $4 million per episode; each episode of the hit series "Mad Men" costs between $2 million and $2.5 million.

Netflix is going after traditional television’s greatest vulnerability with a $3.7 billion budget: high-quality, scripted, serialized dramas. Other websites may follow suit. Already, Hulu, which is backed by NBC Universal, Disney and News Corp., announced it will spend $500 million this year; Google is investing $100 million in original content for YouTube; and upstart Amazon is developing a handful of series, offering a minimum of $55,000 to option episodic TV scripts.

Industry analysts say the strategy is simple: Let the networks have their "reality" shows. NBC can have the Olympics, CBS can have the NFL, and Fox can have "American Idol." But for good, scripted series, viewers will stop paying for cable or satellite TV and turn to the web.

INSTANT GRATIFICATION

It’s starting to happen already.

View full size"Arrested Development," the cult comedy that was recently revived, is scheduled to appear on Netflix.

This summer, it took college student Sampada Nandyala only three weeks to stream the 53 episodes of Fox’s subversive comedy "Arrested Development" on Netflix. The show originally took three years to air.

"Watching it online has immediate gratification," said the 19-year-old from North Brunswick, who estimates she watches about 75 percent of her shows on the web. She’s eagerly anticipating season four on Netflix.

Nandyala is part of a generation that has a personal relationship to television shows. These so-called millennials will plow through two seasons of the PBS hit "Downton Abbey" in a day, or take to the internet to write 10 paragraphs on "Mad Men" — but they’re not watching these shows on TV.

Seventy-four percent of Americans watched video content online at least once a month in 2011, an increase of 4 percent from 2010, according to a Nielsen report — which also said the number of people who watch their home TV set once per month declined by 7 percent. With the cost of cable TV growing — a study this year predicted average pay TV costs will reach $200 by 2020 — the exodus should only grow.

It’s a demographic issue. Online viewing is most prevalent in people under 30. Because of this, there are young people who have never paid for television — and say they never will. Forget the stories of "cord-cutters," those people who decide to give up cable in favor of internet TV — the real problem for the cable industry is "cord-nevers," according to one recent report.

"They are growing up in an internet-based video culture in which the mantras of ‘why would I pay for TV?,’ ‘pay TV is a rip-off’ and, ‘I can find that for free on the web’ are getting louder," wrote TV analyst Stefan Anninger, of financial service group Credit Suisse. "We fear that some of these consumers will find pay TV far less relevant to their lives than do today’s adults." Many, it seems, already do.

LOOKING AHEAD

Sarandos, however, says Netflix rivals cable in only one way: "We compete with other operators for high-quality shows." Otherwise, he said, Netflix plays nice — offering networks a service, in fact.

Take the AMC TV network. Netflix says it helped "Mad Men" and "Breaking Bad" attract the ratings they currently enjoy, acting as a catch-up mechanism for new viewers. Consequently, both shows have improved in ratings each year, a rare feat.

But successes like these could become more scarce. Serialized dramas are expensive to produce and write, and hard to syndicate. In other words, for broadcast TV — which is supported only by advertising revenue — it doesn’t make a lot of sense to actually produce them.

Netflix saw a future where the only people making these types of shows were cable networks using high-quality shows to attract subscribers.

(Consider, for example, that the Emmy nominations this year for Best Drama are all shows on cable.) If this happened, there was a good possibility that cable operators would become increasingly unwilling to sublicense these shows to Netflix. After all, if HBO’s shows are offered through Netflix — which still costs less than $10 a month — why would anyone pay over $100 for a premium cable bill?

From this standpoint, original programming isn’t just a gamble for Netflix. It’s the only way forward.

TICKLISH TOPIC

Joel Stillerman, AMC’s executive vice president of programming, sounds happy. This is a man, after all, who helps run the most critically acclaimed network on television, one that garnered 34 Emmy nominations last month.

But bring up online distribution, and the conversation gets a bit awkward.

View full sizeBryan Cranston (right) and Aaron Paul of AMC's "Breaking Bad," a series that has benefited from instant streaming.

"Our first and foremost concern is to do what’s right by the network," Stillerman said.

Though AMC distributes some of its series online through services like iTunes and Netflix, it sees them mostly as tools to benefit the shows’ performance on cable. "It doesn’t work unless it’s good for everybody," Stillerman said — "it" being the entire network model.

"That’s why the structure is what it is, that’s why it is how it is."

The Big Four broadcast networks — Fox, NBC, CBS and ABC — declined when asked to comment on this story.

If HBO’s critically acclaimed cops-and-gangsters series "The Wire" "had been on in the ’70s and it was on once a week and it was over, what a waste it would have been," said Robert Thompson, a media professor at Syracuse University. "That show is so complex, so good. One of the reasons it happened when it did was we lived in a technological era where you can go back and watch it.

Watching shows week by week has some advantages, of course. "It’s the only medium to watch these shows if you want to talk about it with your friends the next morning," Stillerman said.

But think of, say, "Breaking Bad," which chronicles the life of a mild-mannered teacher who becomes a drug boss. In the second season, when episode titles spelled out the last episode’s final twist ("Seven-thirty-seven down over ABQ"). Are moments like this for the people watching live?

Or are they for viewers who think of the internet as an essential part of the TV experience?

It seems obvious that the best TV now is targeted at the latter group.

As Thompson points out, you’d be hard-pressed to find someone on Netflix watching 13 episodes in a row of the long-running TV series "Law and Order." In this environment, changes are inevitable. "The model of an old TV station where a network sends programming over a cable … it’s a really old-fashioned idea," he said.

CHANGING THE GAME

Online entertainment providers are offering a new idea: What if channels stopped mattering? What if shows were divorced from the network model completely? What if they were completely independent productions, available online and on demand?

That’s what Netflix is trying to do — but it’s not the only one.

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All the big web video outlets — YouTube, Hulu, iTunes, Amazon — are offering or developing original programming (though currently they lack Netflix’s big production values).

Even independent web shows are becoming more common, more successful.

Take Ilana Glazer, a resident of Brooklyn, whose "Broad City" web series (created with fellow comedian Abbi Jacobson) recently became a surprise hit.

The resulting work looks astonishingly professional — the sweeping scenes of New York City streets look right out of "Louie." It’s also very funny. Her show was successful enough to catch the attention of executives at F/X, who produced a pilot only to pass on it. "They liked it, but said it was too young and girly," Glazer said.

Glazer and Jacobson are in talks with another network about the show.

They have high hopes — even as Glazer admits the process has left her jaded. All the while, their web series is still online; still getting new viewers; still growing in cult stature.

THE NEW BOSS

Right now, TV still works for the networks. In the future, TV will work for the viewers. Or, at least, that’s what Sarandos believes will happen at Netflix.

"I’m looking at the value of attracting a very large audience over a very long time as opposed to a very large audience all at once," Sarandos said.

Networks, of course, rely on the latter model, where, he argues, the success of a show is mostly based on the quality of its marketing.

Netflix will work differently. It won’t really market the shows at all — "buying mass media is very expensive and very undependable," Sarandos said.

Instead, it will rely on word-of-mouth, on good reviews, on Netflix’s existing algorithms that make user recommendations.

It may not work. Netflix’s first show, "Lilyhammer," received mediocre reviews; there’s no guarantee its next shows won’t receive the same.

Still, 15 years ago, who would have thought the drama category of the Emmys would be all shows from cable? Who’s to say that shows from the web won’t take over?

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