Netflix Seals Deal for Original Series

By NICK WINGFIELD And SAM SCHECHNER

Netflix Inc. cut a deal to debut a new television series by Oscar-nominated director David Fincher on its Internet streaming service, in an agreement that departs dramatically from how traditional television programming is made and aired.

Under the deal with independent studio Media Rights Capital, Netflix said "House of Cards"—a political drama to be executive produced by Mr. Fincher and star Kevin Spacey—will begin playing exclusively on Netflix's Internet streaming service late next year.

Netflix executives committed to a minimum of 26 episodes—two full seasons—of the series even before a test episode of the show was made, something that's highly unusual in the TV business. In general, TV networks don't commit to a show without a test episode, and usually reserve the right to cancel production of the series after a certain number of episodes if it is unpopular.

In an interview, Netflix Chief Content Officer Ted Sarandos said the Los Gatos, Calif., company will pay a portion of the production costs of the series, with Media Rights Capital financing the rest and retaining DVD, television syndication and international distribution rights. Mr. Sarandos declined to say how much Netflix is paying as part of the agreement, though he said Netflix's fee for the show is capped, protecting the company if the series goes over budget.

"What they brought to me was a perfect storm of material and talent that made it a very safe bet," he said. "If it turns out to be a mediocre show, this wouldn't be a great deal, but it won't be a disaster."

For Netflix, the hope is that "House of Cards" helps it add to the more than 20 million people already subscribing to its Internet movie service. The move to start licensing original shows for its streaming service thrusts Netflix into more direct competition with premium-cable networks like Time Warner Inc.'s HBO, CBS Corp.'s Showtime, and Liberty Media Corp.'s Starz, which also run pricey original series alongside Hollywood movies.

HBO, Showtime and Starz declined to comment.

Netlix's plans to air "House of Cards"—based on a book and BBC miniseries of the same name—are also unusual. Rather than make a single new episode of the show available at a time, as in traditional broadcasting, Mr. Sarandos said he's toying with making four or more episodes available at once so Netflix subscribers can immerse themselves more deeply in the series at one time.

"There's no reason for us to be tied to traditional release models," he said.

Netflix's move into original programming mirrors the evolution of cable television channels. At the dawn of cable in the 1980s, most networks offered little original content, relying as Netflix does on older "library" TV shows and movies that cost less to license. But as cable became more crowded, both premium and basic cable networks began to spend more to license original programs that they could run exclusively in order to differentiate themselves from competitors.

Original content brings significant risks for Netflix, which typically pays only for video that has already shown its value in movie theaters or DVD sales. By contrast, new TV shows can sometimes fail spectacularly, even with the most experienced of creators at the helm.

Netflix's fast growth has sparked anxiety among some media executives and investors that a new generation of viewers may choose to get their video online rather than by buying more expensive cable or satellite subscriptions. Many TV network owners have been reluctant to license their newer content to Netflix, as they look to protect their existing businesses.

But Media Rights Capital's co-CEO Asif Satchu said his company is comfortable with the risks of taking one of its biggest properties to a company that has no experience in marketing or licensing original shows.

"We took a leap," he said, "but we took a leap on one series. It's a measured step."

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