Netflix set to make more shows of its own

Kevin Spacey as Democrat Frank Underwood in House of Cards. Photo / Supplied

Netflix plans to make its Originals more original by shooting several new shows itself, instead of relying on outside studios.

The world's largest paid video streaming service is considering filming Chelsea Handler's new talk show at a space it leased last month in Hollywood, said a person familiar with the situation, who asked not to be named because the plans aren't public. It's also the studio behind a pair of comedy series announced earlier this year - Flaked, starring Will Arnett, and Lady Dynamite, featuring Maria Bamford, the person said.

The move exposes Netflix to new financial risks - hiring the talent, renting equipment and overseeing budgets - but could also speed up its drive to offer a uniform service around the world. While the company controls global rights to many of the shows it brands as Netflix Originals, some of its biggest hits are owned by others: Lions Gate Entertainment Corp. produces Orange Is the New Black, and Walt Disney Co.'s Marvel unit created Daredevil. Netflix's licenses will lapse at some point, making those series available to cable networks and online rivals.

"Obviously there's benefits if we produce a show," Chief Financial Officer David Wells said on the company's most recent earnings call in July. "If there's great reach across the world and we can distribute that show and it will be consumed and enjoyed across the world. So there's tremendous benefits there in terms of just the scale of distributing it."

Ownership also reduces the reliance on major media companies like 21st Century Fox Inc. and Time Warner Inc. that are reevaluating their relationship with Netflix. Consumers are watching less broadcast and cable TV, and more online, undermining the most important source of revenue for networks whose in-house production arms previously viewed sales of new shows and reruns to Netflix as purely additive.

Fox will change the way it licenses shows to online subscription services, Chief Executive Officer James Murdoch said at an investor conference last week. Murdoch also indicated he sees a bigger role for Netflix rival Hulu, which Fox co-owns with Disney and Comcast Corp.'s NBCUniversal.

"That may mean that we sell less to one and more to another over time," Murdoch said. "Our thinking is evolving."

Netflix, based in Los Gatos, California, has been moving deeper into show business ever since it expanded from DVDs-by- mail to create one of the first Web-based subscription streaming services in 2007.

Like its biggest rival, Time Warner's HBO, it started by licensing TV reruns and movies for home viewing after they left theaters. Its first high-profile Netflix Original, House of Cards, made its debut in 2013. That show is owned by Media Rights Capital, the company that made Ted and 22 Jump Street.

Netflix has produced documentaries and comedy specials in- house, and did the same with a couple of less-expensive shows this year, Wet Hot American Summer: First Day of Camp, and Club de Cuervos. It's also buying feature films for theatrical and online release.

The new space in Hollywood expands Netflix's ability to produce shows soup-to-nuts. It has leased 200,000 square feet of office and pre-production space in a tower at Sunset Bronson Studios, with the possibility of adding another 120,000 square feet for sound stages, according to Victor Coleman, chairman and chief executive officer of Hudson Pacific Properties Inc., which owns the property. Netflix will start designing the space next year and move in early in 2017.

Even if that location isn't used, the company will be the studio for Handler's talk show, according to the person with knowledge of the plans. Netflix poached the caustic comedian from E!, and has released one of her comedy specials.

Netflix still plans to keep working with studios for its larger series, like Daredevil, Orange Is the New Black and Bloodline, a partnership with Sony Pictures Television. Netflix helps to develop and produce those programs, while the studios oversee physical production.

While it's too soon to say how far studios will pull back - they have committed to providing Netflix with billions of dollars worth of programming already - the shift could have an impact on what's available.

Fox has already made deals that strengthened Hulu and Amazon.com Inc., a newer rival for Netflix in the streaming business. Fox licensed its biggest new hit, Empire, to Hulu, while its cable channel FX made a deal with Amazon for The Americans.

FX CEO John Landgraf has criticized Netflix for treating other people's shows like their own, potentially leading viewers to believe that an FX hit like Sons of Anarchy is a Netflix show. He also said he wished he never made a deal with Netflix.

Still, Landgraf admits he has had to sell rights to Netflix in order to reward the talent responsible for the show. Many other studios have arrived at similar conclusions - the checks are too big to completely ignore.

Last week, Netflix licensed How to Get Away With Murder from Disney's ABC Studios. And it's negotiating two more deals for shows from other studios, according to a person familiar with Netflix's plans.