Netflix Changes Strategy, Launches Original Content to Compete with HBO

Episode 951 (01:58)

Leo is back from the Super Bowl, and he says football is a lot like the tech world. High risk, high reward plays in football can result in a touchdown. Much like an app, such as Instagram. Then there's companies that grind out a running game, and switch directions - pivoting when there's trouble up ahead. Leo says that's Netflix.

Netflix separated DVD by mail from streaming and charged a price for both. It caused a lot of trouble and Reed Hastings was forced to apologize. Leo says it was all part of the plan, as the news brought headlines of Netflix streaming service. As a result, Netflix went from 20 million subscribers to 33 million world wide. Netflix now makes more money than HBO. The movie industry is choking, giving them less than stellar content. So now it's time for phase two. Netflix is creating original content with Kevin Spacey's company Trigger Street and House of Cards, plus they're bringing back Arrested Development. Suddenly, Hastings strategy is to turn Netflix into the next HBO, with five new shows per year.

This article from the Atlantic has more on the Economics of Netflix' new strategy.