A literary agent who works with Netflix says each episode of House of Cards costs at least $3.8 million to produce.
Peter Micelli, an agent with CAA TV was part of a panel discussion at the UCLA Entertainment Symposium yesterday that presented to an audience of 500 entertainment lawyers. His team was responsible fore selling House of Cards , Hemlock Grove , and Orange is the New Black to Netflix.
Hemlock Grove is being produced for around $4 million an episode, and Orange is the New Black is just under that at around $3.8 million.
To put those numbers in perspective, an episode of Mad Men costs about $3 to produce, and is easily recouped through licensing, advertising, and online streaming.
“They’re huge budgets shows,” Micelli said about Netflix. “ They’re doing things in a huge way .”
Netflix has a unique advantage as it seeks to compete with traditional cable networks like HBO, AMC, and FX. Netflix knows precisely how many of its customers stream each show. They know if we start watching a show and give up on it, and they know when we watch episodes back-to-back for hours on end.
Netflix CEO Reed Hastings said, “you can figure out what to produce and who to merchandise it to… Selective merchandising is very profitable .”
They learned from data about how their customers use the service that lots of us like to “ binge view ” episodes of a TV series hours at a time like a really long movie. When Netlix released it’s first original series, House of Cards , a lot of customers watched all 13 episodes of the whole first season within the first couple of days.
Netflix is making a bet, that seems to be paying off. By investing big in high-quality original programing, existing customers are converted into an army of volunteer marketers who spread the word through social media.
“It’s our most viewed content today, but it’s not the center of the company.” Hastings said. “It may be the center of the PR for a while. That’s OK.”