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3 Higher Ed Lessons from Netflix's "House of Cards"
February 6, 2013 - 9:00pm

House of Cards, a Netflix streaming only drama starring Kevin Spacey, may have a few things to teach us in higher ed:

1.  Long Term Value Derives from Talent:  

Why is Netflix spending a reported $100 million on two seasons (26 episodes) for this show.  Netflix does not advertise, so all revenues come from retaining existing subscribers or signing up new customers.   Wouldn't Netflix be better off spending that $100 million licensing content?

These are good questions, and it will be extremely interesting how the business case for House of Cards is evaluated in a few years.  

My take is that Netflix is making a smart move.  Netflix understands that anyone can license content, and that acting as a pure distribution platform limits the value add (and hence the pricing power) of its service. 

I will spend my money to stream movies and TV from the provider with the lowest costs, as long as the competition has a service that works well on all my devices.  And how much I pay for streaming content will be limited, as there exists so much free or low-cost content available on the web.   

If, however, I become a big fan of House of Cards, then Netflix's service increases in value.  The original programming does not need to justify my full subscription, it only needs to justify it at the margin.  I'll pay for Netflix's streaming service plus original programming (if the programming is excellent), but I may not pay for either one separately.

The key is that I'm willing to pay for quality.  And in entertainment, as well as education, producing a quality product is very expensive.   Perhaps really excellent knowledge producing passionate educators do not make as much money as Kevin Spacey or David Fincher (the director - made Social Network, Fight Club, etc.), but they are still expensive.  

I predict that the value, and wages, of our best knowledge producing faculty will continue to increase.  Faculty who not only create research, but that leverage their research in both their teaching and in impacting the larger public conversation.  

The brand of a university is determined in part by the quality of its platform (be it the beauty of its campus or the quality of its campus amenities or the robustness and flexibility of its online learning platforms), and partly by the quality of its faculty.   Tuition payers will want both platform and talent.

2.  Experimentation is Critical:

Netflix is releasing all 13 episodes at once. Lots of the coverage around House of Cards has been about the "binge viewing" phenomenon.  Locking oneself in for the weekend and watching every episode of The Wire or Breaking Bad, and possibly House of Cards.   

Personally, I think releasing all the episodes together is a great idea.   Anyone willing to stare at a screen for 13 hours to watch an entire season is going to talk about the show to friends.   Netflix's goal is to get House of Cards into the larger conversation, and an all at once release strategy is a great way to do just that.

What I take away from Netflix's decision to release House of Cards all at once is that we in higher ed should also be more willing to experiment.  We seldom need to make $100 million dollar bets on new programs, new delivery methods, and new partnerships.  We can afford to try out some new things and see what works and what does not.  

Success in a global and digital economy requires a higher degree of risk taking than we might be comfortable with.  Too bad.   

Netflix is taking a calculated risk in paying top dollar for top talent, and releasing the shows in an unorthodox manner.   What calculated risks are we taking?

3.  Platform Investments Are Necessary but Not Sufficient:

Netflix is running House of Cards on top of a well developed technical platform. The company has invested heavily in both its streaming capacity and in ensuring that the service can be accessed by a wide variety of devices.  

The challenges and expense of building out such a platform should not be minimized.  Netflix's licensing of content for its platform remains at the core of its business model.  Even if House of Cards is wildly successful it is very doubtful that original programming will ever account for more than a small portion of Netflix's spending.

The lesson, I think, is that we cannot trade-off investments in our platforms (campuses, technology infrastructure, etc.) with investments in our talent. 

Students, parents, employers (basically anyone that pays for tuition) have a great many options where to invest their tuition dollars - and these options are increasing.   Cost cutting can only get you so far, as at some point taking out costs also takes out investments in the platforms and people that determine an institution's value.   

Can you dispute, demolish or improve this argument?

Do you plan to watch House of Cards?

 

 

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