Why Is Netflix, Inc. Betting On ’90s “Friends” Series?

Netflix, Inc. (NASDAQ:NFLX) is all set to buy the rights of the TV series Friends, one of the most popular shows in TV history. Almost everybody has watched at least a few episodes of this cult show. So why is Netflix paying for this older show? A report from Motley Fool by Demitrios Kalogeropoulos answers the question.

Netflix segmentation of shows

According to Kalogeropoulos, the online streaming service company has segregated the TV content into three  categories.

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The first category is of the original series such as House of Cards, Orange is the New Black and BoJack Horseman. These are all hit series of Netflix and generate large viewership along with expanding the user base of the company.

The next content strategy of the company is season-after-series, and shows that come under this category are The Walking Dead, Breaking Bad and The New Girl. The company takes a hit series, when it’s next season is under-production and airs full previous season just before the launch of a new one. This is a win-win situation for Netflix as well as for the broadcaster’s as it generates an array of streaming hours and expands the audience base for the current and future seasons, says the report.

The content segment is a very important part of Netflix’s business model. In a shareholder letter last year, the company stated, “While our original series get most of the headlines, a bigger percentage of overall Netflix viewing is generated by our exclusive complete season-after series.”

Friends can draw user engagement

The third category consists of series that are not original and not currently in production. Netflix selects shows that were a huge success and have already reached a saturation point as far as their broadcasting is concerned. “Whereas originals and season-after series are home-run shots, these are more like base hits,” says the report. Netflix aims at maintaining a substantial library and paying a price for these shows that can be justified in relation to the number of viewer hours generated.

Friends fits in the third category and will help Netflix to generate viewer engagement. Netflix will make all 10 seasons of the series available starting on January 1st. There is a possibility that the show garners a larger chunk of viewers than expected just like The Simpsons.

“The resulting binge-watching tsunami should have a lot of us feeling nostalgic for the ’90s — while we stream HD video into our flat-screen TVs,” says the author.