Like the music industry, the future of the television business model is a popular speculative point among academics and journalists alike. The convergence of television and the internet, along with video-on-demand services like Netflix, have seen similarly pejorative proclamations of the death of television (THE GUARDIAN, 2011). As a medium in a “state of flux” (S. S. WILDMAN, 2012) television could look to their music counterparts for advice on how to manage and even capitalise on convergence culture. Keeping up with the rapid pace of technological change may be one of the biggest challenges facing media companies hoping to avoid a similar fate to record labels post-Napster.

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As a company who’s entire business exists online, Netflix is arguably better positioned to manage this change than traditional cable networks. The company’s Chief Content Officer echoed this sentiment by boldly claiming their goal was to become HBO faster than HBO can become Netflix (HASS, 2013). Founded in 1997 by American software executives Reed Hastings and Marc Randolph, the company now has than 36 million subscribers in 40 countries (NETFLIX, 2013a). Originally a mail-out DVD rental service, Netflix revolutionised its highly successful business model in 2007 (the same year the company delivered its one billionth DVD (THE VICTORIA ADVOCATE, 2007)) by introducing video-on-demand streaming. Reed Hastings explained the move was an attempt to avoid the trap of “single-model companies” (HELFT, 2007) and protect the company from technological obsolescence. The success of this move is reflected in Netflix’ valuation rising from $1.6B ($1.7AUD) to $12.70B ($13.26B AUD) (NASDAQ, 2013), against falling worldwide DVD sales every year since 2007 (ORDEN, 2013).

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However, Netflix’s transition from DVD giant to streaming giant wasn’t without problems. Following the announcement they would split the DVD-by-mail business into a separate company, Netflix announced plans to raise subscription prices. This had a disastrous effect, with 800,000 subscribers cancelling their membership and the share price falling from $298 ($312 AUD) to $63 ($66) in less than five months (NASDAQ, 2013). CEO Reed Hastings said the change, which he admitted was too rapid for customers, was born out of the fear Netflix "wouldn't make the leap from success in DVDs to success in streaming" (HASTINGS, 2011).

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The launch of original programming in 2012 marks the latest milestone for Netflix. So far the streaming service has released nine original programs including House of Cards as well as the high-profile fourth season of Arrested Development, with four more scheduled for release by late 2014. Although at this stage the shift to original content represents only a small percentage of the company’s annual content budget and total viewing hours, that will soon change. Having recently announced plans to spend up to 15 percent of it’s annual licensing budget on original content (up from five percent), Netflix intends to double its original programming library by the end of 2014 (SARANDOS, 2013).

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The premiere of House of Cards saw Netflix receive “enormous media and social buzz”, a fact that according to the company reinforced their brand (NETFLIX, 2013b). Although not everyone saw it this way. Following the release of Arrested Development there was much speculation in the media around the effect of the show’s mixed critical reception. A widely syndicated Associated Press article dubiously interpreted a six percent drop in Netflix’s share price as investors reacting to critics’ mixed reviews (ASSOCIATED PRESS, 2013). As Netflix have not yet released streaming statistics for the show, this premature and specious argument overestimates the importance of critical reception as a metric for success. The AP article fails to mention possible explanations including contemporaneous rumours of Time-Warner's imminent purchase of rival streaming-service Hulu or ongoing licensing issues, specifically the recent loss of media conglomerate Viacom’s content. Although quantitative data, such as ratings and viewing trends, for Arrested Development and House of Cards are yet to be released, the company’ latest quarterly results suggest their investment into original content has paid off. Netflix claimed House of Cards provided a "halo effect", drawing new paid subscribers who stayed after the free trial period. In a letter to shareholders they revealed less than 8,000 cancelled out of more than three million free-trial periods in the quarter (NETFLIX, 2013b).