For those of us climbing to the top of the food chain, there can be no mercy. There is but one rule: hunt or be hunted.”

So says Frank Underwood in Netflix’s award-winning adaptation of Michael Dobbs’s political novel, House of Cards, starring Kevin Spacey and Robin Wright.

It is unlikely the streaming service – or internet TV channel as Netflix describes itself – would adopt such a tagline. But how, in such a short space
of time, has it shaken up the content creation landscape to the extent that one major broadcaster reckons the service is its most feared rival for talent? And what are its plans for the UK?

Orange is the New Black - an exclusive Netflix hit (Credit: Netflix)

Reports suggest Netflix was prepared to outbid both the BBC and ITV to commission The Crown, an epic 20-part, £100m drama inspired by Peter Morgan’s successful West End play, The Audience, which starred Helen Mirren as the Queen.

Produced by Left Bank, this would be the VoD company’s first original production to be made in the UK.

After House of Cards picked up awards at the Golden Globes and Emmys (it is returning for a third season) and with prison show Orange Is the New Black hitting headlines, Netflix is marked firmly on the content creation map and is coming under more scrutiny from interested rivals.

The company describes itself as “the world’s leading internet television network”. Netflix was launched in 1997 by CEO and co-founder Reed Hastings and Marc Randolph, initially as a DVD-by-post company.

Profits for the first quarter of 2014 for the California-based company were £32m; it has 48 million subscribers in more than 40 countries.

Its model is simple. Subscribers pay monthly – in the UK the cost recently increased by a pound to £6.99 a month – and for that they can watch as many shows as they want (both original and those acquired from other broadcasters) anytime and on almost any screen that is connected to the internet.

There are no adverts, and viewers can pause and resume watching later.

Netflix does not publish ratings – saying it knows how many viewers it has and who is watching what, but does not need to share that information widely as it is not beholden to the traditional advertising model.

“We are open to a lot of different things, we wouldn’t necessarily rule anything out.”

According to Richard Broughton, Broadband Director of research company IHS Technology, by the end of 2014 Netflix – which launched in Britain in 2012 – will be on course to have well over 3 million “paying consumers” in the UK.

He also says Netflix is on track to break even by the end of the year.

“It has done better than anticipated, bolstered by its local catalogue,” says Broughton.

“In the UK we are starting to see Netflix compete with broadcast TV.”

In Denmark the traditional broadcasters suffered an 8% decline in viewership between 2012 and 2013. Their own research attributes a third of this to the rise of online video.

For Netflix, however, the danger is competing against rivals who offer bundled services, such as Virgin.

Broughton points out that sometimes it is “important to have a converged bundle,” and that, due to Netflix’s pricing structure, some consumers will pay for a month or two to get a big show and then perhaps cancel.

Hence the importance of headline-hitting content to keep viewers hooked. Unfortunately, there are no figures available that prove whether new content attracts new subscribers or keeps existing ones.

However, IHS does have numbers for Netflix’s total costs, which “reached $2bn at the end of last year – excluding marketing costs – of which a large proportion can be expected to be paid-for content.”

The IHS report goes on: “Of content costs, the vast majority (over 90%) are costs for licensing deals, that is, acquired movies and series. Netflix has confirmed that the proportion of original costs can be expected to grow this year.”

But how much is it planning to spend on its “must-see” original content?

This year Netflix announced it would raise $400m which, IHS says, “would, among other things, fund its original production budgets. Given the 11 original shows (of various levels of expense) on its slate for 2014, it would be easy to approach this figure on production spend alone.

“Of those 11 there are five dramas, including House of Cards season 2 and the as-yet-untitled Kessler-Zelman thriller, which represent a big commitment to the most cost-intensive type of production.

“While no single show’s budget has ever been confirmed, it is clear from the production quality and attached talent that they are dealing in cable network-type prices – that is, several million dollars per episode.”

Interestingly, in the UK Netflix does not see its greatest rival as Amazon Prime Instant Video (formerly LoveFilm). Rather, it is the incumbent pay-TV operators such as Sky, with its on-demand box-sets and latest movies.

As Broughton’s colleague, Principal Analyst for TV Programming Intelligence Tim Westcott, points out: “Netflix might possibly carve out a wider range of US movie rights.”

He compares the streaming service with US companies such as HBO or AMC, and says it has done a good job of “becoming synonymous with the new way of programming”, such as releasing episodes all at once – allowing viewers to ‘binge-view’.”

Westcott also points out that the success of Netflix and its marketing means that, although hit show Breaking Bad was in fact commissioned by US cable network AMC, many people, particularly UK viewers, think of it as a Netflix show.

Netflix Vice-President of Communications for Europe Joris Evers says: “We are happy with how people have welcomed the use of Netflix in the UK.

“It has become part of everyday conversation. Breaking Bad became a really big phenomenon and we were part of that. We are very pleased with how Netflix’s original series and other exclusive programming has gone.”

Although the company had invested in Lilyhammer with NRK in Norway, House of Cards was, as Evers says, “Our first big series. It was a calculated bet. We are very happy with its success. It established us much more as a channel.”

He notes that Netflix spends about $3bn on content and acquisitions and around 10% of that is spent on original content – but that is a “growing percentage over time”.

Evers says that in the UK the company will be adding more Netflix series in addition to other exclusive content. Moreover, with launches in six more countries, including Germany, Europe will soon be the company’s biggest market in terms of broadband consumer households – more than in North or South America.

There are also likely to be more co-productions between Netflix and British production companies and global players such as MTV.

The search for new content has become more urgent following the ending of a licence with Channel 4; this has led to the removal of older shows such as Peep Show from Netflix so they can only be seen on 4oD.

Evers adds: “We are open to a lot of different things, we wouldn’t necessarily rule anything out.”

One senior television executive explains that the benefits Netflix offers – more creative freedom and relatively quick access to a global audience – have made it more attractive to the writers of some of the UK’s biggest dramas.

In other words, British broadcasters are vying with Netflix and Amazon for these writers’ talents as they look for dramas with big stories and plots.

I reel off a list to Evers of some of the most famous writers, from Broadchurch’s Chris Chibnall to Line of Duty’s Jed Mercurio. But, fittingly, the executive demurs along the lines of Francis Urquhart’s most famous catchphrase in the original House of Cards: “You may say that, I couldn’t possibly comment.”