The Deal That Could Dim Netflix’s Emmy Afterglow
With three Emmy statuettes now on its mantle, this should be a carefree time at Netflix. Were it only that simple.
A Wall Street Journal story hit last Friday suggesting pay-TV providers intend to compete for rights to the catalog TV series that Netflix and other subscription VOD services have exploited to establish themselves as destinations for binge-viewing. 21st Century Fox and Comcast are said to be on the verge of one deal in particular that could steer entire runs of select series to the cable operator, which wants to expand its VOD beyond the typical handful of most recent episodes to the territory Netflix has made its specialty.
This is a significant development for Netflix. The prospect of pay-TV distributors beginning to lure sizable amounts of premium content away from Netflix in the coming years poses an existential threat to the streaming service. Netflix will have to maintain a tricky balance between the catalog supply that has long been its core offering and the original content the company has done an admirable job of layering on top of that.
Think yanking the tablecloth out from under the silverware…but in slow motion.
That leaves a twofold question. Can Netflix outbid the distributors for the rights to enough library content to stay viable in the marketplace? Or is that an outmoded definition of viability given library content may not matter as much to Netflix in the near future given its Emmy-winning success in original programming?
If plans to ramp up at least 20 series per year beginning in 2014 struck you as a tad ambitious, the Comcast-Fox news may give good reason for the overreach: Netflix needs to become more reliant on original programming quicker than anyone might have realized because the licensed library content on which the service built its popularity could erode.
Keep in mind this ebb and flow isn’t necessarily inconsistent with the Netflix long game; the point has always been to play the HBO playbook, which means leading with original programming. But where this gets tricky for Netflix is that it will have to evolve from licensing library to funding original content much faster than HBO, doing in a matter of years what the Time Warner-owned channel had the luxury of doing over decades.
The pressure to wean off licensed library content likely isn’t a predicament that snuck up on Netflix, which surely began hedging its bets on original programming last year when it made an expensive deal to snap up Disney film titles beginning in 2016.
But it’s quite possible that as more and more originals are made available, Netflix could sustain itself with just a few key library deals like the Disney one. The company has already repeatedly asserted that it will be more selective about those library deals as its audience data provides a more nuanced understanding of what content is actually worth. So there’s no longer a need to boil the ocean, which was essentially Netflix’s catalog strategy for its first few years in the streaming business.
A pact like the Disney one needs to be kept in mind should a Fox-Comcast deal be the first of many that removes big chunks of licensed content from Netflix. The sheer tonnage of the exiting content could trigger mistaken assumptions that the company will consequently be thrown for a loss, as it did last year when Netflix let a deal expire on over 800 hours from A&E Networks.