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In search of cash, studios send old shows back to Netflix

For years, entertainment company executives happily licensed classic movies and television shows to Netflix. Both sides enjoyed the spoils: Netflix received popular content like Friends and Disney’s Moana, which satisfied its ever-growing subscriber base, and it sent bags of cash back to the companies.

But around five years ago, executives realized they were “selling nuclear weapons technology” to a powerful rival, as Disney CEO Robert Iger put it. Studios needed those same beloved movies and shows for the streaming services they were building from scratch, and fueling Netflix’s rise was only hurting them. The content spigots were, in large part, turned off.

Then the harsh realities of streaming began to emerge.

Confronting sizable debt burdens and the fact that most streaming services still don’t make money, studios like Disney and Warner Bros. Discovery have begun to soften their do-not-sell-to-Netflix stances.

The companies are still holding back their most popular content – movies from the Disney-owned Star Wars and Marvel universes and blockbuster original series like HBO’s Game of Thrones aren’t going anywhere – but dozens of other films like Dune and Prometheus and series like Young Sheldon are being sent to the streaming behemoth in return for much-needed cash. And Netflix is once again benefiting.

Netflix co-CEO Ted Sarandos said at an investor conference last week that the “availability to license has opened up a lot more than it was in the past”, arguing that the studios’ earlier decision to hold back content was “unnatural”.

“They’ve always built the studios to license,” he said.

As David Decker, the content sales president for Warner Bros. Discovery, said, “Licensing is becoming in vogue again. It never went away, but there’s more of a willingness to license things again. It generates money, and it gets content viewed and seen.”

In the coming months, Disney will start sending a number of shows from its catalog to Netflix, including This Is Us, How I Met Your Mother, Prison Break and several editions of ESPN’s sports documentary series 30 for 30. White Collar, a Disney-owned show that used to be part of the same lineup as Suits on the USA Network, will also join the service. (Old episodes of Suits have been one of Netflix’s biggest hits this year.) The popular 2000s-era ABC hit Lost, which left Netflix in 2018, is also returning next year.

Jeremy Zimmer, CEO of the United Talent Agency, said the studios’ about-face was a “financial necessity”.

“They said, ‘Wow, in order for us to compete in streaming, it’s costing us billions to create new content to drive subscriptions’,” Zimmer said. “Where are we going to find the money? Oh! We have this stuff that’s been sitting here. We can sell that. It’s a very logical progression.”

Acknowledging the motivation, Dan Cohen, the chief content licensing officer for Paramount, said one of the biggest advantages to licensing for traditional media companies was that “the margins tend to be high”.

Movies and series from other studios have long provided a vital backbone to Netflix, allowing executives to populate the service with established favorites to complement its original series like The Crown, Wednesday and The Diplomat. The company said Tuesday that from January to June, 45% of all viewing on the service came from licensed shows and movies.

While the amount of licensed content on the service is growing after a slowdown, content from other studios never completely went away. According to Netflix, the top 10 most-watched movie list for a one-week period ending December 10 includes four films from Universal Pictures alone. Those movies come to Netflix from a handful of agreements with Universal, one of which was reached in 2021, in which new animated theatrical releases like The Super Mario Bros. go to Netflix as part of a structure that toggles titles between Netflix and Universal’s own streaming service, Peacock.

The streaming giant has a similar agreement from 2021 with Sony Pictures, whereby the studio sends movies like Spider-Man: Across the Spider-Verse and the Jennifer Lawrence comedy No Hard Feelings to Netflix four to six months after their theatrical run is complete.

Studios are also licensing content to services like Amazon, Tubi and Hulu, of which Disney is the majority owner. And, in most cases, Netflix does not have exclusive access to the movies and series it’s getting; many titles will also be available on entertainment company services like Max and Hulu.

Still, the return to Netflix is notable.

When Warner Bros. was beginning to build out its streaming service – now known as Max – in 2020, it held back content from Netflix, which was now a direct and formidable competitor. Netflix has 247 million subscribers worldwide, while Max has less than half that.

David Zaslav tossed that policy aside soon after he took over as CEO of Warner Bros. Discovery in April 2022. Last month, several seasons of “Young Sheldon”, a CBS show that Warner Bros. produces, became available on Netflix. The series quickly found itself on the service’s top 10 most-watched list.

Many Warner Bros. movie titles also began appearing on Netflix recently, including the 2021 blockbuster Dune, and DC films like Man of Steel, Batman v Superman: Dawn of Justice and Wonder Woman.

For years, Netflix had been trying to get its hands on HBO content. Though HBO had a history of licensing several of its shows – Sex and the City to the E! Network, for instance, or The Sopranos to A&E – the company steadfastly refused to license to Netflix.

That abruptly changed several months ago when Netflix bought the rights to stream HBO series like Insecure, Ballers, Six Feet Under, Band of Brothers and The Pacific.

Nearly all of the shows quickly became hits on the streaming service.

“I am comfortable with it, and so far, it seems to be working,” Casey Bloys, HBO’s chair, said at a news media conference last month, adding that any show that has become available on Netflix has also seen an “uptick” in viewing on the Max streaming service.

Netflix credits its large subscriber base and its recommendation algorithm as the reasons that a 22-year-old show like Six Feet Under or a once-forgotten basic cable legal drama like Suits can become a hit on its service.

“That is a reflection of what we do best,” Sarandos said this week.

Still, Netflix does not anticipate returning the favor.

Sarandos said the company doesn’t have a division for licensing original series nor does he see any reason to set one up.

“I do think that we can add tremendous value when we license content,” he said. “I’m not positive that it’s reciprocal”.

(Published 15 December 2023, 15:32 IST)

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