Streaming Reimagined: In a surprising twist, once-reluctant studios are reopening their content pipelines to Netflix, signaling a shift in the dynamics of the streaming industry. For years, major studios held back popular shows and movies from the streaming giant, fearing they were empowering a formidable competitor. However, facing substantial debts and the harsh financial realities of streaming platforms struggling to turn profits, studios like Disney and Warner Bros. Discovery are embracing a strategy of licensing content to Netflix for a much-needed infusion of cash.
This strategic about-face is a response to the financial pressure of creating new and exclusive content to compete in the streaming landscape, which comes at a hefty cost. By licensing existing content, studios can generate revenue while also ensuring that their content is viewed and appreciated by a broader audience.
Disney, for example, plans to send several shows from its catalog to Netflix, including popular titles like “This Is Us,” “How I Met Your Mother,” and ESPN’s “30 for 30.” Even the ABC hit “Lost,” which left Netflix in 2018, is set to make a return. This move is driven by the financial necessity of finding funds to fuel their streaming endeavors, as traditional studios recognize the lucrative nature of licensing deals.
This shift doesn’t mean studios are giving away their crown jewels. Major franchises like Star Wars and Marvel, along with blockbuster original series like “Game of Thrones,” are still kept off Netflix. However, the deal includes dozens of other films and series, such as “Dune” and “Prometheus,” benefiting both parties.
Ted Sarandos, co-CEO of Netflix, acknowledges the changing landscape, highlighting that the availability to license has increased. He argues that the earlier decision by studios to withhold content was unnatural, considering studios have traditionally built their business models around licensing.
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While Netflix’s original series and movies have been a significant draw, licensed content has always played a crucial role in the platform’s success. In the first half of the year, 45% of all viewing on Netflix came from licensed shows and movies. This renewed focus on licensing is a pragmatic response by studios, recognizing the high profit margins associated with it.
Studios are also striking licensing deals with other streaming services like Amazon, Tubi, and Hulu. However, the return of content to Netflix is notable, considering the platform’s earlier position as a direct and formidable competitor to the studios’ streaming services.
For Netflix, this resurgence of licensed content is a testament to its large subscriber base and sophisticated recommendation algorithm. Despite the return of shows like “Young Sheldon” and movies like “Dune,” Netflix doesn’t foresee reciprocating by licensing its original series. Ted Sarandos believes that Netflix can add tremendous value through content licensing but questions the need for reciprocal arrangements.
As streaming continues to evolve, this strategic shift in licensing dynamics signifies a delicate balance between traditional studios and streaming giants seeking financial sustainability and audience expansion.
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