Often we get asked what the difference between Netflix and Amazon Prime’s Instant Video is and that difference was exemplified today as it has been announced that Warner Bros. has signed an exclusive deal to bring eight series to Netflix’s popular streaming service. The series include Revolution, Fringe, Longmire, Chuck, The West Wing, Political Animals, 666 Park Avenue and The Following, which premieres later this month on FOX. Warner Bros. also indicated that the door was open to bring more series to the service and that they would still retain all traditional syndication rights as well as the rights to sell more recently aired individual episodes for viewers to catch up on (scroll down for full press release).
Why is this such a big deal and why does it give Netflix the advantage over other streaming services? First, because of the exclusive nature of the contract. Generally speaking, streaming content such as series and films has been provided on a non-exclusive basis for these services. Amazon Prime’s Instant Video, though not horrible, has never had the amount of content available that Netflix has had, but the door was open for them to be able to negotiate for the same content because of the non-exclusive nature that these content deals have traditionally been known for. All bets are off with this deal. These are eight series that Amazon will not have the opportunity to offer on its service (for free, anyway… we would imagine that Amazon will still be able to sell these videos as a third-party) and it looks like they won’t be the last. Hypothetically, this deal could expand to Warner’s entire catalog (save two series, which we’ll get to) which would be devastating for the Amazon service as far as remaining competitive is concerned. Making matters worse, Warner Bros. is just the first to go exclusive with Netflix on such a large scale.
Think this sounds familiar? Well you’re right, it does. This whole situation is eerily reminiscent of the final nail in the coffin of the HD DVD vs. Blu-ray format war that coincidentally happened five years ago (almost to the day) on January 8, 2008 when Warner surprisingly announced during CES that they were abandoning all support for the HD DVD format and going exclusively with Blu-ray (they had supported both formats prior tot he announcement). Once Warner made the announcement, the remaining supporters of the format immediately followed suit and the format was officially dead. Warner has a history of hedging their bets while at the same time being the standard bearer for how the industry will move forward… which is exactly what they’ve done here, as well.
For those of you who weren’t paying attention (why should you… you have us, no?), Warner signed another exclusive deal last month WITH Amazon… but for only two shows, The Closer and Falling Skies with no mention of future content being on the service with the same exclusivity. So, why would Warner do this just three weeks before signing this major exclusive deal with Netflix? Again, they are hedging their bets, just like they did with HD DVD and Blu-ray and what likely happened is that the Amazon deal made Netflix stand up and take notice and get serious about dealing with Warner, which is precisely what Warner wanted.
From Warner’s perspective, they can’t lose. Amazon paid them a decent chunk of change for an exclusive deal for two series (which will no doubt translate to sales of current episodes with Amazon’s streamlined ability to purchase current episodes of their instant video television offerings) and now that they got Netflix’s attention, they got the big deal that they really wanted.
Now, this Netflix exclusive deal is risky and it’s something that other studios have been hesitant to do but now that Warner has done it, it opens the floodgates for other studios to do the same which would be absolutely disastrous for the Amazon service. Again, considering the format wars from five years ago, does this sound familiar? If the other studios follow suit, it would seem highly unlikely that Amazon Prime’s Instant Video service would be able to continue to survive which would make Netflix the only viable game in town. Just think of Amazon Prime’s Instant Video as the HD DVD of 2013 and if the Amazon service were to collapse, Warner could just port that exclusive content deal for The Closer and Falling Skies over to Netflix.
We’ve noted in the past how we think that this new era of revenue generation for content is a positive for the television industry and the consumer for for multiple reasons, especially with subscription video on demand services (SVOD) and other digital formats. The studios and networks are apparently finally starting to figure this out.
From the Netflix press release:
“This unprecedented agreement brings to Netflix members earlier and more exclusively than ever before complete previous seasons of some of the most prominent and successful shows on network and cable television,” said Ted Sarandos, Netflix Chief Content Officer. “Through deals like this, Netflix is making the production economics right for the continued creation of the kind of compelling serialized dramas and thrillers that our members love.”
“SVOD has become an important window for our serialized dramas, allowing viewers a chance to discover a series that before might have been intimidating to tune into mid-run,” said Bruce Rosenblum, President, Warner Bros. Television Group. “We continue to adapt our business models to include SVOD when it makes sense for the long-term value of each show and are thrilled to have Netflix as one of our distribution partners.”
This is precisely why we support content deals on SVOD service providers. It gives consumers the opportunity to catch up on shows they may have not seen before that they wanted to but didn’t want to buy whole seasons of (or rent them a disc at a time) and it benefits the studios and networks by creating new viewers of shows that are currently in production. Since it’s basically free money, it allows the studios more freedom to produce more and better shows that may not have had a chance under the old network commercial advertising-exclusive model and by the same token it can make a series viable that might otherwise have been canceled. It can also be responsible for bringing fan-favorite series back from the dead (see: Arrested Development and The Killing).
The issue that gives us pause, however, is with the exclusive nature of these deals. Just using common sense, it should be assumed that an exclusive content deal is going to cost a provider considerably more than a non-exclusive deal. If those increased costs for content don’t translate to increased subscriptions, the consumer will be left holding the bag with higher subscription rates. Taking this a step further, if as suggested, the floodgates were to open and the other studios are lining up to sign exclusive content agreements with Netflix, that would serve to cripple Amazon and any other provider of SVOD services, again making Netflix the only game in town and that’s NOT good for the consumer.
Monopolies in any industry are not a positive thing but they would be particularly bad in this case. You know how pissed off you are about your cable bill every month? Well, just imagine how obnoxious that bill would be if the cable providers had exclusive content deals with the studios and the networks and there was no competition from DirecTV or Dish Network (and no, you f*ckers at Dish… the fact that we’re mentioning you is not an invitation to SPAM this blog like you like to do). That’s what would happen if Netflix was the only SVOD provider. Netflix would be free to jack up their rates as high as they wanted, unhindered by the restraints of a competitive marketplace.
So, what seems like a relatively innocuous news story regarding Netflix content could have huge ramifications for the television industry and for the SVOD industry. The question that’s up in the air is how will these events unfold and what will it mean to consumers, ultimately?
Via Press Release:
Netflix and Warner Bros. Television Group Sign a 2012-13 Network Slate Deal for Hit Serialized Dramas From Warner Bros. Television
Netflix Will be the Exclusive Online Home of Complete Prior Seasons of Shows from 2012-13 Season Including Revolution (NBC), The Following (Fox), Longmire (A&E), Political Animals (USA) and 666 Park Avenue (ABC)
Agreement Also Includes Hit Serialized Dramas “Chuck,” “Fringe” and “The West Wing”
Jan 7, 2013
BURBANK and BEVERLY HILLS, Calif., Jan. 7, 2013 /PRNewswire/ — Netflix Inc. (Nasdaq: NFLX) and Warner Bros. Television Group today announced a licensing agreement allowing U.S. Netflix members to enjoy complete previous seasons of addictive serialized dramas produced by Warner Bros. for top broadcast and cable networks.
Among the shows coming to Netflix next year will be “Revolution,” a drama for NBC from J.J. Abrams’ Bad Robot Productions set in a post-apocalyptic America which ranks as the #1 new series of the 2012–13 television season; “Political Animals,” the USA Network miniseries with Sigourney Weaver in a Golden Globe– and Screen Actors Guild Award–nominated role as a former First Lady serving as Secretary of State; “Longmire,” A&E’s top-rated Western mystery series based on the novels by best-selling author Craig Johnson; and “666 Park Avenue,” the ABC supernatural thriller starring Terry O’Quinn and Vanessa Williams.
Also coming to Netflix will be the highly anticipated drama “The Following,” starring Kevin Bacon as a former FBI agent on the trail of a serial killer played by James Purefoy and which premieres January 21 on FOX, as well as hit serialized Warner Bros. Television series “Chuck,” “Fringe” and “The West Wing.”
“This unprecedented agreement brings to Netflix members earlier and more exclusively than ever before complete previous seasons of some of the most prominent and successful shows on network and cable television,” said Ted Sarandos, Netflix Chief Content Officer. “Through deals like this, Netflix is making the production economics right for the continued creation of the kind of compelling serialized dramas and thrillers that our members love.”
“SVOD has become an important window for our serialized dramas, allowing viewers a chance to discover a series that before might have been intimidating to tune into mid-run,” said Bruce Rosenblum, President, Warner Bros. Television Group. “We continue to adapt our business models to include SVOD when it makes sense for the long-term value of each show and are thrilled to have Netflix as one of our distribution partners.”
The agreement covers a current slate of eight Warner Bros. shows as well as potential future shows. Under the agreement, the shows can also be made available via traditional syndication windows, electronic sell-through services and on a catch-up basis for recently aired episodes.
About Netflix
Netflix is the world’s leading Internet television network with more than 30 million members in 40 countries enjoying more than one billion hours of TV shows and movies per month, including original series. For one low monthly price, Netflix members can watch as much as they want, anytime, anywhere, on nearly any Internet-connected screen. Members can play, pause and resume watching, all without commercials or commitments. Learn more about how Netflix (NASDAQ: NFLX) is pioneering Internet television at www.netflix.com or follow Netflix on Facebook and Twitter.
About Warner Bros. Television Group
The Warner Bros. Television Group (WBTVG) oversees and grows the entire portfolio of Warner Bros.’ television businesses, including worldwide production, traditional and digital distribution, and broadcasting. WBTVG is rapidly developing new business models for the evolving television landscape, including subscription-video-on-demand, broadband, wireless and home video exploitation of its vast library. WBTVG is the industry’s top supplier of series, supplying an industry-leading 25 series (including one co-production) to the five broadcast networks for the 2012–13 season, with 23 from Warner Bros. Television, two from Warner Horizon Television and at least two series on each of the five broadcast networks. This marks the 21st time in the last 26 years that WBTVG has been the number one supplier of series to broadcasters, and the Studio is the only supplier to have at least one show on each of the five broadcast networks as well as a new series on each of the networks. The Group is also producing nearly a dozen scripted series for cable and pay television networks and nine alternative series for broadcast and cable, while Telepictures Productions is producing seven first-run strips and Warner Bros. Animation has eight animated series. All in all, the Group delivers nearly 60 series to the marketplace.
SOURCE Netflix Inc.
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