Netflix Money Is “Pure Heroin” To TV Studios

Okay, so Breaking Bad was about meth, but it's not THAT far removed from the heroin analogy.

Okay, so Breaking Bad is about meth, but it’s not THAT far removed from the heroin analogy.

Ever wonder why a TV channel’s website or on-demand options often only include the few most recently aired shows? It’s because the network doesn’t usually own the show, but instead pays a studio for the rights to air it, and networks haven’t been willing to ante up for the extra money to stream entire seasons as they air. Now some broadcasters realize they’re losing out and want access to all those shows, but Netflix is making it difficult.

Vulture has a really interesting, in-depth piece about this battle that boils down to this: Netflix has been throwing around cash like it’s going out of style to get streaming rights to full seasons of TV shows. Some broadcasters want to negotiate similar deals, but Netflix is telling the studios that it won’t pay anywhere near as much for shows if the broadcasters are able to get full-season streaming rights.

The argument on Netflix’s side is that one of the reasons subscribers pay $8/month for the service is its large library of currently airing shows. While the episodes on Netflix are usually from previously aired seasons, shows like Breaking Bad and Vampire Diaries have benefited hugely from curious viewers catching up on the show via Netflix and then watching new episodes on TV. If TV viewers suddenly have unfettered access to a show’s full backlist of episodes, it could make some Netflix subscribers question why they are paying for the service.

Meanwhile, the studios that produce the shows have gotten hooked on the big-money deals made with Netflix, with some popular shows commanding licensing fees of up to $750,000 per episode.

“It’s put pure heroin into the veins of studio executives,” one industry insider explains to Vulture about Netflix money, adding that the streaming service is becoming preferred to traditional syndication deals for certain shows.

The broadcasters argue that they are sinking a ton of money into these TV shows (upwards of 60% of production costs) and taking all the risk, but they are unable to use those old episodes to help catch viewers up on a show. While that may not be a big problem for sitcoms, serialized dramas often require the user to start from the beginning (or constantly bug their friends by asking, “And who is she?” and “Why did he do that?”)

“Unless you have the whole season up, you’re not really letting viewers come into a series,” explains that industry insider.

It’s also about the additional ad revenue. Yes, Breaking Bad’s ratings improved each season because more people were catching up between seasons on Netflix, but AMC didn’t get any ad money from the millions of times those shows were streamed online. If it had been able to stream all those previous seasons online, it could insert un-skippable ads into each show and charge top-dollar.

It seems inevitable that broadcasters will eventually have much larger streaming archives of the shows they air. This will likely lead to Netflix paying less for these rights, but the service may still have quite a bit of value to consumers who don’t want to pay for cable or don’t want to be barraged by ads during their watching binges.