Unveiling Netflix’s New Content Strategy: Opening Doors to External Licensing

April 12, 2024 FilmTake Streaming Comments Off on Unveiling Netflix’s New Content Strategy: Opening Doors to External Licensing

Netflix has shifted its focus from prioritizing the production of original content to third-party content licensing once more.

A decade ago, Netflix boasted 11,000 titles in its US library, solidifying its position as Hollywood’s primary acquirer. This figure has since diminished to roughly 6,000 titles as major media competitors opt to retain their libraries for proprietary streaming platforms. However, studios are currently reversing this strategy in the face of harsh financial realities.

With nearly $7 billion in free cash flow (up 330% from 2022), Netflix is poised to explore fresh revenue-generating avenues, including licensing its content to competitors for the first time.

Netflix is Posed to License Content Externally

As an exclusive platform, Netflix’s management currently opposes licensing content externally, but the writing is on the wall for embracing external licensing of its films and shows.

Financially speaking, navigating content licensing in multiple windows is critical for generating revenue from Netflix’s originals. That said, not all Netflix originals may be monetized in a new window, and some popular originals not outright owned by Netflix cannot be licensed. The company acknowledges that licensing isn’t currently considered a strategy, although it has previously denied claims regarding advertising before embracing ads. Furthermore, moving a Netflix original to another platform runs the risk of devaluing the content and brand, which could impact consumer perception.

At a more granular level, Netflix can begin licensing original series that have already concluded. In such cases, Netflix has already generated the majority of revenue from these titles, which might no longer significantly contribute to customer acquisition and retention. Also, early seasons of ongoing, long-running shows can be strategically licensed in non-exclusive deals to generate revenue and increase awareness and demand for upcoming seasons on Netflix.

As the major studios have realized, spending $100-200 million on films destined exclusively for crowded streaming services isn’t financially viable in the long run.

Traditional film release windows consist of several stages, including theatrical release, electronic sell-through (EST), DVD/VOD rental, Pay-1, Network, and Pay Two, offering several avenues for monetization over a film’s lifetime. This traditional windowing model highlights the revenue potential many streaming platforms forego by indefinitely retaining original films exclusively in-house, even after reaching peak customer acquisition and engagement value.

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Broadcasters and FAST Services Stand Out as Potential Licensing Partners

Netflix has previously entertained the idea of syndicating its older original series to broadcast networks, with reports emerging last year. This strategy persists as a consideration, evidenced by discussions held with Paramount Global and NBCUniversal about licensing original series and films to external outlets, including linear networks. Broadcasters and linear networks remain valuable for streaming services, serving as promotional platforms for crucial content.

Indeed, Netflix possesses a notable collection of one-season series that can be repurposed, given that the company has mostly exhausted their value (provided they are wholly owned). As many companies in the industry shift focus to FAST services, these platforms offer an expanding opportunity to enhance content monetization for content creators.

Licensing International is a Logical First Step

Globally, Netflix’s originals garner strong demand, allowing for potential licensing to third-party partners overseas without compromising its competitiveness in the US market.

In the highly competitive North American market, Netflix can prioritize licensing titles to broadcast, cable, and FASTs, posing less direct competition than other SVOD platforms.

Beyond this saturated market, Netflix can explore partnerships with smaller rivals. For instance, SkyShowtime, a joint venture between Comcast and Paramount Global, is expanding across Europe and recently acquired two dozen HBO Max European originals. Additionally, non-English titles, which often struggle to gain traction in North America, can be licensed to region-specific streaming services.

Netflix and every other distributor should consider filling specific market demands. Globally, the top three genres by audience demand were drama (39%), animation (14%), and comedy (13%). The leading subgenres were Japanese animation (9%), crime dramas (8%), and sitcoms (5%). Concentrating on these popular genres could enhance the company’s licensing potential.

Major Content Licensing Deals in the U.S. (Updated)

Film StudioFilm SlatePay-One WindowPay-Two Window, etc.
DisneyDisneyDisney+N/A
Disney20th Century Fox /
Searchlight		Disney+ / Hulu /
HBO / Max		N/A
A24A24HBO / Max / CinemaxN/A
NeonNeonHuluN/A
LionsgateLionsgate FilmsStarzN/A
LionsgateSummitStarzN/A
MGMMGMMGM+Amazon / Paramount+
ParamountParamountParamount+MGM+
SonySony PicturesNetflixAll Disney Platforms
UniversalAnimated FilmsPeacock / NetflixNetflix
UniversalLive-Action FilmsPeacock / AmazonStarz
Warner Bros.Warner Bros.HBO / MaxN/A

FilmTake Away: Netflix Has Several Novel Paths to Boost Revenue

As the leading streaming service with the most extensive library of originals, Netflix is well-positioned to license content externally. However, this strategy can also benefit smaller players like Max and Paramount+. While exclusivity remains crucial for differentiation, strategic approaches to licensing can unlock cash flow to invest in new original content.

Amidst industry-wide prioritization of in-house growth, reopening multiple monetization windows can boost revenues and audience awareness, prolonging content value. The industry’s current trajectory is recreating the syndication system of linear television in the SVOD.

However, prioritizing its streaming service remains paramount for Netflix. While external licensing could expand its library, it must weigh the cost against its content offerings.

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