Distributors Retreat to Syndication to Avoid Financial Streaming Iceberg

Distributors Retreat to Syndication to Avoid Financial Streaming Iceberg

Once hailed as a beacon of limitless potential, the streaming landscape is now on a collision course with stark financial realities as content costs soar and subscriber growth stagnates.

The prodigious investments required by major media companies to launch new streaming services while simultaneously pulling valuable content from dozens of global distributors have impacted all key players, resulting in substantial declines in market value over the past two years.

For companies like Lionsgate, AMC Networks, and Warner Bros. Discovery (WBD), share prices plummeted by 61%, 58%, and 55%, respectively, illustrating the need to return to tried-and-true revenue strategies. What was old is new again as media companies revert to a lucrative syndication model resembling cable television.

Revenue Dynamics in the Streaming Era: A Financial Perspective

The advent of streaming platforms has fundamentally reshaped the revenue landscape of the entertainment industry, ushering in a new era of monetization dynamics. Traditional linear television relied on a multitude of revenue streams, including off-network syndication, DVD sales, video-on-demand, and various home entertainment categories to capitalize on popular titles. However, the rise of streaming services has severely disrupted this age-old model, with originals on the top streaming platforms predominantly exclusive, thereby eliminating traditional monetization windows across markets and competing services.

In 2012, Netflix and Disney struck a landmark film licensing deal estimated to generate up to $350 million in annual revenue. Fast forward to 2022, and Disney faced a significant revenue setback, losing out on over $1 billion in one quarter alone following the termination of various licensing agreements, including after pulling the remaining Marvel titles from Netflix and other negotiations after deciding to silo its content on Disney+.

Similarly, Netflix made strategic moves in the licensing space, securing a lucrative Pay-One deal with Sony Pictures Animation in 2014. In 2021, Netflix doubled down on its licensing strategy, signing a post-PVOD five-year agreement with Sony estimated at $1 billion. Concurrently, Sony entered into a Pay-Two window film licensing deal with Disney, further underscoring the value of content licensing in the streaming era.

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

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

Financial disclosures from Sony Pictures highlight the significant impact of licensing revenues on overall financial performance. In the last fiscal year, the company recorded a staggering 175% increase in operating income, driven by higher licensing revenues from digital streaming services and catalog titles. Wisely, Sony recognized its limitations during the streaming craze of the last five years and forwent launching a stand-alone streaming service.

While industry giants like Sony, Paramount Global, and NBCUniversal continue to capitalize on licensing opportunities, Netflix faces inherent challenges due to its platform-first priority and limited long-term library.

While streaming platforms offer unparalleled reach and potential, they come at a significant cost and challenge the supply and demand dynamics of filmed entertainment.

Worldwide Film & Television Distribution Intelligence

Get unparalleled access to market intelligence reports that draw on financial data and insights from dozens of content distribution deals worldwide between key industry participants, including — Distributors, Producers, MPVDs, and Streaming Exhibitors.

Film and Series distribution rates and terms deriving from dozens of agreements for rights to transmit films and episodic television via PayTV and SVOD.

Choose flexible options for single-user PDF downloads.

Licensing Terms & Included Programs:

Pay-1 & SVOD Rate Cards for Motion Pictures and Series Exhibited Worldwide in Multiple Availability Windows

  • Motion Pictures: Pay-1, First Run, Second Window Features, Recent Library Features (Tiers AAA,A,B,C), Library Features (Tiers AAA,A,B,C), Current and Premium Made-For-TV Films and Direct-To-Video Films, covering many license periods over the last decade
  • Episodic TV: Current, Premium, Premium Catalog (1HR & 1/2HR), Catalog Series (1HR & 1/2HR), and Catalog Miniseries + Case Studies on Current Mega Hit, Catalog Mega Hit, and Premium Catalog, covering many licensing terms from 2012-2024
  • Because most-favored-nation rates operate in practice, the rates and terms apply to a diverse range of content and distributors worldwide in multiple availability windows.

Strategic Pivot: Netflix Explores Licensing Opportunities and More

Strategic licensing agreements offer avenues for revenue diversification and growth, enabling companies to capitalize on the demand for premium content across digital platforms. Effective monetization strategies will be essential for sustaining profitability and driving long-term success in the fragmented digital age as streaming platforms evolve.

With $3 billion in free cash flow last year, Netflix is exploring new revenue-generating strategies beyond its traditional content acquisition model, including advertising, live sports, and gaming.

Moreover, amidst mounting financial pressures, for the first time, Netflix is contemplating a strategic pivot towards selective licensing its original content to third parties. While historically committed to exclusive platform offerings, the company now grapples with the prospect of external content licensing—a paradigm shift laden with significant business and financial considerations. Strategic partnerships offer the potential to tap into new markets and diversify revenue streams, but they risk turning the industry leader into just another streaming service easily cancellable.

Beyond Netflix, companies like Warner Bros. Discovery, NBCUniversal, and Disney possess a distinct advantage in their extensive content libraries. These entities can leverage their diverse portfolios through exclusive licensing and strategic windowing, maximizing revenue potential across multiple platforms. These companies can extract maximum value from their content assets by capitalizing on demand share and negotiating favorable deals.

FilmTake Away: Shifting Streaming Strategies Amid Bleak Financial Realities

As major players like Disney, Warner Bros. Discovery (WBD), Netflix, Amazon, and other US content producers and programmers collectively invested a high-watermark of $140 billion in content in 2022, the result was fleeing investors as interest rates exploded, content costs soared, and subscribers became inundated the increasing monthly fees in an ever-fragmented landscape.

Against a backdrop of investor skepticism and looming recession concerns, streaming services are compelled to explore alternative avenues for profitability, leaving plenty of opportunities for independent producers, distributors, and aggregators of film and television content.