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Cash-starved entertainment studios are getting back into the content licensing game, pumping out treasured shows like HBO “Sex and the City” And Disney’s “Grey’s Anatomy” is back on Netflix.
But while studios might benefit from licensing, it could also help streamer become even more dominant.
The reinstatement of licensing is also bringing new scrutiny to long-standing practices as the job becomes more difficult and complex.
Licensing has historically been a mainstay for entertainment companies, except for a period when they hoarded a lot of content when building their own streaming services. It used to be that movies followed a predictable path, running for long periods in theaters and then coming out with pay-per-views, DVD box sets, and so on.
Nowadays, movies spend less time in theaters, if at all. Box set sales evaporated. Then came new streamers and free ad-supported services.
Deals are becoming shorter and more fluid as streamers seek to constantly update their offerings for fickle subscribers. 10-year film contracts are now common for him for three years. A TV Series may be licensed to multiple streamers at the same time.
Content salespeople need to sift through more data to find out how to get the most value out of each title.
“It used to be a lot easier to get a license,” said Mike Pierce, AMC’s vice president of distribution and content sales. Pears oversees the distribution of AMC’s content across its own streamers such as AMC+ and Shutter, as well as his FAST channels across nine platforms, as well as AMC+’s partnerships with Apple TV+ and more. Masu. “It’s not a seller’s market anymore. You don’t just need a salesperson. You need someone with a broader understanding of the industry.”
Why licensing is more than just a “band-aid”
Executives at companies like Warner Bros. Discovery and Paramount are bullish on licensing, which has high margins and generates steady cash.
“It’s a real benefit for the studios and the companies that sell them because they’re going to immediately see billions of dollars in revenue that was foregone over the past few years,” said Jessica Lief Ehrlich, a media analyst at Bank. There is,” he said. America’s.
Licensing may be based on past entertainment strategies, but there’s no reason it should stay there. Wall Street is hungry for profits era of high interest rates.
“It’s the future,” said Dan Cohen, Paramount’s head of content licensing. “Monetizing content throughout the ages has always been important to how we create content and how we pay for it.”
Leif Ehrlich argued that streamers should never have walked away from their licenses in the first place.
“I don’t think this is a Band-Aid,” Lief Ehrlich said of the license. “I think they’ve realized over the last three years that they don’t have to do everything in-house.”
Mitch Metcalf, a former head of research and scheduling at ABC and NBC who now runs media consulting firm Metcalf Entertainment Intelligence (MEI), agrees that licensing is a natural trend in the entertainment industry. Agreed.
“It’s always a mistake to hoard your content and think, ‘I’m going to get as much value out of it as I can and take away the benefits that others can get from it,'” Metcalf said. “That doesn’t make sense. The content just screams to be played in multiple places to increase viewership and revenue.”
“We’re not going to cannibalize the audience,” Metcalf said. “You’ll reach new audiences and generate new revenue.”
License required due to lack of streamers
But every deal comes with potential trade-offs, and there are constant debates about making content more widely available versus what and how much to keep in a company’s own services.
“They were always faced with a Hobson’s choice: do they license it now and take the money and risk not having anything exclusive or distinctive about their service, or do they want future subscriptions?” Do they continue to hold on to the rights in hopes of receiving advertising revenue?” said Meeka Bondi, an entertainment attorney at Perkins Coy.
Licensing helps programs reach new and larger audiences and sell related consumer products. The downside is that making it widely available can dilute its value in the eyes of your audience. Releasing a first-run movie to an ad-supported platform can drive viewers away. And your own streaming business could suffer if people think they can watch your show everywhere.
“If a streaming service were a big hit, in my opinion, they wouldn’t consider licensing more content,” said UBS media analyst John Hodulyk.
While some companies, like Paramount, have not stopped licensing, others question whether the return to licensing is just a short-term solution to revenue problems.
An executive at a major streamer said, “There’s a bit of a sense of despair.”
Companies typically do not host the most brand-defining programming for their services. Paramount has been licensing older seasons of CBS’ procedural “NCIS” to grow its audience, but it’s also forcing viewers to come to Paramount+ to watch the entire series, for example.
Netflix has a license to murder
The biggest risk is that studios will undermine themselves by licensing to the biggest streamers.
Tim Nolen, equity research analyst at Macquarie, said: “The bigger Netflix gets, the more other studios will want to license its content, and the more studios will want to license their content, the more likely they will decide how to use their DTC services accordingly.” “This leaves us with the familiar predicament of whether to grow the stock or not,” Macquarie equity research analyst Tim Nolen wrote. A note after Netflix’s late January earnings report.
On its earnings call, Netflix was enthusiastic about how it’s benefiting from other companies’ renewed licensing appetite.the New engagement report The study, which covered the first half of 2023, found that 45% of viewing came from licensed titles such as “Breaking Bad” and “Suits.”
But don’t expect “Squid Game” to arrive on Hulu anytime soon. Netflix has said it has no interest in releasing its originals to other distributors.
The return to licensing is one of many ways the pivot to streaming profitability has changed the business. Netflix Other entertainment companies that sought full ownership of their content when building streaming services now Becoming increasingly agnostic about it. Streamers are also increasingly considering bundling with other services to attract and retain subscribers.
“As long as they’re smart about it, they don’t have to lose out with it,” Nolen said of licensing. “But at the same time, they’re just feeding the Netflix machine and perhaps making it even more powerful.”
But for now, big entertainment companies don’t have many options.
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