Because if Moonves follows through on the deal he indicated could happen on his company's fourth-quarter earnings call Tuesday, he may very well be creating a monster.
The prospect of CBS producing for Netflix has all the makings of a cool horror flick: A genius gone mad with delight over new revenues hitting his bottom line commits a tragic overreach, unwittingly unleashing a destructive force that harms his business.
The reason a CBS-bred series on Netflix is so scary is that in success such a production could not only elevate a corporate frenemy but damage CBS Corp.-owned Showtime in the process. And yes, even the mighty broadcast network itself isn't entirely protected.
There has been a delicate dance between Netflix and the entertainment industry over the past 12 months in which the studios have been careful about enriching themselves with deals that supply the streaming service with their content, but not so much so that they empower a colossus capable of harming them.
And CBS knows this dynamic better than anyone: The company has been admirably aggressive about licensing its library content in a way Wall Street has come to appreciate. CBS has also known when to withdraw from Netflix as well, removing all but older seasons of Showtime original programming last March–just weeks after the streaming service announced its first original production, "House of Cards."
Which makes it somewhat difficult to follow the logic that yanking in-season episodes of "Dexter" is a savvy defensive move but handing over an original series that could very well give Netflix a "Dexter" of its own is AOK. As HBO has shown with "The Sopranos," all it takes is one show to deliver a quantum leap for a programming service.
And yet Moonves made clear in his reference to a possible deal on CBS Corp.'s 4Q call, that he sees this in terms of volume: "Until they are doing 22 hours a week of premium content, we do not look at them as a competitor, but rather another place to put our content."
"22 hours" is a reference to the potent primetime schedule he's assembled at CBS. Putting aside the fact that he seems to have forgotten about Showtime, from which a subscriber could easily shift his monthly fee over to Netflix if it becomes a preferable option, is the mighty Eye even safe? Think back to Netflix's own most recent earnings call, when CEO Reed Hastings noted that his company is streaming 2 billion hours over the course of the fourth quarter–enough to make Netflix the 15th highest rated TV network, according to calculations by BTIG Research analyst Richard Greenfield.
Now that may still not be enough to match a juggernaut like the CBS comedy "Big Bang Theory," but isn't helping even incremental competition a bad thing in a world of multiplying options? Like all networks these days, CBS already has to compete with itself in the form of DVR-recorded versions of its own programming, why open up a whole new front?
Moonves is open to the idea for the same reason the studio arm of any broadcaster is open to producing series for its rivals to buy: The reward of participating in the profits of a hit even on an outside network outweighs any competitive drawback. That's why Universal Television, the studio sister to NBC, has recommitted itself to producing series for others than the Peacock, having already reaped the benefits of examples like "House," which is winding down a lucrative run over at Fox.
But with "House," at worst NBC is conceding a time slot to a competitor. With Netflix, CBS could accelerate the rise of a whole new tier of competition.
If CBS' studio sister, CBS Television Studios, is the entity to which Moonves is alluding to regarding producing for Netflix, it would be odd considering that division has been very conservative about producing for any company in which it doesn't have at least partial ownership. And it's not like CBS Corp. has struck the bottom of the barrel in terms of catalog content it could sell; Moonves has said the company has barely scratched that surface.
It's probably no coincidence that CBS is the only content company talking about producing originals for Netflix. Three of its fellow conglomerates, News Corp., Disney and NBCUniversal, have a vested interest in making sure its own entry in the subscription VOD space, Hulu Plus, doesn't see its competition get too powerful. And Time Warner is probably even lesser inclined to produce for Netflix given its been so protective of crown jewel asset HBO that it recently stopped even selling DVDs of the pay cabler's content to Netflix at a discounted rate.
Maybe CBS is the victim of its own success here. The network is so strong in primetime right now that its studio is probably capable of producing more new product than the Eye might actually need. But if the company isn't careful, it could be greenlighting a whole new horror show off the air, too.