Viacom and Netflix to Scale Down SVOD Deal

Streaming service seeks more exclusive content pacts

There was a time when Netflix was the place where you could get a broader breadth of content than anywhere else.

That time is over.

Netflix made its clearest indication yet in its first-quarter earnings announcements Monday that its focus is on getting select content exclusively instead of trying to get as much programming as possible regardless of who else has it.

In a letter to investors preceding its conference call, CEO Reed Hastings signaled Netflix’s intent to not renew its existing deal with Viacom, which covered a range of channels including MTV, Nickelodeon and Comedy Central. But in the same breath, Hastings said Netflix was hoping to hang on to some of the programming.

More Netflix Q1 News: Netflix Surpasses HBO Among U.S. Subscribers

“We are in discussions with them about licensing particular shows but have yet to conclude a deal,” he wrote.

It’s an interesting example of how gently and differently Netflix is treating Viacom in the dissolution of its current deal, as opposed to the more bitter partings of recent years, such as the exits of A&E Networks and Starz. While Netflix may not want to be saddled with everything Viacom currently licenses to them, clearly there’s some parts of the catalogue it wants to continue to offer its subscribers.

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That content is likeliest from Nickelodeon, which may have been a little too aggressive in its licensing arrangement last year. Though Viacom denies Netflix cannibalized ratings for the channel by getting too much of its content to stream, some analysts have prognosticated that the streaming service was the culprit for the audience declines.

But Netflix may need Nickelodeon more than ever given its growing foundation among the kiddie audience. The streaming service even announced a new family-friendly offering that would allow for four separate streams at an additional price of $11.99. Still, Netflix played hard to get in the investor’s letter, saying it was playing the field.

“With all the recently added fresh programming from Disney, Cartoon Network, Hasbro’s The Hub and Dreamworks Animation, we have a great kids offering,” Hastings wrote.

Viacom played coy in its own statement, willing but not committing to a future relationship. “We continue to be in discussion with several parties, including Netflix, on distribution of our content.”

Paying for fewer shows doesn’t necessarily mean Netflix will be spending less; the company will have to pay more for less if it wants exclusivity. ” You’re not going to see any change, not going to see any blip in what we spend or contribution margin, for example, in Q3,” he said.

The Netflix-Viacom deal is estimated to be worth about $100 million, according to Bernstein Research. Signed in May 2011, the pact was a renewal of deals originally struck in 2009 and 2010.

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