Netflix could lose A&E, History hit series

Friday deadline looms for 40 skeins, minis

Netflix and A+E Networks are engaged in a “Storage Wars” of their own making.

The unscripted series could be among many ratings hits from the owner of channels A&E and History that will vacate the streaming giant’s servers by Friday, when their licenses expire, unless a new deal is reached.

In addition to “Storage Wars,” some of the most popular and longest-running cable series of recent years could be leaving Netflix, including History’s “Ice Road Truckers,” “Pawn Stars” and “American Pickers” and A&E’s “Dog the Bounty Hunter,” “Gene Simmons: Family Jewels,” “Hoarders” and “Intervention.”

Sources familiar with talks be-tween the two companies offer strikingly different interpretations of the state of the negotiations. Netflix is said to have already considered this a done deal, having decided to part with some 40 series and miniseries totaling approximately 800 hours of content because the viewership didn’t justify the licensing cost. There is still 200-300 more hours of content from A&E and History that it intends to keep on the service.

“Content comes into and out of license periods almost daily,” said Ted Sarandos, chief content officer at Netflix, in a statement relayed via a company spokesman, who otherwise declined comment.

“We renew programming that proves successful and generates viewing among our members and we expire those programs that do not,” the statement read. “While we do not comment on our deals and partnerships, expect some of the A&E and History programming to drop and some to remain on Netflix.”

But other sources suggest the negotiations are not over and that talks will resume later this week that could change which, if any, content stays or goes before the Friday deadline. A sticking point is said to be Netflix’s insistence on getting exclusivity for some or all of the programming, which A+E Networks may not be willing to grant. An A+E Networks spokesman declined commen t.

Seeing Starz again

The departure of a major supplier of TV content from Netflix could mean the most significant content drain for the Los Gatos, Calif.-based company since the exit of Starz, which in February licensed digital rights to top films from Disney and Sony. But just what impact either A+E Networks or Starz would have on Netflix is a mystery considering it keeps its audience measurement data a closely held secret.

The loss of Netflix could be damaging to A+E Networks, which would drop the digital service that probably provides more off-air consumption of its content than any other sources, not to mention what could be tens of millions of dollars in lost revenue. Netflix has demonstrated an ability to drive tune-in back to new seasons of TV series by providing viewers a catch-up cache of episodes from previous seasons.

However, A+E Networks may very well have other options to make up for the loss of eyeballs and dollars.

The dissolution of the Netflix-A+E Networks partnership may have less to do with the programming in question than it does alternatives in the rapidly evolving world of digital distribution. Netflix is facing increasing competition from rival subscription VOD services like Amazon Prime and Hulu Plus, which could be wooing A+E Networks with greater coin, or there’s pay TV distributors like Time Warner Cable and DirecTV looking to advance their TV Everywhere initiatives.

Comcast in both camps

Comcast is an example of a company situated in both camps. The nation’s largest cable operator wants to secure as much content for Xfinity, its own digital repository for TV Everywhere, and Streampix, a SVOD service structured just like Netflix. Comcast had an ownership stake in A&E Networks right up until earlier this summer, when it sold its stake to the two other owners, Disney and Hearst Corp., for over $3 billion.

A+E Networks also owns other channels including Lifetime, but none of them will be as deeply affected as A&E and History. The two networks are responsible for 19 of the top 50 series on cable among adults 25-54. However, TV ratings don’t necessarily correlate to viewership levels on Netflix.

How important A+E Networks is to Netflix is not easy to determine. The content that comes under these deals is entirely unscripted and doesn’t have episodic continuity whereas Netflix’s most valuable content is scripted and serialized. Unscripted content tends not to command anywhere near the price of scripted in syndication. However, these networks’ best unscripted series are often scheduled on air in marathon formats, which suggests they may have greater value than run-of-the-mill unscripted content conducive to the “binge”-pattern consumption common among Netflix subs.

Netflix execs have long claimed that its content offerings are diversified enough that no one program or set of programs drives so significant a share of audience that it can’t live without, which may be a convenient truth for reducing leverage of its content partners at the negotiation table. The company scrutinizes viewership data to determine exactly how much each content deal is worth to them and may have arrived at a valuation not to A+E Networks’ liking.

Whether the A+E Networks content that will stay on the service does better with Netflix auds or not is an open question. But the content unaffected by the Friday deadline is either older titles like “Biography” and “Cold Case Files” (not facing license expiration until June 2013) or are among a small percentage of content that A+E Networks doesn’t own outright, like new-ish scripted series “The Glades.”

Carving out exclusivity

As for Netflix’s other SVOD-specific rivals, A&E and History series are not available on Hulu Plus or Amazon Prime. But that doesn’t mean Netflix pays for exclusivity, which it may be pressured to do now at a time when it is difficult given that the company’s profits are being directed more toward international expansion than covering its mounting content costs. Losing nonessential content may ease the pain of those costs, too.

Netflix may be seeking to carve out exclusivity on a portion of the library that performs best on the service. But A+E Networks may not opt to make the hits available separately from the rest of the programming, bundling them together to leverage the value of its top content.

Unscripted content occasionally merits exclusive dealmaking in the SVOD space. Last year, Lionsgate distribution arm Debmar-Mercury struck a deal with Hulu to put all seasons of Fox series “Hell’s Kitchen” on Hulu Plus.

As Sarandos made clear in an appearance at a Merrill Lynch Bank of America investors conference last week, he is very focused on securing exclusive content. However, it’s also possible Netflix wants to pay less continuing on a non-exclusive basis, akin to its strategy on Epix, the premium movie channel that struck a deal with rival Amazon after Netflix opted to lose its exclusivity. But there were other extenuating circumstances regarding that content which prompted Netflix to decline exclusivity, including a 90-day delay.

Parting with “Storage Wars” may not come easy to Sarandos, who listed the series on Netflix’s corporate blog among the “12 Docs of Christmas” that were his personal favorites.

“I know the purist documentary lovers will boo and hiss, but I love ‘Storage Wars,'” he wrote last December. “Watch both seasons and if you feel like you still want more, check out ‘American Pickers’ and ‘Pawn Stars.’ “