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Hulu-Viacom Deal Escalates SVOD Battle for TV Rights

Even with all the hype surrounding their original series, Netflix, Amazon and Hulu, in order to attract subscribers, each rely on popular shows that first air on TV. And the war for exclusive rights to these binge-worthy properties has never been more pitched.

Over the last two weeks of September, the Big Three subscription VOD providers announced a string of deals, locking up streaming rights for past seasons of hot TV skeins — in some cases, for shows that haven’t been made yet. The pacts include Netflix picking up CW’s “Jane the Virgin” and ABC’s “How to Get Away with Murder”; Hulu grabbing Fox’s “The Last Man on Earth” and ABC’s “The Goldbergs”; and Amazon landing USA Network’s “Mr. Robot,” summer’s scripted-drama cable darling.

Then on Tuesday, Hulu expanded its pact with Viacom, giving the Internet TV service exclusive subscription VOD rights to all past and future seasons of Comedy Central’s “Inside Amy Schumer” and “Key and Peele,” along with other shows.

“It’s an extremely good time to be a content owner right now,” says Lisa Holme, Hulu’s VP of content acquisition, “because there is such a healthy and robust market opening up in SVOD.”

The elevated activity levels also come amid a growing concern among some media congloms that Netflix is growing too powerful. “We have a long partnership with Netflix that has been good for both sides,” 21st Century Fox chief James Murdoch said at an investment conference in mid-September. “But we increasingly do more and more business with Hulu” — in which Fox owns a minority stake.

Strategically, studios and content owners are eager to maintain a mix of distribution partners. “You want to be careful about how many bullets you give to one party,” notes a senior exec at a large TV distributor.

But money talks. Shortly after Murdoch and others indicated they were going to give Netflix the cold shoulder, the SVOD giant was touting new agreements with CBS, Warner Bros. TV, ABC and NBCUniversal. “What’s working in Netflix’s favor is that there’s a lot of content out there, and lots of different agendas,” FBR Capital Markets analyst Barton Crockett says.

For Netflix, one key reason for moving to snap up TV shows earlier than in the past is because it’s seeking rights on a worldwide basis. The No. 1 SVOD player, with more than 65 million subscribers globally, operates in more than 50 countries today, and is eyeing 200 by 2017. “The more a show has been around (on TV), the harder it is to acquire all the territorial rights,” says Jonathan Friedland, Netflix’s chief communications officer. “Our hope is to successfully bid on shows early in their lives, so we’re able to get as broad a geographic footprint as we can.”

This competitive intensity has pushed the Internet services to make acquisitions earlier than ever. Traditionally, syndication deals hinge on how well the shows performed over their life on TV. But Netflix clinched rights to “Colony,” Carlton Cuse’s dystopian thriller from Universal Cable Prods. and Legendary TV, before it even premieres on USA in January. (Netflix previously did the same with Fox’s “Gotham,” and began streaming season one in the U.S. last month at the same time the sophomore season premiered on broadcast TV.)

Amazon, meanwhile, cut a new deal with CBS, making Prime Video the exclusive SVOD home for three new summer series from the Eye through 2018, starting next year with “BrainDead,” a comic thriller from Robert and Michelle King (“The Good Wife”). As with the companies’ prior agreements for “Under the Dome” and “Extant,” episodes will be available to stream four days after broadcast.

The recent spate of deals is, in part, business as usual, as the streaming providers continue to grow and remain hungry for noteworthy new content. It’s also no coincidence that the announcements have flowed as the fall TV season got into full swing, when viewers — and entertainment execs — are focused on TV doings. The hope is that a series will ignite enough catch-up viewing in SVOD to send viewers back to the airwaves for the latest episodes.

Competition among subscription VOD buyers has been building over the past year, and the higher prices Netflix, Amazon and Hulu are willing to pay also have put a damper on traditional cable syndication deals. Top-tier dramas are now selling for double the rate of what comparable shows would have captured five years ago, according to industry sources.

Nevertheless, it’s a small price to pay when one considers that these pacts drive the thing these rivals need most: differentiation in a marketplace awash with commoditized product.

“It’s kind of a domino effect: When one announces an exclusive deal, everyone else freaks out,” says Wedbush Securities analyst Michael Pachter. “The thinking is, ‘We have to control it, and keep it from the other guys.’ ”

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