Why Churn Is Good for Butter, but Not for TV (Guest Column)

Scott Koondel CBS

The shiniest object in the media business continues to be buzzy, exclusive, original programming on streaming platforms. Its glittering allure attracts new subscribers, generates breathless press coverage, and brings smiling executives to awards shows.

However, another truth, perhaps a bit less glamorous but just as compelling, lies beneath the gleaming surface. It’s this: When the allure of the new stuff begins to grow thin, it’s the popular series and franchises from mainstream broadcast networks and Hollywood studios that help these streaming behemoths fight their biggest enemy: CHURN.

A bit of history: When digital services launched, they were built on robust studio catalogues and aggressive licensing of off-network hits, such as “Breaking Bad,” “Dexter,” “I Love Lucy,” “Friends,” and “CSI: Miami.” Over time, big-budget and high-concept original series, such as “House of Cards,” “The Handmaid’s Tale” and “Stranger Things,” quickly transformed their business and the entire entertainment industry.

But as the digital model continued to evolve, and original programming exploded across Netflix, Amazon and Hulu, the challenge became not only to attract new subscribers, but – as more traditional pay services learned long ago — also to retain them, month after month, year after year. Particularly, how do you keep hard-core fans happy in the year-long gap between seasons of their favorite shows – especially now, when the viewing public is so accustomed to a constant barrage of programming options across a dizzying array of platforms? Not surprisingly, the answer is….offer a vast library of popular licensed franchises too.

A recent study showed that the content licensed by Netflix actually generates 80% of its U.S. viewing. It also stated 58% of new Netflix U.S. subscribers watched the licensed programming first, while over at Hulu, 89% of subs watched acquired content first. The same study points to “Friends,” “The Office,” “Criminal Minds” and two CW shows (“Flash” and “Supernatural”) as some of the top viewed series on Netflix. And according to the study’s authors, “Licensed content is the engagement engine that drives SVOD viewership, retention and revenue.”

This phenomenon began well before the cord-cutting era. The fact is, the most successful basic cable networks have long utilized the biggest off-network franchises in tandem with flagship original series. At TNT, “NCIS: New Orleans,” which they recently acquired, is now the lead-in to their most valuable sports asset and has increased that time period by double digit percentages. TBS ratings are powered by off-network episodes of “The Big Bang Theory” that assists in the performance of their sports and originals. The story is the same across the cable dial, where USA Network has used off-network episodes of “NCIS” as the cornerstone of their schedule for many years, supporting their roll-out of new originals; and at Oxygen – which drove their rebranding to a crime network with a high volume of acquired programming, including “NCIS” and “CSI.” Finally, a quick look at ION’s schedule reveals the value that a slate entirely made up of successful off-network product can bring.

These examples and others paint a very clear picture. In the programming arms race, the ultimate winners will be the platforms that provide the best original programming coupled with the highest quality catalogue. The relationship between original and acquired programming is symbiotic, and the value proposition in having a strong combination of both is evident.

Of course, no programming executive gets promoted for acquiring hit off-network series. And the arrival of an off-network series to a streaming service rarely if ever generates a cool screening event on Sunset Boulevard. Still, as the French are fond of observing, “plus ça change… much remains the same.” It is still programming franchises such as “NCIS,” “Law & Order” and “CSI” that fulfill expectations of mass audience in both the domestic and international markets. And it is the popularity and loyalty connected to licensed shows that serve as the backbone of viewer loyalty and subscriber retention across all platforms.

Scott Koondel is the chief content licensing officer for CBS Corp.