In a year in which more than 500 scripted series are on the air and new streaming services seem to debut nearly monthly, some of the biggest money being thrown around for content has gone to a handful of old TV shows, the kind that for years have hummed along evening television without much fuss.
Mega million-dollar figures have screamed across headlines in recent months amid salivation over streaming rights to coveted library content: a reported $500 million for “Seinfeld” at Netflix and $500 million for “The Office” at NBCUniversal’s Peacock, to name a couple. WarnerMedia thus far appears to have one of the greatest appetites, committing an estimated $425 million for “Friends” and $600 million for “The Big Bang Theory” in order to pack the soon-to-launch HBO Max; a source familiar with the negotiations tells Variety that the WarnerMedia-backed service nabbed “South Park” domestic subscription video-on-demand rights for $500 million to $550 million.
But some industry watchers say these gargantuan price tags for licensed content likely mark a unique point in history, not an ongoing trend, thanks to a confluence of factors that may never again occur as peak TV and the so-called streaming wars converge.
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For one thing, there will never be another “Friends.” Or “Seinfeld.” Such blockbuster shows found themselves competing in a far less crowded space in the ’90s, with fewer networks, fewer series and therefore more viewers to go around, helping to breed the sort of cultural cachet that is tough to replicate in 2019.
“What you’re really seeing is a battle of content to drive eyeballs to a particular service,” says Darrell Miller, an entertainment attorney at Fox Rothschild.
So far, these shows continue to have relevance, as Gen Z binges on Ross and Rachel and Jim and Pam — “Friends” and “The Office” are said to be two of Netflix’s most-watched shows. That has made them valuable properties, despite having gone off the air in 2004 and 2013, respectively. Netflix held onto “Friends” this year for an estimated $100 million before relinquishing it to HBO Max.
But what newer generations hold dear remains to be seen.
“The timing of this is working out great for the licensors [the studios], in that these shows were culturally ubiquitous in their time, and now there’s essentially been enough time passed that the kids of people who watched those shows while they were on the air are discovering them,” says one industry insider, who believes the current market is overheated. “[But] if you fast forward another 15, 20 years in the future, it’s not as clear to me that the kids of people who are watching today are going to have parents who talk about this one show that was the biggest thing.”
A similar bidding war emerged between 2014-16 for streaming rights to ongoing series. That spurred a market of sellers hoping to sell network drama out-of-season streaming rights for a pretty penny. Netflix grabbed the industry’s attention in 2014 by shelling out $2 million an episode for rights to the NBC/Sony Pictures TV’s “The Blacklist” and $2 million for reruns of the Fox/Warner Bros. TV “Gotham.”
Another factor driving the feeding frenzy is the need to stack new SVODs with as much programming as possible. And in this vertically integrated industry, such series as “The Office” and “Big Bang” are returning home, each being featured on streaming services owned by the parent company of the studios from which they were birthed.
But that doesn’t mean that they’re getting cut any sweetheart deals. Studios typically engage with multiple bidders for linear and SVOD rights, ensuring that they are still extracting as much value as possible from their library assets and satisfying the profit participants involved. As Variety has previously reported, the dealmaking among Warner Bros., TBS and HBO Max for the streaming rights to “Big Bang” was done at arm’s length, despite the three divisions being under the greater WarnerMedia umbrella.
Looking ahead, the shift to digital consumption has prompted changes to profit participation on new series, which will in turn impact the consequences for licensing deals with both linear and streaming platforms. Streamers including Netflix and Amazon essentially buy out the traditional syndication rights to the shows they commission, because the streaming business model requires platforms to hold on to international and rerun rights long after a show premieres. Since this offers producers no way to profit from selling rerun rights, streamers pay upfront to compensate producers and talent for that lost monetization opportunity.
With the debut of Disney Plus, Disney recently unveiled a profit participation model, which follows the pure-play streamers’ lead in shifting the focus from backend profit participation stakes that pay off in perpetuity to a system of higher fees upfront, plus bonuses or escalators if a show reaches certain benchmarks such as longevity, viewership and awards.
“What the Disney family is doing right now, I would say, is cutting edge — Netflix isn’t doing this yet,” says Marc Simon, an attorney at Fox Rothschild. Instead of giving percentage points, “when it comes to the longevity bonus, they are literally saying, ‘If you have a one-hour series that goes into season 3, each point is worth X dollars. If you go into season 4, the value of your point is worth X dollars. And we are paying it out on objective criteria.’ Which is shockingly transparent and brand new.”
The move means more wiggle room for Disney’s studios when licensing their shows to various platforms, theoretically reducing issues with calculating back-end profits. But it also raises questions of how favorable this new bonus model will ultimately be to profit participants.
“What I believe is, Netflix started this — the fixed-formula back-end, premiums, buyouts — Amazon’s kind of followed through with their formulas for certain things [and now] Disney’s doing their version of it,” says Miller. “We’re at the very, very beginning of an entire new world. I predict in three to five years it’ll be a whole new landscape.”