When HBO Max debuted in late May, it made a surprise announcement: The eight original “Harry Potter” films — among the biggest-ever movie franchises — were on the brand-new streamer on day one. But then: Expelliarmus! It turns out WarnerMedia had carved out only a 90-day window on HBO Max for the J.K. Rowling boy-wizard movie octet. The films are vanishing off HBO Max on Aug. 25. They’ll apparate on NBCUniversal’s Peacock starting in October in a six-month period of rolling windows. NBCU had previously cut a multiplatform-rights deal with Warner Bros. for the “Potter” franchise through 2025.
Meanwhile, Peacock stuffed several premium movie titles into the July 15 launch package — some with very short periods of availability. The streamer had a mere 17-day window on Universal’s first three “Jurassic Park” movies, which rambled back to Netflix on Aug 1. Warner Bros.’ trio of “Matrix” movies also flew off Peacock at the end of July; WarnerMedia has said those will be coming to HBO Max within the next nine months.
What’s with the game of musical chairs? Among content buyers, the appetite for fan-favorite “comfort food” entertainment to attract viewers has soared as the flow of new TV shows and movies has dried up with COVID production shutdowns. With the need to feed the boom in quarantine streaming, library titles have become more valuable than ever — and studios, looking to capitalize on the demand and make up revenue losses from a dearth of new releases, are often licensing them out for shorter runs.
“The competitive environment is absolutely driving the pricing up,” says Amy Kuessner, senior VP of content strategy and global partnerships at Pluto TV, the ViacomCBS-owned ad-supported TV streaming service. “For us, it’s making deals more expensive and more difficult to close.”
Classic movies have been the hottest titles in the recent spate of licensing activity, industry execs say. That’s because movies can be swapped in and out much more easily than TV series, which historically have longer licensing periods to allow subscribers to watch the full series run. Also, even given a short window on a movie, a streamer can advertise the addition of a title as “new” in any given month.
“Movie library cycling is about raising the catalog depth perception,” says Richard Cooper, research director at U.K.-based Ampere Analysis. “That’s critically important for a streaming service to maintain quality perception.” With the exception of Disney Plus and its promise of delivering a comprehensive suite from Disney’s house of brands, it doesn’t add much value to keep a movie nailed up on an SVOD for an extended time, he says: “There’s only so much ‘Harry Potter’ I can take.” During the coronavirus pandemic, there’s been a 50%-70% increase in the volume of movie licensing deals, while fees on average have climbed 25%-50%, estimates Larry Waks, a partner with Foley & Lardner, who heads the law firm’s entertainment practice. “I think they’re lasting trends,” he says.
Historically, studios licensed films to basic cable for roughly 36 months and to pay-cable channels such as HBO for 12-15 months. Today, it’s no longer unusual for a studio to license a particular movie to, say, Amazon Prime for two or three months before turning around and granting rights to another streamer. In some cases, studios find that streaming platforms aren’t even demanding exclusivity.
“It’s pretty simple,” says one studio executive. “We’re making more money carving up the rights than we would if we signed one big deal.”
Indeed, one-month licensing windows on movie titles are now common — a strategy to create an illusion of scarcity, says Adam Lewinson, chief content officer at Tubi, Fox Corp.’s recently acquired AVOD service. He says asking prices have been all over the map: sometimes flat or down, sometimes two or three times as much. “There are some very good salespeople out there who do a great job of trying to help feed an overheated marketplace,” he says.
As new entrants seeking to quickly build up subscriber bases, Peacock and HBO Max have been paying above-market rates to stock their lineups, industry insiders say. “They are going to overpay and accept lower margins,” says a senior exec at a rival streaming service.
Disney-controlled Hulu also has been particularly aggressive about landing library content, and has been the most willing to shell out big money for older movies and shows, studio executives say. Netflix, which helped kick off the boom in streaming licensing when it launched its digital service more than a decade ago, has become more conservative in what it spends on other people’s content — opting to invest in original movies and shows such as “The Irishman” and “Stranger Things.” Disney Plus is not active in the space, preferring to highlight movies and shows that hail from its Disney Animation, Fox, Lucasfilm, Marvel and Pixar brands.
MGM, which owns a library of nearly 5,000 titles domestically, including all the James Bond movies, has seen “very, very strong business” of late, says Chris Ottinger, president of worldwide TV distribution and acquisitions. New movie and TV product has been delayed a year or more — a turnabout from hand-wringing over the glut of TV series in recent years, he notes. The buying fever will die down, but “the question is, what is that point?” says Ottinger. “It’s like trying to predict what is going to happen with the virus.”
The headline-grabbing SVOD licensing deals over the past year have involved popular TV shows, which Lewinson says represent the “top 1% of content.” HBO Max paid upward of $550 million in a multiyear pact for “South Park” (formerly on Hulu), and NBCU reportedly will shell out $100 million per year to bring “The Office” to Peacock starting in 2021. (The show will stay on Netflix through the end of 2020.)
There’s still a fierce battle for the upper echelon of series, which have proven to drive healthy engagement for streaming services. Lionsgate this year took “Mad Men” to market after Netflix declined to renew its deal. Last month the studio announced a three-way deal with Amazon, Starzplay and AMC. In 2011, Netflix paid $1 million per installment to Lionsgate Television for the 92-episode run. For the second quarter of 2020, Lionsgate said its TV segment profit increased 39.6% to $34.9 million, “reflecting the recent syndication of ‘Mad Men.’”
Pluto TV had the opportunity to bid on “Mad Men” but “we didn’t think it would be right for our platform,” says Kuessner. “We are not in a position to throw out millions of dollars just because costs are going up.”
For media conglomerates WarnerMedia and NBCU, which own big content portfolios and also operate direct-to-consumer streaming services, the calculus is about what to hold back for their own walled gardens — and what to monetize through third-party licensing. By contrast, Disney has been aggressive in unwinding licensing deals forged before it launched its streaming service in 2019 and has been stashing content, forgoing hundreds of millions of dollars in revenue.
“Warner and NBCUniversal have a huge volume of potential titles they can add to their services at any point,” Cooper says. “But to maintain subscriber interest, they have to keep moving those titles around.”
With coronavirus production shutdowns, studios are becoming increasingly reliant on home entertainment revenue. But the risk in counting too heavily on repeatedly licensing older films and shows is that those titles can lose their luster. “Only a very few films really hold their chops over the years,” says Seth Willenson, a library valuation expert. With even the largest libraries there’s an 80/20 rule, in which 80% of the value comes from 20% of the content. And, he adds, “that’s if you’re lucky.”