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Sony Pictures Gained Ground in Streaming Wars With Historic Licensing Deals at Netflix and Disney

Studio's strategy derives revenue from theatrical and direct-to-consumer

Sony Pictures Entertainment
Michael Buckner for Variety

Tom Rothman, Sony Pictures motion picture group chairman, has said many times, both on the record and in the private confines of Louis B. Mayer’s old office on the Sony lot, that he is an arms dealer in the arms race.

He is referring to, of course, Hollywood’s leading business mandate to launch and service streaming competitors to giants such as Netflix and Disney Plus — subscriber platforms that have become Wall Street’s golden geese after the global pandemic shuttered movie theaters and theme parks. With Amazon Studios and Apple TV Plus chugging along in search of narrative identities, and WarnerMedia, NBCUniversal and ViacomCBS working to grab eyeballs with vast film and TV libraries, many wondered how and if Sony Pictures Entertainment would enter the fray.

In quick succession in April, Sony not only brokered two historic TV licensing deals that will bring close to $3 billion in revenue to the Japanese-owned shop, according to two sources familiar with the transaction, but also secured its own lucrative first-look streaming movie deal without having to launch yet another competitor in a crowded market of OTT hopefuls.

Arms dealer, indeed.

The first transaction was a roughly five-year pact with Netflix, which won a heated auction for licensing rights to all Sony Pictures films in the “pay 1” window — the first time a movie can air on television after release in theaters and on home entertainment. Sony’s previous pay 1 partner was cable network Starz.

The second deal, for the “pay 2” window, manifested as an ambitious and boundary-pushing agreement across all of Disney’s distribution engines — including Hulu, FX, ABC, ESPN, Freeform, National Geographic and Disney Plus (where Sony’s prized “Spider-Man” franchise will be reunited with the rest of the Marvel family). The Netflix deal approaches close to $2 billion in value over its term, with the Disney deal pushing the package into the $3 billion territory.

Many roadmaps to streaming success are being workshopped in real time, to mixed results, such as WarnerMedia’s tinkering with an ad-supported model of HBO Max, for instance, or the continued silence from Comcast’s NBCU over what resources they’ll pour into Peacock. Sony brass, however, decided nearly two years ago that investing in the premium studio content that audiences expect in movie theaters was the best way forward, sources say.

Kenichiro Yoshida, Sony Corp. CEO, and Tony Vinciquerra, Sony Pictures Entertainment chairman and CEO, empowered Keith Le Goy, the studio’s distribution and networks chairman, to leverage the quality of its product to bring home the best deal possible, added the insiders. The process saw unprecedented participation from a traditional movie studio head in Rothman, says an insider, who personally presented a multi-year slate strategy to prospective buyers.

“Transactions like these are usually pure sales jobs, but this time it was too important,” says an individual familiar with the auction.

Baked into the Netflix pay 1 deal is also a first-look agreement for the streamer to acquire an annual number of movies Sony will make exclusively for streamers — though the arrangement is not exclusive, allowing Sony Pictures to sell to numerous digital buyers. In light of COVID-19, the studio has offloaded numerous successful projects to streamers over the past year, including the flagship HBO Max comedy “American Pickle” from Seth Rogen, and the groundbreaking LGBTQ holiday rom-com “Happiest Season” to Hulu.

With that additive business, Sony gets bolstered revenue without detracting from a valuable proposition to A-list filmmakers — putting films in theaters is the only priority. In the industry-defining months of the pandemic, the most visible collateral damage in the content business has been to the relationship between corporate interests and artistic sensibilities.

The full-on talent revolt of directors including Christopher Nolan and Denis Villeneuve in the face of WarnerMedia’s decision to release Warner Bros. films in theaters and on HBO Max simultaneously provided a blueprint on what not to do in building a streaming arsenal. Sony’s new licensing deals will help the studio find visibility in the streaming landscape, insiders believe, while still broadcasting to the creative community that they’re fighting for theatrical cinema.