Netflix Has No Plans to License Originals to Other Streamers; Major Acquisitions Also Not Currently in the Cards
The future of the streaming industry is difficult to predict, and one big reason why is because of the sheer number of streaming services available. The United States market alone has over 300 direct-to-consumer (DTC) streaming services, and the number is seemingly continuing to grow.
Unfortunately for streaming providers, the number of U.S. customers who subscribe to a streaming service has essentially plateaued at between 80-85%. That means that there simply isn’t a huge pool of new users for streamers to pull from, so companies like Netflix have to find ways to further monetize the customers they already have if they want to continue boosting their domestic revenue.
Some media providers have chosen to become content “arms dealers” in order to boost income. Instead of putting content onto their own DTC services, they license it out to other companies for a fee, then sit back and collect royalties. Sometimes these licensing agreements are for completed shows/movies, and sometimes they simply involve the rights to characters/franchises, leaving the company that acquires those rights to deal with development and production costs themselves.
Netflix executives don’t seem too eager to become one of these arms dealers, however. In an interview with Bloomberg's Lucas Shaw, Netflix co-CEO Ted Sarandos was asked about whether the company would consider licensing out content in the near future.
“We’ve never had that as part of our business model,” he said. “We do a better job of monetizing our content through our subscription model. And those other businesses, particularly the linear TV businesses, are in massive secular decline. I’m not gonna try to maximize revenue from that shrinking business.”
Indeed, companies with major movie studios have been much more likely to shift into content licensing mode thus far. Sony has become one of the biggest content dealers in the business recently, agreeing to deals with both Netflix and Disney in 2021. Warner Bros. Discovery has also begun licensing popular content as of late, agreeing to a deal which sent the rights to develop animated shows featuring DC comics characters to Prime Video in 2022.
WBD CFO Gunnar Wiedenfels believes that such deals will become more common in the streaming industry as services are forced to pull back on content spends and refocus on profitability. But Netflix isn’t a company with a huge movie studio and a DTC service on the side; its focus is streaming-first, and that means that it doesn’t have to worry about using streaming to prop up other parts of its business. Additionally, Netflix remains a unicorn in the streaming industry as one of the few streaming services — if not the only streaming service — that is profitable.
That might lead some to think that Netflix is in prime position to start picking up other DTC services. After all, 86% of streaming users want an aggregated service that allows them to watch more content in one place. Netflix has been mentioned as a possibility if the AMC family of streamers looks for a new home in 2023, but Sarandos and his co-CEO Greg Peters didn’t sound particularly eager to start writing massive acquisition checks any time soon.
“Can you build a big business without [acquiring intellectual property] and without a library? We just did,” Sarandos said.
“Acquisition might be a particularly economic inefficient way to get to that library,” Peters added.
The company will likely continue to use its original programming as the cornerstone of its library. Original shows like “Wednesday,” “Squid Game,” and “Dahmer-Monster: The Jeffrey Dahmer Story” were record-breakers for the service in 2022, and it still has at least one more season of “Stranger Things” to unleash. One report from May 2022 predicted that by 2024, 75% of the Netflix library will be original series and that makes sense as Netflix originals drive four times the demand as originals on other streamers, which is likely a big factor driving the decision not to license those shows to competing services.
Aggregation is surely coming in the streaming industry, and services that serve small niches of customers will likely start seeking major licensing deals before long. Netflix won’t be among those services, but, if its executives are to be believed, it also likely won’t look to make any major acquisition deals in the coming year.
Netflix
Netflix is a subscription video streaming service that includes on-demand access to 3,000+ movies, 2,000+ TV Shows, and Netflix Originals like Stranger Things, Squid Game, The Crown, Tiger King, and Bridgerton. They are constantly adding new shows and movies. Some of their Academy Award-winning exclusives include Roma, Marriage Story, Mank, and Ma Rainey’s Black Bottom.