More Studios Are Licensing Content; Will This Impact the Number of Streaming Originals Produced?

When Warner Bros. Discovery axed several high-profile shows like “Westworld” and removed them from HBO Max, there was backlash from fans and the creative community over the company’s continuously aggressive cost-cutting measures. However, as the company is looking to dig itself out of the debts brought on when Discovery acquired Warner Media, WBD quickly licensed many of its cut shows to free ad-supported streaming TV (FAST) platforms Roku and Tubi.

These moves are part of a larger trend in the entertainment and streaming industries in which companies, in an attempt to generate additional revenue, are licensing portions of their libraries to other streamers. While this licensing strategy seems to have shown positive early returns for WBD, this pivot is likely to lead to a reduced number of originals titles on linear and streaming platforms, according to a recent report from Axios.

FX chairman John Landgraf revealed there was a record-breaking 599 adult scripted original series on broadcast, cable, and streaming platforms in 2022. This is up 7% from 2021 when there were 559 shows. However, he predicted that 2022 would be the true “peak” of the “Peak TV” era. While Landgraf has made this prediction in the past, several factors give this a higher probability of being true this time around.

For instance, a January report from Ampere Analysis found that content spending is set to slow down this year. The report indicates that while spending will still increase by 2% in 2023, that would be down from the 6% growth seen in 2022. This makes sense as streamers are confronting more difficult economic conditions as they reduce spending to deal with climbing losses from traditional TV and increasing maturity in the streaming industry.

The slowdown will most likely impact the number of shows being produced for streamers — or at the very least keep the number of shows stagnant. This slowdown in spending shows that streamers are becoming more contentious about where they spend their money in order to deliver the best possible return to their investors.

But this is not the whole picture. Slowing their spending isn’t enough to recoup streaming losses. Disney and Peacock disclosed fourth-quarter streaming losses of $1 billion and $978 million respectively. WBD also recorded streaming losses of $217 million in the fourth quarter. However, this is a significant improvement from the $600 million it reported in the segment in the third quarter thanks to the company’s aggressive cost-cutting measures.

Therefore, as streamers pull back on the number of original series they produce, they will also be looking for other sources of revenue. This is where licensing content comes in. WBD has already done this, and other companies are considering this. Disney is looking into expanding the licensing of its movies and television shows in order to mitigate its streaming losses.

Not all streamers, though, are open to licensing titles. Right now, Netflix has no plans to license content to other streamers. Netflix co-CEO Ted Sarandos has said that licensing content was never part of the business model.

“We do a better job of monetizing our content through our subscription model,” he said. “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.”

Despite Netflix’s stance, more streamers are likely to license more content in the coming year. This a more cost-effective measure than simply churning out expensive and underperforming content. The profitability of licensing these titles to other streamers will determine how successful this will be. But even if it’s only a drop in the bucket – which is probably not the case – every little bit helps.