Netflix shows its power with Glee producer deal
LOS ANGELES — Netflix has sent a warning shot to the rest of the entertainment industry by landing a new multiyear deal with prolific TV producer Ryan Murphy, the man behind 20th Century Fox Television’s Feud, American Horror Story, Glee and more.
The deal, which some observers pegged at as much as $300 million US, is the latest evidence of just how powerful the streaming giant has become at luring Hollywood’s top talent away from established competitors.
The agreement, announced this week, adds another name-brand producer to Netflix’s growing stable of hit makers. It also signals the company’s willingness to splurge on big names as it continues to borrow heavily to fund its ambitious growth strategy, which will see the company spend a projected $7.5 billion to $8 billion on content this year, up from $6 billion in 2017.
While some experts see the Murphy deal as the latest exhibit in Netflix’s profligate ways, the announcement is being lauded as a coup for the company, which recently poached Grey’s Anatomy and Scandal producer Shonda Rhimes from ABC in what is shaping up to be an escalating war for talent with traditional networks.
Netflix declined to comment on the financial terms of the fiveyear deal, which begins July 1, after Murphy’s agreement with Fox expires.
The producer, whose shows appear on the Fox broadcast network as well as the FX cable network, is known for his edgy creative tastes that win awards and critical plaudits, but not always mass viewerships. His latest project for FX is Pose, a transgenderthemed dramatic series set to debut this summer.
“Ryan Murphy is a win for Netflix because he will make good content. But he’s a risk because he may not make commercial content — shows that people will want to see,” said Michael Pachter, a digital media analyst at Wedbush Securities.
Pachter said Netflix probably overpaid to persuade Murphy to leave his longtime creative home at Fox. “It’s everything that’s wrong with Netflix. He’s going to have expensive tastes and will want to hire A-list stars. That could push the price of his shows even higher,” Pachter said.
The streaming service typically pays talent more upfront than traditional media companies because there is a smaller backend revenue stream due to the absence of certain residuals, such as syndication.
The Murphy deal could escalate the Wild West ethos that Netflix and other streaming services such as Amazon have brought to the TV industry — where longtime loyalties are broken in an instant and everyone is up for the taking. “It’s land-grab time in the world of television,” said Peter Csathy, founder and chairman of Creatv Media.
“They’re grabbing up the biggest names they can get for marketing purposes. In isolation, it may not be seen as a smart financial deal. But if Netflix is able to parlay that into more subscriptions and customer retention, then it’s smart.”
Netflix’s subscriber base continues to soar, exceeding expectations on a regular basis. For the recently concluded fourth quarter, the company added 8.3 million new viewers, a quarterly high. Global subscriptions stood at 117.6 million at the end of last year.
Netflix has continued its physical march into Hollywood, too, moving into more buildings on the Sunset Bronson Studio lot — and expanding both its office space and soundstage footprint.