Net­flix’s Friends deal may be end of on­line en­ter­tain­ment

The sigh of re­lief may turn into an an­guished gasp for the many fans out there

Toronto Star - - SBJ - STEVEN ZEITCHIK

NEW YORK— The i nter­net breathed a sigh of re­lief Mon­day when Net­flix an­nounced Friends would still be on the ser­vice in 2019.

Af­ter first not­ing that the land­mark sit­com would be re­moved by Jan. 1, Net­flix re­leased a state­ment Mon­day af­ter­noon that said, “The Hol­i­day Ar­madillo has granted your wish: Friends will still be there for you in the U.S. through­out 2019,” re­fer­ring to a one-off char­ac­ter. Net­flix had rene­go­ti­ated a deal with pro­duc­tion out­fit Warner Bros. and its par­ent com­pany AT&T/Warner-Me­dia for do­mes­tic rights. The New York Times re­ported a price of $100 mil­lion (U.S.) — a whop­ping in­crease of $70 mil­lion from the cur­rent price.

And so it was that Joey will con­tinue to ask how we’re do­ing while Chan­dler could not be any hap­pier for the next cal­en­dar year.

But that sigh of re­lief may yet turn into an an­guished gasp for the many Friends fans out there.

Since Net­flix be­gan mak­ing Friends avail­able in 2015, the show has been among the stream­ing ser­vice’s most pop­u­lar. (At least anec­do­tally — Net­flix releases data like Mon­ica al­lows a dirty apart­ment.) And that means Warner Me­dia, which has de­signs to launch its own stream­ing ser­vice next year, might well soon want the se­ries for its own plat­form.

Might — it’s still not clear how this will all go. In fact, the whole af­fair could be a sim­ple hic­cup or a sig­nif­i­cant omen for con­tent con­sump­tion in the years ahead, de­pend­ing on the view one holds about the stream­ing land­scape.

There are ba­si­cally two ways to read Net­flix’s Friends tango. The first is that Warner re­ally doesn’t want to give up its golden ticket and would sooner keep col­lect­ing the sure mil­lions for a li­brary ti­tle (the in­dus­try’s eu­phemism for pre­vi­ously aired pro­gram­ming) than take a chance on putting an es­tab­lished hit on its own un­proven stream­ing ser­vice.

Ac­cord­ing to this in­ter­pre­ta­tion, the com­pany re­ally just wants to make enough noise to drive up the price third-party plat­forms pay; it doesn’t re­ally want to pull the shows off these ser­vices. So this 2019 re­prieve will be fol­lowed by more re­prieves. Friends is safe on Net­flix. And Warner Me­dia’s own stream­ing ef­forts will be a busi­ness of largely lesser shows.

This view is ar­tic­u­lated by the out­spo­ken Wall Street an­a­lyst Rich Green­field of BTIG, who, in an in­ter­view with the Wash­ing­ton Post on Tues­day, de­scribed what he saw hap­pen­ing with Warner Me­dia prop­er­ties such as Friends and oth­ers of sim­i­lar A-list ilk.

“No­body with a legacy busi­ness to pro­tect is go­ing all in on stream­ing — they’re sim­ply too scared,” Green­field said. “They want to play in the old world to keep revenue and profit, and play in the new world and ap­pease Wall Street.”

Friends, in other words, will con­tinue be­cause Warner-Me­dia doesn’t have the stom­ach to pull the se­ries.

As ev­i­dence, this camp — call them the legacy-firsters — cites AT&T chief ex­ec­u­tive Ran­dall Stephen­son, who, at the UBS me­dia con­fer­ence here Tues­day, said fu­ture deals wouldn’t nec­es­sar­ily be ex­clu­sive, and Warner would keep some Friends episodes (he didn’t say how or how many) on its ser­vice in ad­di­tion to mak­ing them avail­able on Net­flix.

(Nonex­clu­sive! Ev­ery­body wins! Ex­cept it’s not that sim­ple — Net­flix won’t pay as much for that and Warner Me­dia might not think the lower fee rich enough to cut into its own Friends- driven subscriptions. But that’s an­other story.)

The sec­ond camp — call them the balka­niziers — be­lieves Warner and other con­glom­er­ates mean busi­ness. This is the more con­ven­tional Wall Street view and ba­si­cally holds that the largest com­pa­nies, par­tic­u­larly Dis­ney and Warner Me­dia, are not mess­ing around when it comes to stream­ing. They re­ally want all con­tent off out­side plat­forms so they can build their own ser­vices and shift their model to di­rect-to-con­sumer. Con­tent will thus balka­nize to nu­mer­ous dis­tinct stream­ing plat­forms, with al­most no over­lap be­tween them. Michael Nathanson of Mof­fett-Nathanson is among the many who think we’re head­ing that way. “We be­lieve we are wit­ness­ing the evo­lu­tion in tra­di­tional me­dia think­ing about SVOD strate­gies,” he said last year, us­ing the acro­nym for stream­ing ser­vices. These com­pa­nies want to “re­cap­ture some of the value trans­fer that has shifted to Net­flix,” he noted. Or, in non-an­a­lyst-speak, “sell their shows di­rectly to fans.”

Dis­ney chief ex­ec­u­tive Robert Iger has been among the most vo­cal ad­vo­cates from within the in­dus­try. Iger has spo­ken of­ten about “wean­ing” his com­pany off the li­cens­ing milk of out­side stream­ing ser­vices so it can sell its own shows. Dis­ney is set to pur­chase 21st Cen­tury Fox, which has al­ready pulled hits like How I Met Your Mother and Fam­ily Guy (two shows that have nearly as much playa­bil­ity as Friends).

Dis­ney wants its own stream­ing ser­vices — its fam­ily-ori­ented Dis­ney+ and its more grownup-minded Hulu — to be the repos­i­tory for all these es­tab­lished hits.

The legacy-firsters see this and think Dis­ney is the ex­cep­tion (and won’t go all in on stream­ing in any event). They point to Com­cast and Vi­a­com, two con­glom­er­ates that have gone much slower, for var­i­ous rea­sons, and say not much will re­ally change. They’re skep­ti­cal Warner Me­dia’s blood is cold enough to give up all this revenue.

On the other hand, the balka­niz­ers be­lieve that many of the big con­glom­er­ates will soon be sell­ing their own shows for a sim­ple log­i­cal rea­son: Even if it means some li­cens­ing losses now, di­rect-to-con­sumer is the fu­ture. Dis­ney and Warner Me­dia, they ar­gue, are dou­bling down. And even con­ser­va­tive play­ers such as Com­cast and Vi­a­com will even­tu­ally find their own ways in, re­sult­ing in their hits pulled from out­side ser­vices too.

Which of these two camps’ views come to pass will pro­foundly in­flu­ence where we’ll get our con­tent — and in turn whether many of us will think it worth­while keep­ing Net­flix.

If the legacy-firsters are right, then not much will change. Sure, orig­i­nal shows will even­tu­ally go to their re­spec­tive plat­forms. (Net­flix has in part been ramp­ing up all its orig­i­nal shows in re­cent years in prepa­ra­tion for just this balka­niza­tion.) But we’ll still get a lot of li­brary hits on these plat­forms. So ac­cord­ing to these folks, keep your Net­flix sub­scrip­tion, be­lea­guered sub­scriber, for it has much of what you sub­scribed for. The ser­vice is the new ca­ble, and will keep of­fer­ing what ca­ble has long of­fered us in its “bun­dle” — a wide va­ri­ety of shows from mul­ti­ple sources, all for one price.

But if the balka­niz­ers are right, we’re headed to a very dif­fer­ent world. A world where there isn’t one-stop shop­ping at all. You want to watch Dis­ney con­tent? You pay for Dis­ney+ or Hulu. Warner Me­dia se­ries? Head to its ser­vice. Net­flix shows? Go ahead, go to Net­flix. But you won’t get much else. And that means we’ll ei­ther be pay­ing for a lot of ser­vices or not get­ting much of what we want.

For now, the legacy-firsters hold sway, and we don’t have to pay for subscriptions all over the place to con­sume a wide swath of en­ter­tain­ment con­tent. By 2020 or soon af­ter, though, the balka­niz­ers could be right. Stream­ing could frag­ment, much like ca­ble did be­fore it. The num­ber of wor­thy ser­vices will mul­ti­ply, but the amount of con­tent on each will thin. In such a sce­nario, me­dia could not be any more di­vided.

In fact, the whole af­fair could be a sim­ple hic­cup or a sig­nif­i­cant omen for con­tent con­sump­tion in the years ahead


Net­flix rene­go­ti­ated a deal with pro­duc­tion out­fit Warner Bros. and AT&T/Warn­erMe­dia for do­mes­tic rights for $100 mil­lion (U.S.).

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