Max, Netflix, Off-Licensing, and The Real World
I Want My MTV, Rob Tannenbaum and Craig Marks’s rollicking oral history of MTV, chronicles the fumbled founding and turbulent first decade of the pioneering cable TV channel that transcended its “asinine beginnings” to (temporarily) become “the sun around which popular culture rotated.” The authors describe the dubious, but also ingeniously low-stakes gamble on which MTV was founded. Unlike practically any TV network that preceded it, MTV would neither license, nor create its own content. Furthermore, that content would consist of music videos—a new type of programming that few people were making, fewer were demanding, and no one had ever based a business on.
With few available content sources to choose from outside of roughly 30 Rod Stewart songs and a few dozen submissions from British and Australian New Wave bands little known in America, how did MTV plan to fill out the rest of their ambitious 24-hour programming schedule without repeating the same songs every hour or so? “By asking someone else, record labels, to make and pay for [the videos], then hand them over for free,” Tannenbaum and Marks write. “That’s not a business model, that’s chutzpah.”
There was arguably nearly as much chutzpah in Netflix’s original business model of trying to kill the Blockbuster down the block with a 3-day-delay mail-order approach, or their attempt to largely phase out physical media in their second phase. But in retrospect, the pre-original content Netflix, when most viewers subscribed to the service to binge syndicated TV series like The Office, incorporated a lot more bet-hedging than the Netflix we know and love today, which has lost money non-stop since they committed to producing their own shows. Their faith in the power of SVOD was laudable, as was their plan to make the content so irresistible and plentiful that the subscription base would eventually grow big enough (and tolerate enough price hikes) to pay for it.
But the most interesting stories in premium SVOD over the last couple of years have involved various retrenchment strategies to compensate for the failure of that model. The first phase, of course, was adding ad-supported tiers, with Netflix, HBO, and Disney leading the charge.
More recently, in the cost-cutting wave that followed the WarnerBros-Discovery (WBD) merger, the new WBD has made some interesting moves (not the least of which was their confounding decision to drop the “HBO” from HBO Max). Last December, WBD cleared out some of the platform’s backlist deadwood, as older shows and newly canceled recent hits like Westworld began to disappear. Much as when baseball players cut from major league rosters are slapped with the dreaded DFA—designated for assignment—tag and dropped to the minors or simply dumped, several post-premium shows were designated for re-release on free-streaming FAST channels.
This wasn’t an entirely unprecedented strategy for HBO, which has at several times licensed older properties for off-network syndication on lower-rent platforms (among them deals cut with Amazon before Prime threw its hat into the original programming ring).
But perhaps the most surprising HBO outplacement news came in late June, when WBD revealed that it was “in talks” to license the five-season HBO comedy series Insecure and other DFA’d HBO titles to Netflix, the first time HBO has ever let a tier-one original content competitor get its hands on HBO content. Like selling ads and staggered season releases for Netflix, for HBO, cutting such a deal with a premium rival was internally frowned-upon if not strictly verboten until recently.
This move may represent a desperate measure in desperate times, or simply indicate that WBD CEO David Zaslav has the chutzpah to ignore the HBO old guard when only tradition stands in the way of making a profitable content licensing deal. And if Netflix, likewise, isn’t signaling a return to the lower-risk strategy of leveraging others’ content creation investments, the deal marks at least a potential course change for both financially insecure premium content powerhouses. Only time will tell.
Netflix reported a strong third quarter after the market closed on Tuesday, with more growth anticipated in Q4 after its Basic with Ads tier launches November 1 in twelve countries as part of a wider development in the streaming ecosystem that will see streaming platforms engage with the metrics of linear broadcast for the first time.
What lies ahead for Netflix in the ad-tier/hybrid era?
As of summer 2023 for US customers, the two apps will be one consolidated service, with both an "ad-lite" and an ad-free version becoming available. A LatAm expansion follows, and the European market launch is in 2024.