Netflix holding on to Friends for $100 million

Contract renewal comes in the wake of WarnerMedia announcing its upcoming service

TL;DR

• Last week, rumours surfaced that Friends would be removed from Netflix by January
• Netflix had paid $30 million to license the show for its library until the end of this year
• Now, that price will purportedly be increased to ~$100 million to keep the show until at least the end of 2019

$0.02

This deal comes at an interesting crossroad. Netflix licenses Friends from WarnerMedia — a company that’s planning to launch a multi-tier streaming service of its own by the end of next year. The company’s head, John Stankey, has said that consumers should expect content owned by WarnerMedia to be available less on third-party platforms over the course of the next year as it begins to develop a robust content library of its own. Not only would this include Friends but other popular programming, like anything from HBO or Warner Bros.

The assets of AT&T after acquiring Time Warner | Source: Statista

The idea of “content is king” rings especially true for the owner of WarnerMedia (which was recently acquired by AT&T — see above). While Amazon has thrown billions into content on its Prime Video service, it hasn’t had too many hits. WarnerMedia, on the other hand, is tried and true. Its upcoming service will have three tiers:

1. Entry: a movie-focused package
2. Premium: original programming and blockbuster movies
3. Bundle: a combination of the first two, plus additional WarnerMedia content plus and third-party licensed content

Each one of these tiers has an extensive list of enviable content to build itself upon. However, the potential challenge is that, so much of it is currently licensed to other companies where it can live on their services. WarnerMedia will have to make a tough decision: does it think that revenue from its own streaming service will outweigh the money that it earns in licensing revenue?

For now, Canada might be shielded from such moves. While WarnerMedia will undoubtedly launch a streaming service in the US, it may choose to continue allowing Canadian media companies to license its content (eg. Currently HBO content in Canada lives on Bell Media’s Crave service) so that it doesn’t need to invest in developing a presence in foreign markets.