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Netflix push into original fare may be bad news for Hollywood

April 23, 2013|By Matthew Fleischer
  • The success of Netflix shows such as "Hemlock Grove" may signal the end of the company's reliance on non-exclusive, bulk licensing deals.
The success of Netflix shows such as "Hemlock Grove" may signal… (Sophie Giraud / Associated…)

The desire of Netflix to acquire more original programming such as the political drama "House of Cards" could mean bad news for Hollywood, which has come to count on the company as a good customer and a steady source of revenue.

Netflix Chief Executive Reed Hastings noted Monday that some of the company's big content deals didn't work out as planned. Many shows Netflix got rights to ended up having little appeal to its subscribers.

"Many of our earliest deals were with networks and cable networks and included some shows that have not proven successful," Hastings said.

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So going forward, Netflix will be a little more picky about what it buys, and some analysts are warning that this could hurt TV producers.

In a report released Tuesday, media analyst Michael Nathanson of Nomura Equity Research warned that means the Netflix gravy train could be ending for companies such as Viacom and CBS. The bottom line of companies that have sold to Netflix "will be harmed as they lose these high-margin license fees," Nathanson wrote.

For example, Viacom's deal with Netflix is estimated to be worth $130 million annually. Netflix has indicated it won't be renewing that pact, which gave it lots of content from Viacom, parent of cable channels including Nickelodeon and MTV.

Instead, Netflix will try to cherry pick hit shows from Viacom. Whether Viacom is interested in selling shows on an individual basis remains to be seen. Many programmers like to bundle the hits with the less successful programs in package deals.


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