Netflix’ exclusive International license to Star Trek: Discovery may have been a great short-term deal for CBS, but the approach could ultimately come back to bite Hollywood.
Star Trek: Discovery a Netflix original!
While traveling in Denmark this week, I decided to take in the latest episode of Star Trek: Discovery (ST:D.) Trying to use CBS All Access outside of the US does not work. However, since Netflix has purchased the exclusive International rights to the show, it was simple enough to watch it legally. I fired up Netflix on my laptop and was automatically signed in and able to access all the content Netflix provides to Danish audiences, including ST:D.
When I started streaming the show, imagine my surprise when I saw a Netflix logo proudly claiming ST:D as a Netflix Original. The exclusive International license Netflix purchased from CBS clearly came with a lot of extra privileges. It also could spell trouble for local broadcasters and, in the end, for Hollywood studios like CBS.
Reluctance to work with Netflix a U.S. thing
There are plenty of other top U.S. shows on Netflix Denmark which aren’t available in the U.S. Just a casual browse through Netflix’ Danish library revealed Lucifer (Fox), Outlander (Starz), Modern Family (ABC), and The Good Place (NBC.)
U.S. studios are making a big noise about moving away from licensing content to Netflix in the U.S. For example; Fox is holding back shows for its add-on service FX+ on Comcast. Disney has also stated it will not renew its deal with Netflix for movie distribution after it expires next year. Again, this is to allow it to launch a direct-to-consumer service in 2019 in the U.S.
Clearly, Hollywood’s reluctance to work with Netflix does not extend to International markets.
Licensing to Netflix a double-whammy for regional broadcasters
The licensing of great U.S. TV shows to Netflix for International markets is clearly a good deal for Hollywood studios. It is also a lot easier to sell one big, expensive license to Netflix rather than going market-by-market to negotiate lots of much smaller deals.
However, allowing Netflix to scoop up the cream of American television for International markets has two very big negative impacts on International local and regional broadcasters.
Local broadcasters like TV2 in Denmark have relied on popular U.S. shows to help attract local audiences to their channels. However, it is simply impossible for a local broadcaster to compete with Netflix when trying to license content. Moreover, when Netflix negotiates an exclusive International license, as in the Star Trek: Discovery case, a local broadcaster like TV2 does not even get a chance to bid.
Local broadcasters are already seeing their audiences, particularly younger audiences, migrate away from broadcast channels to Netflix, and other US-based online services. Consider that between 2014 and 2017, Danish traditional TV viewing has gone from 81% of total viewing to 64%. Over the same period, streaming has grown from 19% of total viewing to 36%.
With the top US shows moving from local channels to Netflix, this flight from local TV providers to SVOD will accelerate.
In the long run, only Netflix wins
There doesn’t seem an easy answer to this problem for the local and regional broadcasters outside the U.S. A renewed focus on local production may help, but creating local shows on a par with Star Trek: Discovery is simply beyond the budgets of regional broadcasters.
As local broadcasters decline, their ability to compete for U.S. content licenses will also decline. That could be bad for Hollywood. Netflix could emerge as their only viable option for licensing their shows outside of the U.S. market.
Why it matters
Hollywood studios are selling worldwide rights to their best shows to Netflix.
Local International broadcasters and video services cannot compete with Netflix for these shows.
Without these shows, local broadcasters will be less able to compete with Netflix.
In the long run, Hollywood could end up with little alternative to Netflix for International distribution.