The story behind Netflix’s $100 million ‘Friends’ deal

How do you worth a sitcom that hasn’t been on TV for 14 years?

Simple: You inform Netflix you’re going to take it away, and notice how a lot they pay.

The solution, as everyone knows via now, is $100 million. Which is what Netflix goes to pay AT&T* for the precise to circulation “Pals” subsequent yr.*

However the resolution may be somewhat extra sophisticated, for a couple of causes. To determine why, let’s move over some deal phrases and historical past, a few of which you haven’t learn sooner than.

Because the Wall Boulevard Magazine’s Joe Flint reported the day gone by, AT&T’s WarnerMedia, which personal “Pals,” has prolonged a deal that provides Netflix unique streaming rights to all 10 seasons of the display via 2019. And WarnerMedia is prone to need get right of entry to to the display for its personal streaming carrier, which is meant to release someday subsequent yr.

And because the New York Occasions’ Edmund Lee reported as of late, Netflix is paying $100 million (give or take) to circulation the display subsequent yr.

However Netflix wasn’t the one streamer fascinated about “Pals.” Different bidders for the display incorporated Hulu, the streaming carrier recently owned via Disney, Fox, NBCU and… WarnerMedia, in addition to Apple, which doesn’t have a streaming carrier but but in addition plans on launching one subsequent yr.

I’m advised that Apple, which is spending some huge cash commissioning its personal displays however has but to shop for a library of present ones, ended up pulling its bid for “Pals.”

I’m additionally advised that Hulu, which could be very prone to finally end up only owned via Disney/Fox as soon as the ones two firms consummate their merger, attempted exhausting to land “Pals.” On the very least, Hulu’s pastime within the display ended up pushing the fee up way past the $30 million a yr Netflix was once already paying for it.

However the true factor isn’t simply what “Pals” is price for a streaming carrier subsequent yr, however within the years following. WarnerMedia will nearly undoubtedly wish to come with “Pals” in its yet-to-launch carrier. Nevertheless it hasn’t made up our minds whether or not it’s going to need unique rights to the display, or whether or not it’s going to be keen to proportion it.

Partly that’s as a result of there’s some chicken-and-egg occurring right here: “Pals” is a precious asset, so WarnerMedia would naturally need that asset in its personal carrier as an alternative of any person else’s… until that WarnerMedia carrier finally ends up being a flop, during which case stashing “Pals” there method this is a wasted asset.

So right here’s the hedge WarnerMedia has ended up with**: After 2019, WarnerMedia has the power to drag “Pals” from Netflix altogether, and stay the display as an unique. Or it could let Netflix circulation the display as neatly, at a cut price of about 25 %. Which means that there’s a state of affairs the place WarnerMedia can get some other $75 million a yr from Netflix and nonetheless use the display as a key a part of its personal streaming carrier.

Is that a good suggestion? Individuals who paintings for AT&T will inform you it’s. For a contrarian view, I will direct you to former Amazon exec Matthew Ball, who has an excellent tweetstorm you’ll learn presently. Totally free!

And should you’re the type of one who unearths all of this entertaining, I’ve excellent information for you: You’re prone to see a repeat of this plot someday within the close to long run, when Comcast’s NBCUniversal*** has to take into accounts what it desires to do with “The Workplace,” which it recently streams on Netflix, however will possibly wish to stay for its personal, yet-to-be-announced streaming carrier that it’s going to most likely release as soon as it sells its stake in Hulu.

NBCU pros say Netflix has advised them “The Workplace” generates extra viewing hours than the rest at the carrier. Which means that Jim and Pam would possibly finally end up getting more cash than Ross and Rachel.

*Some people who find themselves concerned on this transaction would really like you to understand that the quantity isn’t in reality $100 million, however one thing lower than that. However be happy to spherical up.

**The deal isn’t in reality finalized, however other people conversant in negotiations say it’s lovely some distance alongside.

***NBCU owns a minority stake in Vox Media, which owns this web site. Haven’t typed that shortly. Feels excellent to get it going once more.

Leave a Reply

Your email address will not be published.