Netflix's "Mad Men" Syndication Deal - Increasing Competition for Premium and Ad-Supported TV Networks
Bill Niemeyer, Senior Analyst
April 8, 2011
Netflix this week announced a deal with Lionsgate to syndicate hit cable drama Mad Men (currently seen on AMC in first run). Netflix gets the rights to stream online the four seasons already completed (these will be available July 27) and three seasons yet to be produced, the latter becoming available after they complete their seasons on AMC. Press reports say Netflix is paying almost $1 million each for a total of 91 episodes.
The Netflix Mad Men deal is the latest in a series of recent agreements to acquire the streaming rights for TV content. Earlier this month, Netflix and Twentieth Century Fox announced a deal for streaming of a package of shows, including the first season of Glee and the first two seasons of Sons of Anarchy. In March, Netflix paid $100M to outbid HBO and others for the rights to show House of Cards, a soon-to-be-produced 26 episode political drama starring Kevin Spacey. In December, Netflix and Disney announced a $200M agreement to stream TV shows, including past seasons of ABC broadcast series such as Lost and Grey's Anatomy.
These deals and others certainly move Netflix closer to being a direct competitor for premium channels like HBO and Showtime. Both have subscription revenue models and use movies as a key source of content, with Netflix now entering the high profile original content arena via House of Cards.
But, Netflix's content deals are also bringing it into competition with ad-supported cable networks. Even though Netflix does not pursue advertising dollars (and likely has no plans to do so), they are directly competing for ad-supported television's raw material - programming.
The Mad Men deal highlights this. Pre-Netflix, a syndication deal for Mad Men would have been done with the likes of A&E or Bravo or even AMC itself, not the subscription channels like HBO.
Syndication of recent first run hits is an important source of ad revenue for TV networks. These high-profile shows, especially a multiple Emmy award winner like Mad Men, also drive viewers into the network to build audience for other shows. And they help support the carriage fees charged by networks to operators.
Now, through these recent deals and ones likely to follow, Netflix is directly impacting the business models of ad-supported cable networks by drawing away syndicated programming and the viewing it produces. Plus Netflix is driving up the price for syndication in general.
As Lionsgate's Steve Beeks said in the Netflix announcement, "The innovative structure of our distribution plan underscores the tremendous value of producing and owning content in a digital world where demand for content continues to grow and pathways for reaching consumers continue to diversify."
Translation - open up your wallets, content distributors.
One more indication that OTT is having a significant impact now on the business of television. And we’re still in the beginning phases of the OTT market. It's going to be an interesting next few years.
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