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Issue 56: December 16, 2019

Netflix did something strange this week. At an investor conference, the company's content chief stated that its competitors were paying too much for old content. This begs the question: Just how sustainable are new versus old shows in the streaming market?Read on to find out more in this week's Stream Report.

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Streamer's Spotlight: Are Old Shows Worth A Sign-Up?

Netflix Exec Says Old Shows Aren't Worth the Price

At an investor's conference this week, Netflix's content chief Ted Sarandos explained that new services streaming service provides, such as AT&T (HBO Max) and Comcast (Peacock) are paying too much for older TV shows. Specifically,

he stated

that "The value of those shows...was going down and the cost of them was going up pretty dramatically in the opposite direction."

He later noted that by clinging to older shows such as

Friends

(which leaves Netflix this month) and

The Office

(leaving Netflix in 2021) produces diminishing returns, especially as the rights holders continue to increase the cost of licensing the shows.

However, the question remains: How much value do the older hits hold? And can services like Netflix sustain themselves on just original content alone?

Licensed Content Matters to Most of Us

Netflix's current sign-up economy is heavily driven by its new content. That's something that nobody is truly questioning. Many of Netflix's original shows, to include its hit

Stranger Things

and

Orange Is the New Black

, produce enough word-of-mouth buzz that those shows pull in a massive number of subscribers. Yet many of Netflix's core base are not there for the new fly-by-night originals, but the nostalgic licensed content that they can watch on repeat.

Case in point: A

Morning Consult

poll found 29 percent of Netflix subscribers would cancel the service if it lost

The Office

. A further 35 percent stated they'd leave if Disney's Marvel movies left Netflix, while 26 percent stated they'd leave if Disney's other shows and movies left. A smaller, but still significant 17 percent stated they'd leave if the sitcom

Friends

disappeared from Netflix.

Interestingly enough, that's exactly what's happening. Thanks to the introduction of Disney+, most of Disney's owned content will be leaving Netflix eventually. And

Friends

and

The Office

will both be gone by 2021. Should even half of these poll respondents make good on their threats, Netflix could stand to lose a quarter of its subscriber base over the next 2 years.

Can Original Content Make the Difference?

Netflix is playing a big gamble as it shifts towards original content and away from the TV shows that its core base of viewers (millennials and GenX) choose to watch as anchor shows. Content like

The Office

and

Friends

play an important cultural role for a large swath of the company's subscriber base that isn't going to be aging out of the market for decades. Such shows will eventually lose their appeal, but that eventuality is a long time off.

Meanwhile, few Netflix shows last beyond 3-4 seasons and fewer than 50 episodes. Meanwhile, the top syndicated shows (e.g., the ones most people watch over and over again) have 80 ore more episodes stretched across 8 ore more seasons. To put it lightly, Netflix isn't setting itself up well for long-term replayability based on how consumers typically consume older shows.

It's possible that Netflix's content chief is onto something. Content spending is big business, and services need to spend that money wisely. However, in light of what's happening, the company could just be blowing smoke. After all, Netflix has very little control over the number of top shows it's lost recently. As more of the companies it licenses content from entering the market with their own services, it's likely to continue losing its top syndicated shows.

This Week's Streaming Guide

1. Watch the FX's Remake of 'A Christmas Carol' this Thursday

Charles Dickens' classic Christmas tale is reborn this THURSDAY at 7:30 PM EST on FX. -

Flixed

2. Netflix's Live-Action Remake of 'The Witcher' Premieres this Friday

Don't miss the gritty live-action remake of one of the best-regarded video games of the past decade. -

Flixed

News and Industry Developments

1. AT&T Is Launching Yet Another Live Streaming TV Service

Dubbed 'AT&T TV', the company is currently testing the service in a select few markets. -

F

ox

Business

2. Disney May Launch Unannounced Star Wars Series on Disney+ in 2020

The rumor mill is flowing that Disney is currently producing and plans to launch an as-yet-unannounced Star Wars TV show focusing on the expanded universe character Doctor Aphra. -

Heroic Hollywood