CBS Moves Slowing Into Streaming Deals, Netflix Eager To Sign

by David Goetzl, Jan 25, 2011, 2:30 PM

• Comment
• Recommend
• Tweet
• 

It's hard to argue with Leslie Moonves' strategy to restrict digital distribution of CBS content. Even as Hulu formed and Netflix streaming emerged, the CBS chief held firm that he wanted CBS to maintain control of the company's content, not license it to another party.

He's gone laissez faire, saying with each new property that CBS is evaluating the option. There has been no urgency, even as consumers gravitated to new platforms.

His attitude: If CBS begins selling online streaming rights, distributors will be banging down its doors to throw money at it. By waiting, it's winning. The money still seems to be out there.

Yet, when will the tipping point come? When will it make sense for CBS to cash in?

Netflix, for one, looks to be a particularly lucrative business partner, eager to pay handsomely to stream CBS shows to its customers. Netflix views streaming as its future. It believes a day may come when it is out of the DVD-shipping business -- and it is focused on building the digital library crucial to its transformation.

On Tuesday at the NATPE event, Netflix chief content officer Ted Sarandos said he covets the CBS portfolio, as well as HBO's. Netflix currently has deals with Disney, NBC Universal and Fox.

What kind of resources does Netflix have? Sarandos said it will be an aggressive bidder to pry rights for Warner Bros. films away from HBO in a few years, and there's "no question" it can win.

On the TV front, Sarandos has not been able to land streaming rights to episodes of HBO original series. He didn't address the potential for a CBS deal, but said he expects a rapprochement with HBO. "Them being a great seller and us being a great buyer ... we'll eventually figure out some place where we can do business on their content, that makes sense for both of us," he said.

There are several enticements for a CBS or HBO. Unlike with a Hulu or iTunes, Sarandos said Netflix isn't looking to do a revenue-sharing deal, where a network would only do well if a show draws well. Instead, "we'll write you the check ... and if nobody watches it then we're out," he said.

Moonves has indicated that by moving slowly with streaming deals, CBS is protecting the value of its shows in the syndication market, not to mention viewing levels and ad dollars on TV.

CBS indeed may be a tougher customer for Netflix since its crime dramas with their standalone episodes have significant syndication value. On the other hand, a serialized show such as Fox's "24" may have less value in the after market, making Fox more willing to look for other revenue avenues.

Along with a decline in sales of DVD box sets, Sarandos says Netflix offers a prime opportunity for monetization for the likes of ABC's "Desperate Housewives" and "Grey's Anatomy."

"We're writing very large checks to license that content and building a very interesting model that keeps people engaged in content," he said.

Netflix is not interested in streaming episodes the day after they appear on-air -- it's too expensive to acquire rights and there are too many places for free viewing. Instead, its business is built around interest in catching up with, or trying out, a new show by viewing previous seasons.

Over time, as CBS considers what to do, it could be losing an opportunity to create interest in its shows, such as the serialized "Good Wife." Netflix subscribers are approaching 20 million.

Also, Netflix has expanded into Canada with a streaming-only product -- no shipping of DVDs -- and it plans to move aggressively into other countries in the next year. That might give CBS shows exposure abroad, and help build global syndication sales there.

Moonves has always gambled that content is king, and his belief that funds from Netflix and others will always be there looks to be reinforcing that. It's nice to have a quick revenue boon in your back pocket, so to speak.

• Comment
• Recommend
• Tweet
• 

Be the first to comment on "CBS Moves Slowing Into Streaming Deals, Netflix Eager To Sign"

Leave a Comment