At the FX upfront breakfast this year, John Landgraf said something surprising: the company was rolling out a new digital service called FX Now. Part of the service (which is authenticated using your cable account) would be movie distribution.
After all, movies provide FX's base programming (on which it builds its slate of originals, so it's in a position to negotiate rights). On the new portal, FX planned to provide those films to its viewers exclusively of any other streaming service. When you're watching Thor on FX Now, for example, you're not able to watch it on Netflix.
Today, a similar deal was announced: Amazon has purchased an exclusive window on thousands of episodes of Viacom shows that expired on Netflix at the end of May, as well as a nonexclusive window on others. Dora the Explorer and SpongeBob SquarePants are among the shows migrating to Amazon. A big chunk of Comedy Central content popular with Netflix's young-skewing audience will also move (but not all of it. Tosh.0 is no longer on Netflix, but Daniel Tosh's stand-up special is). Terms of the deal weren't disclosed, but analysts put it in the $200 million range.
"We are in constructive discussions with several parties, including Netflix, concerning digital distribution of various portions of our rich portfolio of content beyond the expiration of our Netflix agreement later this month," Viacom CEO Philippe Dauman told analysts on a May 1 earnings call. "We continue to see such distribution to be a growing and complementary avenue for our affiliate business."
Lest the changes at Netflix seem too much like the company's affiliates jumping ship, remember that Netflix itself is pushing those affiliates to license content exclusively as well, and it's to be expected that some content publishers will dig in their heels. Netflix said it would pay a premium for exclusive content over and above what it would give for a shared window, which spells some serious negotiating brawls between streaming services and video publishers.
The payoff, when the deals are struck, can be huge: Disney's exclusive deal with Netflix, inked last year, means some $350 million annually for Disney over the course of multiple years. So the question becomes whether an entity like Viacom wants to take one of those lucrative exclusive contracts, or try to sell its content multiple times to various streaming services.
The big loser? The consumer, who will have to buy several streaming subscriptions if he wants to be sure to keep pace with, say, Workaholics as it leaps from one provider to another. Amazon's annual fee for its service actually works out to less than Netflix's $8 per month, but with those two players, Hulu, Aereo, Walmart's partnership with Vudu, and a new service from Target, keeping track of your favorite show's back-catalog could conceivably cost as much as your cable bill.
Of course, this isn't new: fighting over early exclusive content windows is a practice that stretches back at least to the wars between HBO and Starz over who got the latest theatrical blockbuster first. "I'm sure gladiators were given exclusive arena battle rights for Rome one year and Iberia the next," said Pivotal Research chief analyst Brian Wieser. "The reality is there are many entities out here competing for digital content rights and have other businesses that can subsidize the losses."
Wieser also says that pundits are living in a fantasy world if they think their cable bill is going to break down into a cheaper à la carte system of cable groups that the consumer can buy piecemeal. You may not have to buy Logo or Al Jazeera, but you'll have to pay through the nose to watch the NCAA. "If you were negotiating with ESPN directly, they'd say, 'OK, $40 a month. Take it or leave it,'" Wieser said. (The current chunk of your cable bill that goes to pay for ESPN is about $5).
The Viacom-Amazon and Disney deals, as well as the next one, are part of an iterative negotiating process. Because Netflix and others are blazing a trail for the streaming industry, every new agreement will look a bit different. "Starz unintentionally cut the first deal of the modern era, where they got paid, like, nothing for an overall deal and their content was everywhere," Wieser said. From there, the next guy learns that he'd better lock down his rights into a manageable number of years at a comfortable rate, and the guy after that goads Amazon into giving him an even better deal.
And the consumer? "Buy a disc if you feel like you need certainty," Wieser said. "That's what I do."