The new Netflix series "Hemlock Grove" might have a horror theme, but that is not what is causing a lot of fear in many Los Angeles offices.
Instead, the source of that slowly growing dread is the idea that Netflix, which movie studios and television networks have come to see as a steady pipeline of income in a market where such revenue streams are harder and harder to come by, is done accepting fare from traditional entertainment generators and wants to become a creator of original material in its own right.
If Netflix is able to succeed as a creator of its own original content, it will almost certainly impact the sorts of contracts it strikes with entertainment companies, and thus may reduce the income studios and networks receive from Netflix.
For example, a few years ago, Netflix signed a contract with Viacom that is estimated to be worth in the neighborhood of $130 million each year. That contract gave Netflix wide-ranging access to Viacom's content. This was referred to by some as a "bulk licensing deal."
In recent weeks, however, Netflix has indicated that it will not renew the contract; instead of buying blanket access to almost everything Viacom produces, it wants the freedom to be selective. That way, it can pay for access to Viacom's hit without paying for access to its misses -- access Netflix customers do not want.
We would not be surprised if, in the future, Netflix becomes a much tougher negotiator and if the contracts it works out with networks and studios become more detailed, more precise and narrower than they were previously.
This is yet another example of how technology has changed the way business is being done in Hollywood.
Source: The Los Angeles Times, "Netflix push into original fare may be bad news for Hollywood," Matthew Fleischer, April 23, 2013