Time For Plan B On ‘Perpetual’ Deals For Forgotten Streaming Shows?

One of the great ironies of the Streaming Age is that, as media companies commission more and more programming for their online services, many shows quickly become lost in algorithmic perdition, sinking to the depths of a bottomless content sea after a brief run on viewers’ home screens.

Yes, you can still find a show that debuted on Netflix or Hulu three years ago. Even the worst search interface can surface an older show eventually. But if you’re not specifically looking, the algorithm soon forgets about older shows, and doesn’t suggest them to viewers anymore.

The sinking begins.

Maybe it’s time to reconsider – among everything else that’s being reconsidered since Netflix’s calamitous April earnings announcement and subsequent pivot – what we do with all those “lost” older shows that are piling up on all the services.

In part, this becomes important because having lots of stuff sitting on your service that most people aren’t watching, or even stumbling across, can be expensive.

That’s the painful irony behind Warner Bros. Discovery’s decision last week to kill Batgirl and another nearly complete movie (to take advantage of a short-term tax write-off), while mothballing half a dozen more straight-to-HBO-Max features and several series that already had been released.

Viewership was so meager on original shows from Robert Zemeckis, Melissa McCarthy, Doug Liman, Seth Rogen, and (twice!) Anne Hathaway that it was cheaper to take them off HBO Max than continue paying out contract provisions to the creators.

It suggests that there has to be a better way, both for streaming services and for production companies, who are distinctly alarmed by the streaming industry’s sudden downshift and its implications for them.

The HBO Max mothballing decisions were part of CEO David Zaslav’s steely-eyed search for just about every nickel he can salt away to reduce the newly merged company’s crushing $53 billion debt. Zaslav is focused on maximizing his fading legacy outlets – cable networks, theatrical releases – while blunting some of the previous regime’s streaming-first focus, which helped send losses leaping to a whopping $3.4 billion last quarter.

Understandable enough, but vaulting those shows so quickly, among many other cost-cutting decisions, is not likely to endear the company to creatives going forward.

HBO Max likely will clean up at the Emmys in a few weeks, thanks to the decisions of the former regime. Whether that level of artistic achievement is still possible in a couple of years, when all the implications of Zaslav’s cost-cutting, service-merging, and programming reductions are fully manifested, will be interesting to track, if not watch.

“The reality is, this is what Warner needs to do given its financial condition,” LightShed Partners analyst Rich Greenfield told the Hollywood Reporter. “What Warner does in the future, if they can de-lever, time will tell.”

The media companies are clearly thinking about how to build additional, low-cost venues for their libraries of content. Zaslav said WBD is open to selling or licensing its non-core franchise shows to third parties, following Sony’s embrace of arms-dealer status.

Several SVOD services have already built linear channels out of content they have laying around and the rest are rumored to be looking into that option. Perhaps those channels will drive significant additional ad revenue for low-visibility shows at very modest incremental expense.

Effectively, though, these linear channels represent something of a reverse-Schitt’s Creek play. Schitt’s, you may remember, went from little-seen basic cable fixture on Pop to Emmy-conquering hit on Netflix. Now, media companies want to take their streaming flops and go the other direction, mixing them in with their existing library content as a way to extract value via linear channels that feel a lot like basic cable, but with better ad targeting.

Another possible outlet for leftover content emerged this week, on news that Walmart wants its online shopping service, Walmart+, to better compete with Amazon Prime. The retailing giant is negotiating with Paramount Global, Disney and Comcast to build a contract version of a streaming outlet to counter the appeal of Amazon’s Prime Video unit, likely at some discount to Prime’s $8 billion a year content spend.

“Walmart doesn't need to own the service, as they learned with VUDU,” said David Zapletal, Chief Operating Officer of Digital Remedy told Fierce Video’s Bevin Fletcher. “Content is now a commodity and it's too competitive to win now through an (owned & operated) service. Therefore, by integrating partners and enriching user data with (Walmart’s) own proprietary data, the entire funnel wins.”

In that same Fierce Video article, Future Today co-founder Vikrant Mathur said the model envisioned in initial reports is “very similar to the traditional distribution model that these networks have followed with the (v)MVPDs,” with something like carriage fees paid to multiple wholesale programming providers.

The catch will be, as for all subscription services, the price to consumers, said Mathur, whose company runs big AVOD networks Fawesome, HappyKids, and iFood.

“For the offering to be really compelling to the consumer, Walmart+ will probably need to bundle and offer multiple content services, wherein lies the challenge,” Mathur said. “Given (Walmart+’s existing) $12.95 price point, and the networks’ notoriety for not discounting their packages to (v)MVPDs, how many such services will Walmart be able to squeeze in without having to raise the price?” 

I sat down with a couple of veteran Hollywood dealmakers last week who had a different suggestion for all that leftover content: Perhaps jokingly, they suggested raising a $500 million fund to buy back forgotten old shows from Netflix and others, then take that programming out to other outlets, especially internationally.

And there’s another possibility, which might even generate some revenue. Sell back those lost shows to their creators (not just smart aggregators like my two dealmakers). And on the front end, stop buying projects under perpetual global licenses. Instead, cut shorter-term deals for at least lower-profile original projects, with rights reverting to creators over time.

That would give the creators a chance to again do what they used to do. They could shop their show to legacy networks in faraway lands, build a FAST channel for Roku and Tubi, or maybe even create a virtual-reality experience in the Metaverse and sell NFTs as tickets. Or whatever else people come up with to watch video over the next 30 years.

Cutting deals that revert shows to creators after a given period also could ease the widespread unhappiness among creators over the lucrative but limited upfront deals they get from Netflix and other streaming services.

Those deals guarantee a fat upfront payment, but are basically piece work paid on a cost-plus-15% basis. There’s no “Lotto ticket” attached, unlike the old days, where international rights, format sales, and syndication could significantly improve a creator’s bottom line.

Reverting content after a few years, much as Quibi tried to do during its short existence (creators got the long-form version of their project back after two years, and the episodic shorts version back after seven), might give creators more motivation even when they’re making smaller projects. That might even make for better shows instead of the assembly-line productions that were mocked in a pair of recent South Park movies about the streaming wars.

Regardless, it’s time for creators and media companies to reconsider what “in perpetuity” means in an era of algorithms that don’t remember shows forever.

Having a vast catalog of stuff sitting around, not getting seen, especially as we seem to be easing into the back end of Peak TV, isn’t particularly attractive to viewers, creators, or investors. It’s time for the industry to adapt, again.