Why ‘Friends’ is still important to content providers 14 years later


Big news: Friends is staying put on Netflix at least through 2019.

The show went off the air 14 years ago, but that didn’t keep fans from freaking out after word spread that it was leaving Netflix by the end of the year.


Still popular: Friends averaged 28M viewers at its peak and still draws 2.2M for repeats on Nick at Nite.

Still not convinced? Tinder (yes that Tinder) recently released the top shows that people list in their profiles and Friends was #1!


Comparison of annual deal size between Netflix and Warner:
1) Old deal (2014–18) — $30M
2) New deal (2019) — $100M (↑ 233%)

Quick math #1:
1) Domestic subscribers — 58.5M
2) Annual cost to license Friends — $100M
3) Netflix is paying $0.14 per month for each domestic subscriber in order to license the show.

Quick math #2:
1) Annual cost to license Friends — $100M
2) # of seasons — 10
3)
# of episodes — 236
4)
$/season to license — $10M
5)
$/episode to license — $424K

Dive deeper: Excellent tweet storm from Matthew Ball @ MediaREDEF.


More #1: Why it’s difficult for Netflix and ‘Friends’ to go on a break

More #2: ‘Friends’ is staying on Netflix ‘throughout 2019,’ company says

More #3: Warner Spares Netflix. But At What Cost?

How Hollywood Is Racing to Catch Up With Netflix


Direct to consumer: Traditional media brands like Disney are racing to catch Netflix before it is too late.

Some analysts estimate that Disney would need 40M monthly subscribers paying $6/month just to break even with its upcoming streaming service.

Quote from Jessica Reif Cohen — Media Analyst @ Bank of America Merrill Lynch:
“All of the media companies will have to become more consumer-oriented… Five years ago, none of us thought people would watch as much as they do on their phones. Content consumption is going mobile, nonlinear and on-demand.

The media universe has never evolved this quickly — we haven’t seen this kind of change in the last 40 to 50 years. This has been the big concern in the market about media for the past three years.”

Valuations of major media players:
1) Apple — $1T
2) Amazon — $920B
3) Alphabet (Google) — $844B
4) Facebook — $504B
5) Disney — $167B
6) Comcast — $163B
7) Netflix — $140B
8) 21st Century Fox — $84B
9) CBS –$20B
10) Viacom — $12B


Quote from Ted Sarandos– Chief Content Officer @ Netflix:
“Pay television didn’t have a distribution problem — it had a packaging problem and a content problem. We saw that a lot of [cable customers] were paying for sports they didn’t want and channels they didn’t watch. There’s got to be much more equilibrium between consumer demand and pricing. Through the growth of all these direct-to-consumer services, television will become better and better.”

Netflix currently pays Disney ≈ $300M per year to license their movies. That revenue will go away next year when Disney pulls its library from the streaming service.

That deal would be worth far more if it were extended today.


More #1: An In-Show Promo By Any Other Name: Netflix’s $13 Billion Gamble

More #2: OTT Is More Than Just An Acronym

As Netflix surges, original content is the new black. But licensed shows still take the crown


% of new titles that are Netflix originals by year:
1)
2016–15%
2)
2017–25%
3)
2018–43%


Flashback #1: Netflix’s Dilemma: Marketing 700 New Original Series Is A Lot Harder Than Making Them

How much content does $8B buy? The answer from Netflix appears to be 700 original TV shows and 80 original movies.

Quick math: That is a pace of 1 original show every 13 hours and 1 original movie every 5 days.

Flashback #2: Apple Goes to Hollywood. Will Its Story Have a Happy Ending?

Original scripted shows by year (% change YoY):
1) 2009–210
2) 2010–216 (↑ 3%)
3) 2011–266 (↑ 23%)
4) 2012–288 (↑ 8%)
5) 2013–349 (↑ 21%)
6) 2014–389 (↑ 12%)
7) 2015–422 (↑ 9%)
8) 2016–455 (↑ 8%)
9) 2017–487 (↑ 7%)
10) 2018P — 500+ (↑ 3%+)


More #1: Netflix, Amazon Video, and Xfinity are accidentally re-creating cable TV

More #2: Pivoting to TV is the new pivoting to video

More #3: A Six Point Plan for HBO (The Future of HBO, Pt. II)

Netflix Is Expected to Spend up to $13 Billion on Original Programming This Year

Netflix is continuing to ramp spend on original content potentially reaching $13B this year!

Feature films by studio in 2018:
1)
Netflix — 82
2)
Warner Brothers — 23
3)
Disney — 10

Content spend in 2019:
1)
Netflix — $10B+
2)
Amazon — $4B+
3)
Apple — $1B

Netflix content spend by year (YoY increase):
1)
2013 — $2B 
2)
2014 — $3B (↑ 50%)
3) 2015 — $4B (↑ 33%)
4) 2016 — $5B (↑ 25%)
5) 2017 — $6B (↑ 20%)
6) 2018 — $8B (↑ 33%)
7) 2019P — $10B (↑ 26%)
8) 2020P- $12B (↑ 20%)
9) 2021P — $14B (↑ 17%)
10) 2022P — $16B (↑ 13%)


Most popular platform for watching entertainment on TV:
1)
Netflix — 40%
2)
YouTube — 17%
3)
Cable TV — 16%
4)
Hulu — 8%
5)
Broadcast TV — 8%
6)
Amazon Prime — 3%
7)
Other — 9%


Flashback: Inside the Binge Factory

Netflix subscribers:
1) 2011–25M
2) 2018–125M
3) 2020P — 200M
4) 2030P — 360M

More #1: How Netflix Became the №1 Destination for Television Entertainment (By Far)

More #2: Netflix’s Content Budget Is Bigger Than It Seems (Netflix Misunderstandings, Pt. 1)

More #3: Netflix Testing Out Pricier New ‘Ultra’ Plan at $16.99 per Month

Inside the Binge Factory


Hard to believe: It has only been 7 years since Netflix entered the original content business by beating out AMC and HBO for the rights to House of Cards.

TBT Headline: Netflix To Enter Original Programming With Mega Deal For David Fincher-Kevin Spacey Series ‘House Of Cards’ (03/15/2011)

Wow: 13 Reasons Why was watched by more people in India than the U.S.

More #1: There’s always demand in the banana stand; Arrested Development is back!

More #2: How Netflix sent the biggest media companies into a frenzy, and why Netflix thinks some are getting it wrong


Netflix subscribers:
1) 2011–25M
2) 2018–125M
3) 2020P — 200M
4) 2030P — 360M


Katzenberg’s NewTV Video Startup Raises $800 Million

Peak content? Jeffrey Katzenberg will be launching a new video startup with $800M in funding.

Strong pedigree: Katzenberg launched Dreamworks which was later sold to Comcast for $3.8B in 2016.

The big idea: Combine Netflix production quality ($5–6M per episode) with episodes closer in length to YouTube videos (<15m).

Flashback: Inside Jeffrey Katzenberg’s Plan to Revolutionize Entertainment on Mobile Screens

More: Netflix Content Chief Says 85% of New Spending Is on Originals

Netflix Surprises With Big Subscriber Gains, Shares Soar

Netflix blew away Wall Street expectations adding 5.2m subscribers vs. a projection of 3.2m. They beat the target by 63%!!!!

The stock is up 30% this year.

They have now broken 100m subscribers with more than half coming from outside the U.S.

Netflix has customers in 109 countries and 80% of the subscriber growth was outside of the U.S.

Revenue grew to $2.8b or roughly $9 per subscriber/month.

Assuming an average ad CPM of $25, an average user would have to watch 359 video ads per month to match that level of revenue.

Premium content. Netflix currently has $15.7b in content obligations and recently received 91 Emmy nominations.

Netflix Hits 125 Million Subscribers

Netflix crushed Q1 earnings just like they did in Q2, Q3, and Q4.

Subscriber growth in Q1–2018:
1)
Projected — 6.4M
2)
Actual — 7.4M

Milestone: The company topped 125M subscribers for the first time!

Just a bit outside: Back in May 2017 we wrote about a bold prediction that thought Netflix could reach 128M subscribers by 2022!

Wow: Over the past four quarters, Netflix has beaten guidance by 6M subscribers. That number alone would be the #3 streaming service behind Netflix and Hulu!

Big news: Comcast Will Start Bundling Netflix Into Xfinity TV Packages

More: Disneyflix Is Coming. And Netflix Should Be Scared.

‘War Machine’ Has Been a Minor Hit — and Netflix Needs Minor Hits

Interesting analysis using Google Trends in the absence of consistent ratings.

Quote from Scott Porch — Reporter @ Decider.
“Netflix isn’t a network like NBC or HBO that puts a lot of marketing into a project, premieres it on a date certain and hopes you watch it. Netflix is a database with thousands of hours of programming, an algorithm-driven interface that shows you things you’re likely to enjoy watching, and a programming philosophy that the Netflix tent should be big enough for Fuller House and Chef’s Table.”

Netflix’s Dilemma: Marketing 700 New Original Series Is A Lot Harder Than Making Them


Big challenge: Marketing 700 original shows when you’ve already spent $8B developing original content.

Big budget: Netflix plans to spend $2B on advertising this year!

How much content does $8B buy? The answer from Netflix appears to be 700 original TV shows and 80 original movies.

Quick math: That is a pace of 1 original show every 13 hours and 1 original movie every 5 days.

Flashback: ‘War Machine’ Has Been a Minor Hit — and Netflix Needs Minor Hits

Quote from Scott Porch — Reporter @ Decider.
“Netflix isn’t a network like NBC or HBO that puts a lot of marketing into a project, premieres it on a date certain and hopes you watch it. Netflix is a database with thousands of hours of programming, an algorithm-driven interface that shows you things you’re likely to enjoy watching, and a programming philosophy that the Netflix tent should be big enough for Fuller House and Chef’s Table.”

First impression: TV series were the first engagement for 70%of Netflix customers and 88% for Hulu.

Top genres watched by new Hulu subscribers:
1)
Comedy — 19%
2) Drama — 16%
3) Animation — 10%
4) Sci-fi — 9%

Top genres watched by new Netflix subscribers:
1)
Drama — 21%
2) Comedy — 11% 
3) Thrillers — 9%
4) Crime — 8%
5) Mysteries — 8%

More: 
1)
Peak Documentary Has Arrived in TV Too

2) Could Blockbuster Video Have Been Netflix?

3) Can the Shortform Video Market Make a Comeback?

4) The forgotten story of AOL’s In2TV, which helped invent binge TV way before Netflix