A big topic in the streaming world has been who owns what. All I can say is, “Finally!”
For many years, we—sort of speaking of the business press, especially the casual observers—have treated all streaming TV shows interchangeably. If Netflix branded a show an “original” for all intents, the press referred to it as an original and lumped all the originals together. With the Friends on Netflix issue coming to a head last fall, we’ve finally started to unpack what it means to have licensed content on a given platform.
(Here’s a good article by Beejoli Shah at The Information that makes the distinction between licensed and owned content. I hope we get more of this.)
Here’s my hot take, though: the licensed versus owned conversation STILL doesn’t explain enough. Why?
In one word…co-productions.
This convoluted third category is like the love child between owned and licensed shows. Moreover, TV series can fall into different categories depending on the territory they are licensed in. Someone needs to step in and explain all this.
Since I need to clarify this distinction for my series on Game of Thrones versus Lord of the Rings versus Chronicles of Narnia anyways, I may as well write a full article on it.
For the streamers each ownership model has different pros and cons, and understanding those different models can explain why certain shows get renewed, while others don’t, why certain shows are branded certain ways and others aren’t and, mainly, the economics of all of them.
I’ll start by explaining wholly-owned series, then explain licensed series and co-productions. What they are, how they impact the business models and provide some examples. Along the way I’ll explain the traditional licensing windows and a geographical clarification. And since this article was directly inspired by my big series on GoT versus LoTR versus Narnia, I’ll pull examples from those three streamers for each of these definitions (as best as I know).
This is simple: the network distributing a piece of content also owns the content. 100% free and clear.
More granularly, the studio’s in-house production team owns all the rights to it. To get to this point—where a channel owns 100% of the rights—usually requires that the network developed the show itself. That means they either found the show runner—who wasn’t already under a deal with another T V production house—took her pitch and optioned her TV show; or they hired her under an overall deal, so that anything they produce they have first rights to. That’s step one, own the underlying IP. (Yes, if it is based on a book or movie or what not, you have to own all the rights to that too.)
The second step is to then pay all of the production costs. Most of the time, if you do those two things, you own a show outright.
What does this mean for a network/streamer? Well, they can do whatever they want with the TV series. (I’ll explain a qualification to this in a moment.) They can air the show for as many seasons as they want, as long as they’re okay with the production costs. They can keep it exclusively on their channel or syndicate it. They can raise or shorten the number of episodes. In short, they don’t have to negotiate with an outside producer because they are the producer.
The qualification to unlimited control is talent. Even a wholly-owned show has obligations to talent—especially key talent like showrunners or the lead actors—that can influence some of these pieces. If the talent’s contracts are up, and they don’t want to make the show anymore, they don’t have to (until they get a pay raise).
Since the 1980s, roughly, broadcast channels have become more and more likely to own their own shows, or at least air shows under the same corporate parent. (So NBC airs shows produced by Universal Cable Productions or Fox aired shows by 21st Century Fox Television.) This has happened since time immemorial, but became more common when the FCC relaxed primetime air time rules and ended “fin/syn” regulations (which I do not have time to explain today) in the 1990s. When the streamers got into the game, they prioritized “wholly-owned” shows because it enabled them to choose distribution plans they wanted.
(Note on verbiage: I called these “wholly-owned” at my previous job, and I’m sure different places can call them different names. I like wholly-owned much better than “original” because it is about who owns the series financially, not customer-facing branding.)
The downside to wholly-owned is one of costs. If you’re paying all the costs up front, that can quickly get expensive. For a licensed show, you can choose to pay a fraction of the total costs because the production house can make additional revenue later. Same with broadcast shows back in the early 2000s, when networks often paid 50-70% of the costs for co-productions. However, if you’re looking to own all the rights forever, or want exclusivity forever, owning the content completely is actually cheaper.
HBO – Game of Thrones. The Sopranos. The Wire. True Detective. Veep. Silicon Valley.
(Basically, nearly their entire catalogue. HBO as a premium channel has tried to own 100% of their content. That’s why HBO Go/Now’s offerings have nearly every TV show they’ve ever made.)
Amazon Prime/Video/Studios – Transparent. The Man in the High Castle. Mozart in the Jungle.
(Amazon has a fair bit of wholly-owned content, but some of their biggest swings will fall in later categories.)
(Netflix is rarely the producer of record, according to Wikipedia. However, as this Digiday article makes clear, Netflix is essentially acting like the wholly-owned studio by owning rights for extremely long time periods. These shows are examples of series that are functionally owned by Netflix, even if another producer originated the project.)
A “licensed” show is a TV show that the streamer doesn’t have any financial stake. They don’t own any downstream revenue. At all. It’s actually about as easy to understand as a “wholly-owned” show. If a wholly-owned show is 100% of the rights of project, a licensed show is zero percent of the rights. Zilch. Nada.
Instead, a streamer simply pays the TV producer for the rights to air the show on their streaming channel for a set period of time. (You could almost call them “rented” shows in that regard.) The key qualification for licensed show is when in the show’s lifecycle the seasons are aired on the streamer. These “windows” break down into three rough areas (though some streamers and producers likely have their own definitions):
First-run: Basically, the initial license period when a show premieres. This window usually lasts one year, but can be shorter or longer. This first-run applies to any distributor from broadcast, cable to streamer. (In the EU, a lot of US prestige TV shows are first-run licensed on Netflix or Amazon, like The Magicians, The Expanse or Mr. Robot.)
Second-run: The second person who gets a crack at the apple. Usually this is after the first year of exclusivity for the first run window, which is why shows like The Magicians, The Expanse or Mr. Robot appear on their respective streamers about a month before the new season launches on the traditional linear window in the US. (And the second person could be the same as the owner of the first-run rights.)
Library: Anything after. The only qualifications here is whether the show is recent (last 3-5 years) or ancient (30+ years) or somewhere in between. And how many times it has been exhausted in syndication—Friends, Seinfeld, The Simpsons, for example—and whether or not that matters.
Here’s an example of a show going through various iterations. Downton Abbey started its US first-run life on PBS. It was an ITV-WGBH co-production, with first-runs on ITV and PBS. The second run was purchased first by Netflix, then bought up my Prime Video. Now, as a library show, it is still on Prime Video.
The benefits of licensed deals for the streamers are to get much more content with less upfront costs. (Ideally.) Also, for global streamers like Amazon and Netflix, they can license global rights to fill out their catalogue worldwide. This can also be cheaper for the TV producer, since they need less of an international sales team. The downside is that—in success—the streamer has no upside. Further, it can lead to content jumping platforms, like the Downton Abbey example above.
Netflix – The CW shows on Netflix. (Part of an output deal.) The Magicians. (Second-run from Universal Cable Productions after Syfy run.) Friends. (Library run from Warner Bros. Television.) You. (A&E/Warner co-production that became a Lifetime first-run in the US.) A lot of the UK, Canadian and European content in the US and vice-versa.
Amazon – Catastrophe (first run licensed in the United States). The Expanse (second run licensed in the United States; first run in other territories; now a co-production). Again, a lot of the BBC. ITV or Channel 4 shows were UK originals that are licensed for the US or globally.
HBO – Don’t have any. (The movies are licensed, but again a different thing entirely.)
To be clear, Netflix and Amazon have been extremely aggressive at buying worldwide first and second run licensed rights.
Another note just from the examples is how many of the shows are from NBC-Universal TV productions. Clearly, they enjoy getting paid back with licensing revenue, even as their cable provider struggles to figure out a streaming plan itself.
Basically, a co-production comes from two huge entities—who are each trying to rip off the other financially in general—having this conversation:
TV Production Company: “Hey, I have this show with [HUGE ACTOR/ACTRESS] in it being run by [GUY/GAL WHO DID OTHER BIG SHOW] that you love, and it’s based on a [INSERT IP HERE], that is so buzzy right now!”
Streamer: “Oh man, we really want that. Does Netflix know about it?”
TV Production Company: “Oh yeah. We’re getting an offer soon.”
Streamer: “Okay, well we want to make it. We’ll pay you for it.”
TV Production Company: “Fine, but if we make any money, we get to keep half.”
Each side brings something to the table in a co-productions. The TV producers have all the talent so they demand some sort of backend profit participation. The streamer is paying all the money, so they get some sort of participation too. Then, after the initial agreed upon windows or run is complete, the rights revert back to the TV production company. (Historically, networks used to not pay for 100% of the costs of a co-production, but with fewer revenue streams, that is becoming the norm.) This Digiday article I linked to above is essentially describing a co-production.
In general, since these deals are super complicated, the studios and streamers negotiate them ahead of time. This way, when a show comes along, the basic portions of the deals are already decided and it can speed up the time required to make the series. They are also updated regularly, especially if one side feels (or realizes) it’s getting the raw end of the deal.
The main upside for co-productions is access to talent. This is the currency of Sony, Warner Bros, Fox and other big TV studios. They sign large overall deals with top talent to then shop around. That’s why Netflix is spending big bucks on overall deals. The downside for the networks is that at somepoint—which may be ten years in the future—some of their original programming could go to other platforms. The bet the streamers are making is that by the time that happens the content won’t be that valuable.
HBO – Westworld (Warner Bros. TV/HBO co-production; Again, HBO usually avoids these, but in this case it is at least under the same corporate overlord.) The Larry Sanders Show (HBO/Sony Pictures TV co-production; this is why when Gary Shandling passed away, the show wasn’t available for streaming on HBO, because Sony had likely driven too hard of a bargain. It’s now back on HBO.)
Amazon – Jack Ryan (Amazon/Skydance/Paramount co-production; sometimes you can even do these as a three way. If the underlying IP is valuable enough, it can demand its own separate pot of profit money.) The Tick, Good Girls Revolt and Sneaky Pete (Sony co-productions).
Netflix – House of Cards (Media Rights Capital co-production). Orange is the New Black. (Lionsgate co-production) Gilmore Girls: A Year in the Life. (Warner Bros co-production). Lost in Space: 2018 Series. (Legendary co-production) Marvel Series (Marvel/Disney co-production) Unbreakable Kimmy Schmidt. (NBC-Universal co-production.) BoJack Horseman. (The Tornante Company co-production) [Update: Also, Netflix may not be a profit participant on some or all of these shows. That said, they license period is so long for them–in some case 10 years from the last season they order–that they become de facto co-productions. Thanks to some feedback on Twitter for that.]
As you can see, some of Netflix and Amazon’s biggest shows came from major TV production studios. And some of them tend to be older shows, as my working theory is Netflix is looking to make more of its own shows or own closer to 100% control indefinitely.
I mentioned two qualifications to these definitions. First, shows have different ownership structures in different territories. Or better phrased, they can be wholly-owned by one entity, but licensed internationally. So a show is wholly-owned by Syfy in America, but licensed abroad. This happens quite a bit to US originals getting distribution by Netflix and Amazon Prime Video in Europe. This is why something can be an “original” in a territory, even if Netflix doesn’t own the rights to it.
So, to mimic myself when I write about data, when ever we refer to content we should clarify where we are talking about.