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Netflix Boosted By Old Shows, But Margins May Suffer

The ‘Netflix effect’ has remerged with some of the streaming titan’s competitors changing their tactics by licensing their old TV shows and movies to their biggest competition – Netflix.

Analysts say the move could expand Netflix’s content catalogue and possibly erode its profit margins.

Back in 2007, Netflix used to depend on content licensed from other companies but because its competitors began their own streaming services, the leading streaming company had to change its strategy.

Now, however, it seems licensing has come back in vogue for streamers of content.

“Conventional wisdom of the last 10 years was that you keep everything in house,” said Casey Bloys, HBO’s chief executive. “But in the history of television, syndication — selling a show somewhere else — was the brass ring. It meant the show was successful and would have a life elsewhere.”

According to analysts at Morgan Stanley, Netflix’s Licensing deals could be a “long-term positive” and should widen the profitability gap over its streaming rivals.

However, the cost of the licensing and other endeavours could put pressure on Netflix’s profit margins in 2024, which has led analysts to augment their estimate for Netflix’s total cash spending next year by $500 million to $17.7 billion.

With Netflix reporting its results next week, investors will be paying close attention to how the new licensing and also the password-sharing crackdown plays out in regards to revenue.

The timing for the comeback of licensing deals happened around the strikes in Hollywood, brought production to a halt, but with the writer’s strike ending and only the actors strike continuing, the new deals have resurrected some of the older shows like Suits and Ballers.

Both series were at the top of the Nielsen Streaming for three months, showing that these older shows can boost a network’s rankings.

“Without doing anything on Max, the engagement on Ballers and Insecure really saw a spike when they were on Netflix,” Bloys said. “The initial experiment we had with a couple of titles has had an immediate positive impact on Max.”

Despite these licensing deals’ positive impact, Bloys said there are some high-drawing shows for audiences that will never be streamed on Netflix. “I doubt you’ll see Succession or White Lotus,” he said.

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