So it turns out that Dora and her Viacom friends (Blue’s Clues, The Backyardigans, etc.) have all jumped from Netflix to Amazon.
Subscribers may have been surprised (don’t remember seeing an email or pop-up message from Netflix ever about any kind of content disappearing soon, and for good. For good reason?). But Netflix investors were not:
In April, Netflix told investors that it would allow its deal with Viacom to expire, saying it has been moving away from broad, multi-year deals with networks and cable channels in favor of more selective licensing arrangements.
As that LA Times article says, Netflix is instead getting Disney’s stable of characters – but only in 2016.
Obviously, this is a good deal for Amazon (it did shell out hundreds of millions of dollars for the deal; neither Amazon nor its shareholders care, of course) and Amazon Prime viewers. And this is a lucrative deal for Viacom, though it comes with a caveat (from the LA Times article also):
According to Bernstein Research, Viacom has become increasingly dependent on streaming service revenue to help boost profits. Subscription video-on-demand (SVOD) made up nearly 5% of the company’s operating income in fiscal 2012 — and 200% of its growth in operating income.
“But SVOD hurts ratings for kids’ networks,” Bernstein media analyst.
“Now the debate is whether SVOD licensing fees offset the ad revenue decline,” he said. “In the short run, we agree ‘yes’ but going forward, we think ‘no.’ Cannibalization increases, and licensing fees decrease as the balance of power shifts in favor of the SVOD providers.”
Anyway. I am sure Netflix has its reasons for letting the deal lapse. And I am sure it fully expected someone like Amazon to snap it up. Two things though:
1. Given the importance of kids videos (not a very long-tail market, and they don’t mind seeing the same damn thing a few hundred times) to streaming video providers, does this deal help Amazon take off and firmly establish Prime as a very viable alternative to Netflix?
2. As long as Netflix is in the business of competing for content that others produce, expensive deals and bidding wars every couple of years will be the norm. So will we see Netflix attempt to start its own kids franchise at some point? Animated series only…which are presumably easier and cheaper to produce, compared to $100m grown-up dramas that most people only watch once or at best, twice.