The Battle of the Binge

Battle of binge viewing, that is.

Great phrase, don’t you think? Man, we wish we’d thought of it. But it’s part of the title of the following piece by Josef Adalian, wordsmith extraordinaire:

battle-of-the-bingeFX, Turner, and Netflix Face Off in a Battle of the Binge
by Josef Adalian

Let’s say that your friends have become increasingly obsessed with a new TV show that’s already on episode eleven of a thirteen-episode season. You finally realize that you are missing out on something great and want to quickly catch up in time for the finale … but you’re out of luck. Most networks only have rights to stream the last five episodes of their series on their websites and VOD, and Netflix usually doesn’t post the whole season until a few weeks before the next season begins.

But Vulture has learned that a couple of cable’s biggest programming powerhouses, FX and Turner, are fighting back on this industry standard, telling TV studios that they will not buy any new show unless it comes with the right to keep streaming every episode in a current season until it ends. Netflix has made its position on the issue clear: If studios give into these demands, the service could dramatically cut the price it pays for streaming rights, potentially denying producers millions of dollars in revenue. A battle of the binge is brewing.

Before getting into the clash, a quick lesson is in order for how streaming has changed the traditional economics of TV production. When a network picks up a show, it doesn’t own it; it essentially leases the episodes of a season for a pre-determined window (usually one year) from the studios that make them. Because the networks are renting and not buying, they usually pay around 60 percent of production costs and make their money back (and, presumably, a profit) by selling ad time. Studios try to recoup their 40 percent outlay via international sales or syndicating reruns. But in recent years, both sides of this financial equation have come under attack.

At the networks, ad revenue has been squeezed by the rise of time-shifting and other alternative means of watching shows. While networks love to tout how many viewers are watching a show a week after it airs (so-called “L+7” ratings), advertisers only pay for viewers who watch commercials, and then only if they watch within three days of an initial telecast (C3 ratings, in industry parlance). According to a senior cable network executive, it’s not unheard of for that C3 number to be anywhere from 35 to 45 percent below the L+7. “That means we’re losing [35 to 45 percent] of our ad revenue,” says the suit.

Meanwhile, studios have been feeling the pain because syndication deals, while still a big part of their profit formula, are not nearly as reliable or lucrative as they might have been even five years ago. Some cable networks, like TNT, that used to rely on reruns of old network dramas have diverted more resources to creating their own scripted hours. And with comedy, some networks are finding it more cost-effective to create 100 episodes of a show on the cheap (like FX’s Anger Management) rather than pay big bucks for a modestly rated network sitcom.

This is where Netflix comes in….

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