What Is Netflix’s Content Licensing Strategy?

Content licensing is usually for a fixed number of years, and Netflix (NFLX) pays for an exclusive subscription video-on-demand (or SVOD) license for a given title. However, content providers may prefer other cable and broadcast networks and other over-the-top (or OTT) players over Netflix. Another possibility is that this content license may expire at a certain point. So to avoid a particular player’s monopoly over content, numerous licenses can be issued for the same content. Netflix has always focused on global content rights when licensing content from other content providers.

The company explained its global content licensing strategy at the UBS Global Media and Communications conference earlier this month. Netflix stated that currently, most of its content licensing expenditure is on global content rights.

The company was also asked whether it had observed any reluctance on the part of media companies to sell their content to the company. However, Netflix stated, “No, we’re following a path that we set out on a few years ago, which is to kind of move up the food chain in those productions. So be less likely to be an aftermarket buyer at many screening and more likely to be a co-production partner with the networks.”

In July 2016, Netflix entered a content licensing agreement for Star Trek with CBS (CBS) Studios International. In 188 countries, excluding the United States and Canada, Netflix will exclusively stream Star Trek, starting with the original series that debuted in 1966 through to other spin-offs. Netflix has also entered a content licensing agreement with 21st Century Fox (FOXA). According to the terms of the deal, Netflix will have exclusive streaming rights to its FX channel series American Crime Story.

The FX channel is part of Twenty-First Century Fox’s Cable Networks Programming segment. In fiscal 2016, the segment had revenue of $15 billion and accounted for 55% of the company’s total revenue of $27.3 billion.