Netflix’s New Comedy Licensing Signals Sane Spending Alternative

News seeped out of Netflix the past few days that the streaming giant is offering a different deal to at least some comedy performers, licensing their stand-up specials for just two years before returning rights to the creators’ control.

The new approach suggests to the entire industry that (finally!) there may be another path besides numbly deficit-financing dozens of shows that surface and sink into obscurity within weeks of their debut in the big slush pile o’ content on Netflix and elsewhere.

Netflix is still on course to spend $17 billion this year on content, executives said at the company’s last earnings call, with the next couple of years expected to see spending levels “in the same zip code.”

Nearly 15 years after it started streaming video, though, Netflix spending is only now somewhere around break even. Most of its later-arriving competitors are still hemorrhaging cash, losing at least $10 billion combined this year.

Debt-strangled Warner Bros. Discovery is now talking about licensing the library shows it already has rather than keeping them on HBO Max and Discovery+. Other companies, feeling investor pressure to make money on streaming, are trying to figure out how to compete with cost-effective programming that can still attract and keep subscribers.

The new Netflix approach with comedy offers one possible solution to those conflicts, in a popular sector where it has successfully commissioned many breakthrough hits in the past.

The Wall Street Journal said the approach would cut the typical $1 million buy-out price to $200,000 for a short-term license. That’s notable savings for something that may not have a forever shelf life.

It also could seriously dent financing plans for some up-and-coming comics trying to piece together the funds to make a special, and that won’t be simple to overcome for many who haven’t yet established their names.

Veteran writer and standup comedian Jo Koy recounts in his latest special released earlier this month Live from the Los Angeles Forum the challenges of pulling together financing for his first special a decade ago.

Netflix executives declined to buy the show ahead of production, forcing him to cobble together financing from numerous other sources. Days before the show taped, even after Koy had pulled together the needed funds, Netflix executives again said they weren’t going to buy it. Only after the show was taped and edited did Netflix executives tell him, “Don’t shop it anywhere else. We’re buying it,” Koy said. Since then, Netflix has bought three more specials upfront.

The new licensing approach echoes the deals offered to creators by the short-lived Quibi. Creators there were paid to create projects that could be broken into 10-minute chapters for episodic release on the short-form mobile site. In turn, creators got rights back for the full-length version of their show after two years, and the episodic version after seven years.

It was a hit for many creators (especially at the prices Quibi was paying), because it both got the project made and gave them the flexibility to try to sell the full-length version a second time into international markets or other platforms. Those international and syndication opportunities are one big loss for creators in the era of up-front buyouts of global rights.

For all streaming services, more short-term licenses may be another way to maximize value in their programming. In a Peak TV era, their already overstuffed services have to keep producing high-profile content to attract and keep customers. But that means slightly older content quickly disappears from recommendation engines, and might as well be dead to many viewers.

That “algorithm death” has led some services to launch free, ad-supported linear channels (FASTs) with that library content, as a way to generate more cash from older shows while also giving the shows another chance to be discovered.

While it means less money for some comedians on the front end, it also means they can have more flexibility on the back end with a high-quality project that can act as a calling card for the rest of their careers. It’s the Quibi deal all over again, if you can get the project made in the first place.

Netflix’s big investment in comedy has been career-making for some performers. Tasmanian-born Hannah Gadsby became a breakthrough star for her Emmy-winning 2018 show, Nanette, an alternately hilarious and harrowing confessional monologue in part about the traumas of growing up lesbian in a place that called it a crime.

Two-year licensing deals aren’t being imposed on the heaviest hitters in Netflix’s stable of comedians, such as Dave Chappelle and Gadsby, arguably Chappelle’s comedy polar opposite and a sharp critic of transphobic jokes in his Netflix specials. Gadsby said they extended their deal with Netflix in part to broaden “a notoriously transphobic industry.” Gadsby will produce both a stand-alone show and another showcase for other comics in the latest deal.