How does Netflix license TV shows and movies?
Today, video on demand platforms is drawing TV viewers from across the globe. What is the reason for its huge popularity? Access to thousands of popular movies, TV shows, and originals in one single platform can satisfy any taste. Convenience and affordable packages also make them a primary choice over the traditional TV network. Building a video streaming website like Netflix is an awesome approach to draw in traffic to your site and to benefit from video content. Netflix is one of the largest providers of on-demand movies and TV shows on the Internet. As of 2020 first quarter, Netflix has over 182 million paid subscribers and the company is still leading the charge over its competitors.
Why is a Streaming License Important?
To make your subscribers happy with a wide range of popular shows and movies, you might need to acquire content from TV show creators and movie makers. If you are acquiring movies and shows for your streaming website from elsewhere, you need to get permission or movie licenses from the original content creators to stream it on your platform. The type of license you need to get might vary depending on the type of content. Licensing for online streaming content is the process of getting permission from the owner of a movie or TV show to stream its content through an on-demand platform like Netflix.
If you are planning to build a Netflix like website, a licensing agreement is essential under which the terms of a legal contract between you and the content owners will be defined. It starts with copyright, which is a legal right of ownership that allows content creators of a published work to control how it is managed and whether it can be copied.
Unauthorized use of copyright content will result in copyright infringement that can lead to legal challenges. Usually created in the form of written consent, a video streaming licensing is given to the third-party by the copyright holder for the use of their content. The agreement can involve a price paid for the license, the limit of use, and other conditions. For example, the owner of a TV program can give you a license to operate a movie or stream all the seasons of a particular show in your online platform to a specific period. Once the period of the agreement expires, it can be renegotiated or dropped depending on the viewer’s interests.
How Does Netflix License Their Movies & Shows?
To keep its subscribers satisfied with the number of content choices available for streaming online, Netflix partners with content providers to license streaming rights for movies and TV shows. A licensing agreement is established under the terms of a contract between content creators or owners and Netflix. Each agreement differs based on the requirements of both parties.
Securing Netflix licensing with moviemakers and content owners is one of the greatest expenses for Netflix. The company spends over $15 billion on production and content licensing. The growth of on-demand content has made it more difficult to obtain licensing inexpensively.
Here is what Netflix splurges on content- its annual cash spending over the years 2014-2019.
Netflix uses customer data mining to find out which content subscribers pay to watch and relies heavily on this info to determine the cost of each Netflix licensing agreement. Data is compiled to determine the total hours of viewing a TV program or movie generated over the period of a licensing agreement. Finally, this metric is compared with content arrangements, and it fixes final pricing on exclusivity and the time frame of the agreement.
Netflix also started investing in producing its own content in-house or acquiring exclusive rights to stream its originals shows like Orange Is the New Black, BoJack Horseman, Stranger Things, and a lot more. While Netflix owns all the rights to its originals and streaming it anywhere in the world, due to the unavailability of its service in some countries, it might not be able to secure the licensing right for such regions.
According to BMO Capital Markets, Netflix is planning to invest $17.3 billion in content and the content budget is beyond originals. The overall content spending of Netflix would be definitely more than the forecasts.
How To Get A License To Stream Movies?
Curating content for your streaming service requires constantly collaborating with content providers to acquire compelling content. However, when you are planning to build a streaming service on a large scale, it might not be easy obtaining rights to show a movie as the media houses might have already sold the rights of popular shows and movies.
In video on demand, licensing involves 2 parties- The content providers and the broadcasters. The streaming license agreement you make with the content providers will permit you to stream the complete show for a period of one or more years.
There are mainly 2 ways to license movies for streaming.
- Contacting the copyright holder directly to obtain the license.
- Rent the movies and shows from authorized distributors.
At times, content owners sign multiple contracts for the same content with multiple on-demand platforms. This is known as non-exclusive agreements and far less expensive than exclusive agreements which is another type of agreement.
Exclusive agreements are a differentiator among content providers, especially when there are a large number of video-on-demand services in the industry. An exclusive license agreement between a content owner and broadcaster can be fixed for a specific number of years where the broadcaster will have exclusive rights to manage and stream the content. Exclusive agreements are massive investments and come with a hefty price. But, exclusive content can draw large numbers of subscribers to your video-on-demand platform.
Related Content – How do video on demand sites get their content
To start with the process, you have to approach the licensing team of a studio and the licensing agreements will differ with the type of content and studios. The next step is to fix the video content licensing fee. Depending on the type of video, its intended use, the nature of the content, and the usual laws surrounding supply and demand, the price of licensing can vary considerably.
“Terms of Use” is a crucial pact or treaty that you need to sign before you acquire licensing from content owners. One last thing to be noted is that you need to make sure that you secure all necessary documents and licenses to stream any video content on your website. Launching a streaming site may be easy, but certain things must be taken into account since your venture directly relates to financial elements and also license based concerns.
How Much Does It Cost to License a Movie/Show?
If you are planning to license movies and shows for your streaming website and want to know how much does it cost to license a movie, the cost can vary considerably depending on the following factors.
- Terms and conditions of content owner or distributor
- The demand of the content.
- Audience size of your streaming platform.
Here is the amount of money spent by popular streaming services on content.
The video license agreement cannot be finalized with single pricing as many variables like the above-mentioned ones affects the price. If you want to minimize costs when you need to obtain a license to operate movies, make sure you choose movie distributors who offer cheaper prices than others.
Here are some of the common licensing models in the streaming industry.
Fixed License Fee
The streaming service pays a fixed license fee for a specific period. The license is not required to report back to the license granter the success of the program or share any revenue they have received. Netflix follows this method to license its movies and shows.
Revenue Share
The license holder agrees to share revenue with the distributor. It works on a pay-per-view basis.
Minimum Guaranteed Revenue Share
Some content owners or distributors might also agree for a low-cost streaming license agreement where both content owners and licensees take a share of the revenue generated from streaming movies.
If you are looking for how to get rights to stream movies for earning good revenue from your online streaming website like Netflix, you need to consider these factors when calculating the total licensing costs.
If you plan to establish a large streaming service like Netflix, you will have to spend billions of dollars on content licensing. However, you can start small, and as your streaming service grows you will be able to buy popular movies and TV shows that are in high demand.
Another alternative is to acquire content from authentic content marketplace for films and TV rights. Content marketplaces are trusted global community that connects content sellers and buyers to fix the deal effortlessly online. All negotiations and transactions are done completely online. These marketplaces partner with leading Hollywood trade bodies like EMA, Movie labs etc to implement existing global industry standards for content selling and purchase.
It connects both content sellers and buyers and facilitates buying of licensed content including both movies and TV shows at affordable prices through easy procedures. Most content marketplaces follow simple pricing where it charges monthly nominal subscription fee to distributors. If you want to reduce the licensing fee, acquiring content from global content marketplaces is a great idea as you have the flexibility to select the content based on your budget allocation.
Advantages of Movie Licensing
Unless you are using movies for non-commercial use, the law states that you must obtain permission from the copyright owner for any content that you have not created yourself but want to use or share.
Content licensing management is based on the avails that outline specific license rules about when TV shows or movie content can be shown. The Entertainment Merchants Association (EMA) has set predefined digital supply chain standards. Many of the popular video on demand platforms have a non-proprietary transactional video on demand solution called EMA avails and are successfully incorporating it into their workflow.
EMA is a leading Hollywood non profit trade body that offers a cross industry format called EMA avails for the delivery of licensing avails specifying how and when content can be presented to the audience.
EMA avails include data like title, language, episode title, episode number, viewing time frame, wholesale price, license type, caption availability, total run time, license rights description, and a lot other within the EMA standards. Major studios and on-demand services who support these content providers are adapting their systems to be EMA Avails complaint.
Besides abiding by the law, let’s have a look at the other advantages of obtaining a license to operate a movie.
Saves Both Time and Money
While producing original content is a great way to lure today’s demanding viewers, still it’s way too expensive. You have to bear the costs to hire a production house, creative team for direction and camera, a scriptwriter, and many other professionals unless you have your own team. The entire process not only takes a lump sum amount of money; it consumes a huge amount of time as well. In such situations when you cannot afford the efforts of hiring a creative team, licensing media content is the best alternative. You can save both time and money by licensing popular titles that your viewers would love to stream on. In simple words, paying a royalty fee for a piece of engaging content is less expensive as compared to investing a lot of money and effort in producing originals.
Boost Up Brand Credibility
Think about securing copyrights of Game of Thrones on your video streaming platform? Well, for sure, your audience base will skyrocket overnight. Obtaining streaming license agreement for shows that are in high demand among viewers will boost your brand credibility tremendously. Compelling content will accelerate the pace at which people would subscribe to your streaming platform which ultimately contributes to your brand credibility and enhances the exposure of your streaming service.
Balance Out Content Publishing
Today’s viewers are always searching for exclusive content that they have not streamed before. To retain your desperate viewer base, it is important to update your content library regularly with new and interesting videos. If you fail to add new content to your library, the chances are that you might lose some subscribers. One of the great ways to avoid such bad scenarios is to license popular titles from content owners and media distributors and publish it on your streaming platform. This will help to balance out content publishing frequency even if you don’t have new content to update on a regular basis as you are offering classic shows and movies your viewers would love.
How to start a Streaming service like Netflix – Business Startup Guide
Conclusion
In a digital era where everyone can create and distribute media, the regulations of engagements between the entertainment industry and viewers need more clarity. One thing that you must keep in mind is that you need to get the required permissions and licenses along with usage rights in order to stream your video content. If you are looking to stream TV series or movies, you must be rest assured that you have a license to stream this content. In case you are accumulating content from independent video providers, make sure the viewership and ownership rights are capped by the agreement.
