Netflix's 'Friends' Deal Highlights Licensing Tangles for the Future of Streaming

December 5, 2018

By Chloe Aiello

Care to watch the original "Star Wars" trilogy? Don't assume Disney's forthcoming streaming service Disney+ will have it. And while AT&T owns the '90s megahit "Friends," it won't be streaming that show exclusively on its own over-the-top platform when it launches in 2019 ー viewers will still be able to binge the series on Netflix.

"Star Wars" and "Friends" are just a couple of the confusing licensing arrangements viewers should come to expect as more media companies push to debut their own streaming services to rival Netflix and Hulu.

"Consumers are going to continue to find these glitches, if you will, these tangles in the streaming universe that I think are going to take some time to iron themselves out," Dade Hayes, a contributing editor at Deadline, told Cheddar on Wednesday.

His comments follow reports that Netflix ($NFLX) paid $100 million to hold the streaming rights to "Friends" through 2019.

Many were shocked by the amount, especially considering Hulu paid about $160 million to stream Seinfeld for five years, and AT&T's ($T) CEO Randall Stephenson said the deal is nonexclusive. When AT&T debuts Warner Media's over-the-top streaming service, expected at the end of 2019, the sitcom will probably appear there too, the New York Times reported.

“That’s content we definitely want on our platform,” Stephenson told investors at a Tuesday conference. “And clearly it’s important to Netflix as well.”

The fate of "Friends" in 2020 is still undecided. AT&T and Netflix have reportedly not settled on an agreement past next year, but according to Recode, a few options are on the table. Netflix could continue to pay a lesser amount to keep the show on a nonexclusive basis, while AT&T streams it too; or AT&T could pull Netflix's rights and stream "Friends" exclusively ー although that could prove disastrous if the streaming platform flops.

"Stephenson... kind of was able to talk out of both sides of his mouth saying, 'Our Warner Brothers television unit made this large sum of money licensing the show,' and as you say, 'We are also, by the way, developing a kind of Netflix rival that can stream our own stuff,'" Hayes said.

Streaming "Friends" both on Netflix and on Warner Media's OTT platform gives AT&T the option of profiting twice from the show, but not all media watchers cheered the strategy.

Matthew Ball, former head of strategy at Amazon ($AMZN) Studios made his disapproval abundantly clear in a Tuesday tweet storm.

"I'm stunned, but not surprised by AT&T's decision to extended their #Friends licensing deal with Netflix through 2019. A perfect example of, despite saying they were committed to winning in [Streaming Video On Demand], Big Media wants to have their cake, eat it to (sic) - and then hope they get a 3rd cake," Ball wrote on Twitter, adding in a subsequent tweet that continuing to stream the program on Netflix would "eviscerate the value of this series on Warner SVOD."

But Hayes said AT&T's conundrum will be even more common in the coming years, as networks attempt to navigate complex licensing agreements in an effort to reclaim their content. Just look at Disney and AT&T-owned Turner Broadcasting. In anticipation of Disney+, the entertainment giant attempted in August to buy back rights to broadcast the majority of its "Star Wars" films. Its efforts were unceremoniously rejected, Bloomberg reported.

"Don't forget this is really about contracts, about business affairs and legal executives kind of haggling over terms. And multiply that by tens of thousands of hours of programming, it's going to take a little bit of time to work out," Hayes said.