CBS Corp. Signs International Licensing Agreement With Netflix
CBS Corp. (NYSE:CBS) and Netflix (NASDAQ:NFLX) announced Wednesday that the two companies had signed a two-year, non-exclusive international licensing agreement bringing the former’s TV shows to the latter’s new streaming services in Canada (NYSE:EWC) and Latin America (NYSE:ILF). Last month Netflix announced its plan to expand into 43 countries across South and Central America and the Caribbean.
The deal, signed back in February, will go into effect in September. Canadian subscribers will have access to both the current and complete back seasons for the CW’s 90210, as well as past seasons for many Showtime programs and other CBS library shows. In Latin America, previous seasons of 90210, Medium, Nurse Jackie, Dexter, and Californication will be available, as well as library titles like Star Trek, Charmed, and Twin Peaks.
The new arrangement suits CBS (NYSE:CBS) because the Netflix programming will not compete with U.S. ratings, which determine advertising revenue, or Showtime’s domestic subscriber base. Netflix will make programs available to markets that previously didn’t have access, which only stands to increase Netflix’s subscriber base while also increasing overall viewership for CBS programming.
Expansion into other markets and a larger streaming library are necessary if Netflix (NASDAQ:NFLX) wants to hold onto its high levels of growth. Shares have been down since the company announced that it would be increasing the price of its DVD-by-mail service to $7.99 from its current $2 add-on price. For subscribers continuing to use both the online streaming service and the DVD service, that’s a 60% price increase.
The decision to increase prices was a hard one, and the company is aware that it will likely lose a significant number of subscribers, but with increasing competition, Netflix (NASDAQ:NFLX) is now having to pay more for its content in order to keep its library competitive, and those higher costs are being passed on to subscribers. During its third fiscal quarter, Netflix expects no net gain in subscribers, with Q3 earnings guidance well below analysts’ original expectations before the announcement.
Retreating Netflix customers are likely to flee to service likes Amazon (NASDAQ:AMZN) on Demand and Hulu, a joint venture between Disney (NYSE:DIS), News Corp. (NASDAQ:NWSA), and Comcast (NASDAQ:CMCSA). While Hulu’s owners are currently looking to sell, whoever acquires the video-streaming site will have exclusive access to their programming for two years, and another three years of non-exclusive access after that. Hulu has a free, ad-supported service with access to many recent television episodes, while its subscription service Hulu Plus, with a monthly fee of $7.99, is ad-free and has a larger library of both TV shows and movies.