Why Your Favorite Shows Are Leaving Netflix
It’s true: Netflix will no longer be streaming “The Office” as of 2021, or “Friends” as of 2020.
This news has come as a shock to many Netflix subscribers, maybe even yourself: “Despite those series going off the air in 2004 and 2013, respectively, they’re two of the most popular selections on Netflix; according to Nielsen figures, Netflix users streamed 52 billion-plus minutes of ‘The Office’ in 2018 and 32.6 billion minutes of ‘Friends.’”1 If you are wondering why the video-streaming mogul would give up its two most-watched shows, you are not alone.
“The Office” was produced by Universal Television in association with Deedle-Dee Productions and Reville Productions.2 Universal Television recently auctioned off the rights to the series, accepting NBC’s offer of $100 million a year, and rejecting Netflix’s offer of $90 million.3 In a press release on June 25, 2019, NBCUniversal announced that it “secured the exclusive domestic streaming rights to ‘The Office’… on the company’s soon-to-be-launched streaming service for five years, beginning 2021.”4
Now, you may also be wondering why NBCUniversal paid for the rights to the show, given that Universal Television is the parent company of NBC. The answer is transfer pricing: “When a large company like Comcast is made up of smaller, independently run divisions, each division must pay a transfer price for any products or services of another division. … In this case, the NBC streaming service is buying the rights to ‘The Office’ from Universal Television.”5 The purpose of transfer pricing is to ensure that the company pays market value for the product.6 Paying fair market value for the rights to the show means that “profit participants” (such as the show’s creators, actors, producers, and writers) are each paid a fair amount in royalty fees, and the studio avoids giving the profit participants grounds for taking legal action against it.7
Similarly, “Friends” will be moving from Netflix to WarnerMedia’s upcoming streaming platform, HBO Max, in spring 2020.8 The classic sitcom was produced by the Warner Bros., and for the same reason NBCUniversal paid Universal Television for the rights to “The Office:” WarnerMedia paid Warner Bros. $85 million a year for the exclusive rights to “Friends.”9 However, this news was expected by those who were familiar with the deal between Netflix and Warner Bros. for the rights to the show for the year of 2019. Prior to 2019, Netflix paid $30 million a year for the rights to the series, but made a $100 million deal for 2019; “The deal … gave Netflix the ‘Friends’ rights for another year while WarnerMedia work[ed] to get its streaming service started up. After that, WarnerMedia [had the option to] take full control of the show or offer to let Netflix share it and pay 25% less, according to people familiar with the terms of the agreement.”10
What does this mean for the shows’ dedicated fans? Although NBC and WarnerMedia have not released many details about their upcoming streaming services, there have been some indications of what the future holds. Reportedly, NBC’s service will be free for subscribers of traditional pay-TV bundles and will cost about $10 per month for “cord cutters.”11 It has also been reported that the price of WarnerMedia’s service will cost “slightly more than the monthly $14.99 cost of HBO Now.”12 While we may not have a firm grasp on what is to come, we do know that now is the time to enjoy life as we know it, because us viewers will soon be forced to deal with the changes resulting from the current war between streaming platforms.
Alex Sherman, NBC is removing ‘The Office’ from Netflix in 2021 and putting it on its new streaming service, CNBC (June 25, 2019), https://www.cnbc.com/2019/06/25/nbc-to-remove-the-office-from-netflix.html [https://perma.cc/55ES-GSXR]↩
Lesley Goldberg, ‘Friends’ Officially Leaving Netflix for WarnerMedia’s Streaming Service, Hollywood Reporter (July 9, 2019), https://www.hollywoodreporter.com/live-feed/friends-officially-leaving-netflix-warnermedias-streaming-service-1223151 [https://perma.cc/5BUY-ZBMN]↩
supra note 1.↩
Sarah Whitten, NBC owns The Office, why are they paying $500 million for it?, USA Today (June 27, 2019), https://www.usatoday.com/story/money/2019/06/27/why-office-leaving-netflix-and-why-nbc-had-pay-so-much/1587151001/ [https://perma.cc/V2VC-ZD5V]↩
Travis Clark, ‘Friends’ will leave Netflix at the end of this year for a new service called HBO Max, Business Insider (July 9, 2019), https://www.businessinsider.com/friends-leaving-netflix-in-2020-for-hbo-max-details-2019-7 [https://perma.cc/HMB6-MESA]↩
Joe Flint and Amol Sharma, Netflix Fights to Keep Its Most Watched Shows: ‘Friends’ and ‘The Office’, The Wall Street Journal (Apr. 24, 2019), https://www.wsj.com/articles/netflix-battles-rivals-for-its-most-watched-shows-friends-and-the-office-11556120136 [https://perma.cc/G6QK-SEDW]; Clark, supra note 8.↩
Sherman, supra note 2.↩
Kelsey Sutton, WarnerMedia’s New HBO Max Snaps Up Streaming Rights for Friends From Netflix, Ad Week (July 9, 2019), https://www.adweek.com/tv-video/warnermedias-new-hbo-max-snaps-up-streaming-rights-for-friends-from-netflix/ [https://perma.cc/3LX7-6ULA]↩