With the meteoric rise of Netflix and the shift to Internet television imminent, it seems like a foregone conclusion that other TV networks should be streaming shows online. More people are watching their shows online anyway -- in the last quarter of 2014 broadcast television viewership dropped 4 percent, while online video rose 60 percent [source: Ramachandran]. Networks that don't cater to the online market viewers are going to be left in the dust. So why not give the people what they want and cash in on all of that untapped advertising revenue?
Well, in a lot of cases networks do want to get their shows online, but they want to keep control to maximize the money that they make. Broadcast networks like ABC, CBS, NBC and FOX usually stream their new shows, but only a limited number of episodes and for a short time. That might be leaving some advertising money behind, but it makes sense when you consider that it could hurt DVD sales if all of the content is available for free.
Which brings us to the real issue -- licensing fees. TV networks don't actually own the content they provide, they pay for the privilege of airing them. For instance, a network like NBC airs "The Voice," which was created by Mark Burnett. NBC pays Burnett and his production company for the right to broadcast "The Voice" and sell the advertising around the show. Other sources of revenue (like DVD sales) actually go to the company that owns the show, which means that they want to negotiate their licensing contracts as favorably as possible.
Allowing a network to stream their content can, on the one hand, mean more viewers, but it can also mean cutting off other potential sources of revenue, so a show's producers need to make sure that they're getting the best possible deal. Adding online streaming to the licensing deal drives up the cost of the license to compensate, and the result is a confusing jumble of negotiations and counter-negotiations that can often kill a deal.
Licensing agreements are also generally for a limited amount of time, which is why Netflix, in spite of its popularity, still doesn't have all the shows you want. Companies that own the rights to movies and TV shows can negotiate higher licensing fees when they know there's more demand. Older shows are generally cheaper, but there's a reason why Netflix is streaming "Star Trek: Enterprise" but not "The Simpsons" or "Seinfeld." Even a hugely successful company like Netflix has to pick and choose shows to manage its licensing costs, to be able to renegotiate when the licenses expire.
- Engler, Craig. "TV Economics 101: Why you can't watch every show online for free." BoingBoing. May 4, 2010. (November 20, 2014) http://boingboing.net/2010/05/04/tv-economics-101-why.htm
- Ramachandran, Shalini. "TV Viewing Slips as Streaming Booms, Nielsen Report Shows." Wall Street Journal. December 3, 2014. (December 3, 2014) http://online.wsj.com/articles/tv-viewing-slips-as-streaming-booms-nielsen-report-shows-1417604401