Yahoo Finance "Pretty Little Liars" Netflix Departure Is a Sign of Things to Come
Every month, Netflix (NASDAQ: NFLX) reveals a list of what's coming to and departing from its platform the following month. July's list heralds the arrival of Caddyshack and a new season of Stranger Things, but one departure has stolen most of the spotlight. Pretty Little Liars is leaving the platform, and fans are not happy.
People get upset whenever shows leave Netflix, of course, but Pretty Little Liars' departure is unlikely to be an isolated incident. In fact, it seems that Netflix has a real licensed content problem brewing.
Image source: Getty Images.
Where is Pretty Little Liars going?
Pretty Little Liars won't be available to stream on Netflix in July, but that doesn't mean it will disappear from the internet. There's no word yet on where it might become available to stream, but Hulu is a pretty good guess. Why? Hulu is owned by Disney (NYSE: DIS), which also owns ABC Family, which made Pretty Little Liars in the first place.
We've seen this kind of vertical integration in streaming over and over again since the Disney-21st Century Fox merger kicked off a new gold rush for so-called "Netflix killers," which are companies that also happen to also be major content creators. It simply makes more financial sense for Disney to have its most beloved shows on its own streaming services. (Pretty Little Liars' distributor is AT&T-owned Warner Bros. Television Distributing, but streaming deals are usually cut directly by studios.)
Just as predicted
That Netflix was unable to hold onto a big show made by Disney is hardly a surprise. We've been expecting Netflix to lose shows like this for a while now. Long-term deals are keeping the losses from happening all at once (the fact that services like Disney+ aren't actually available to consumers yet helps, too), but these sorts of losses are inevitable in the long term.
Pretty Little Liars isn't unique. Presumably, it was just one of the first shows licensed from Netflix's now-competitors to hit the end of its current contract. We can't know for sure, since Netflix doesn't share details of this nature, but we do know the streaming service inked its Pretty Little Liars deal in 2012, which is a long time for any show to run on the platform. There may be some big, dramatic renegotiations in Netflix's future, but it seems prohibitively likely that most shows will leave quietly like this, when options are not picked up or contracts are not renewed.
This will cost companies money, of course; Disney reportedly expects to lose $150 million in operating income as it parts from Netflix. But the pros outweigh the cons for mammoth entertainment companies like this, because taking major hits like Star Wars and Marvel Studios films away from a competitor and putting them on Disney+ just in time for its launch seems sure to draw eyeballs to its service -- and perhaps away from others. (We don't know when Disney's deal with Netflix expires -- it was announced only as "a multiyear deal" and started in 2016 -- but it has been widely reported that Disney+ will launch with Star Wars and Marvel Studios films, and the service is supposed to arrive in November of 2019.)
Licensed content isn't the only place where conflicts can take Netflix shows down. As I've written before, even Netflix originals aren't always safe -- some of them, like Jessica Jones and other Netflix Marvel series, were made in collaboration with now-rivals like Disney. There's plenty of reason to be concerned about original content, but the loss of beloved licensed content will likely be what hurts Netflix the most.
So it begins
While other companies are taking a hit in order to invest in their own streaming services, Netflix would rather have the content than the cash. As more and more licensed deals are stripped away, Netflix will have little left besides its own original content. The popularity of The Office and Parks & Recreation (both owned by Comcast's NBCUniversal) will make their likely departures more dramatic than that of Pretty Little Liars. We've known for a while that Netflix would deal with a licensed content exodus. And now, it seems like the unpleasant process may be starting.
More From The Motley Fool
Stephen Lovely owns shares of AT&T and Netflix. The Motley Fool owns shares of and recommends Netflix and Walt Disney. The Motley Fool recommends Comcast. The Motley Fool has a disclosure policy.
