Streaming and rental video provider Netflix Inc. (NASDAQ: NFLX) is currently involved in a negotiation with A&E Networks for a license to distribute the network’s content. The existing license expires Friday. A&E is owned by Disney Co. (NYSE: DIS) and Hearst Corp. following last year’s divestment by Comcast Corp. (NASDAQ: CMCSA) to the two remaining partners.
Netflix currently distributes popular A&E channel programming like “Storage Wars,” “Ice Road Truckers,” and “Pawn Stars,” as well as the network-owned History channel. According to a report in industry magazine Variety, Netflix has already decided to let go of the 40 or so shows it gets from the network, which total some 800 hours of programming “because the viewership [doesn’t] justify the licensing cost.”
The magazine also cites Netflix’s chief content officer:
While we do not comment on our deals and partnerships, expect some of the A&E and History programming to drop and some to remain on Netflix.
Last February, Netflix lost its license to distribute programming from the Starz network, which is majority owned by Liberty Media Corp. (NASDAQ: LMCA).
One sticking point could be a Netflix demand for exclusive distribution rights to some or even all of the network’s programming. But given the options available to A&E, Netflix is not in a particularly strong bargaining position here. Netflix has demonstrated that having a vault full of back episodes of the popular shows can generate viewer interest in the new season’s shows, but A&E could get similar interest from streaming competitors like Amazon.com Inc. (NASDAQ: AMZN), Hulu Plus, and Comcast’s Streampix, as well as cable competitors like Time Warner Cable (NYSE: TWC) and DirecTV (NASDAQ: DTV).
Even if Netflix is able to retain rights to some or all of A&E’s programming, the cost will be high and will continue to eat away at the company’s bottom line. Content owners now have several offers to choose from and are finally developing their own streaming distribution channels. That will only make Netflix’s position harder to maintain going forward.
Shares of Netflix are down 4.6% at $57.74 this morning, in a 52-week range of $52.81 to $162.99.