Netflix Should Have Paid More for This Crucial Content

When I cut the cord on cable TV two years ago, I didn't miss much of my regular TV diet. At the time, Netflix (Nasdaq: NFLX  ) posted the latest episode of Saturday Night Live every Sunday, keeping me up to date with biting political parody. The ink was still fresh on that deal with NBC, then owned by General Electric (NYSE: GE  ) .

And I was pretty sure that this cozy relationship would continue. Here's how the NBC deal was originally presented: "Netflix members will be able to instantly watch ... [e]pisodes from every season of NBC's signature comedy franchise 'Saturday Night Live,' including day-after broadcast of the upcoming 2010, 2011 and 2012 seasons."

Other series like The Office or 30 Rock came with a less palatable schedule. Netflix would get its hands on prior seasons of those shows, not the latest and greatest. But that was OK -- scripted sitcoms and crime dramas don't have the immediacy of SNL's up-to-the-minute commentary.

But something funny happened in 2011. The same week as Netflix announced its stillborn Qwikster idea, the deal with NBC was renewed -- this time under the wing of new parent Comcast (Nasdaq: CMCSA  ) . And up-to-date episodes of SNL fell by the wayside. This sad fact was drowned in the brouhaha about pricing changes and plan splits, but Netflix customers were stuck at the last episode of the 2011 spring season. You want something fresher? Drop by or maybe Hulu.

Oh, well. There goes my Sunday afternoon comedy fix.

Get 'em while they're hot!
Well, SNL kicked off season 38 the other week, so Netflix just got hold of the entire season 37. That's nice, and Netflix certainly thinks it's a big deal. Here's the bombastic email the company sent out to announce the new content:

Source: Netflix.

Of course, I'm using the term "new content" in a very loose sense here. That's kind of like announcing last year's Super Bowl winner the day after this year's big game. Hurricane warnings after the storm has passed. You get my drift.

I suppose the Comcast-backed NBC put an impossible price tag on fresh content, and Netflix decided to settle for an inferior solution. But I'm not sure there's any value at all in this particular content deal. In a perfect world, we'd be getting this week's episode, or at least last week's before it turns sour like old milk.

Spill the beans, Hastings!
I'd be thrilled to hear Netflix management discussing the actual viewership of stale SNL episodes. CEO Reed Hastings is happy to talk about success stories:

I, with great confidence, would tell you that we brought 1 million new viewers to AMC for the new season of Mad Men. I'll tell you we grew the audience for Sons of Anarchy on FX. We will grow the audience for Walking Dead on AMC. Access to the content in a catch-up mode on Netflix is nothing but good for them, and the same for kids. ... The other one is in the show Breaking Bad, which is another big success on Netflix. We got Season 4 24 hours before Season 5 came on AMC. And 50,000 people watched every minute of every episode of Season 4 in 24 hours.

I'll sharpen my ears when Netflix reports earnings in a couple of weeks, looking for any hint of the value in outdated SNL content. My guess is, Netflix would be far better off paying more for a fresher slate in this particular case.

Why would investors care this much about Saturday Night Live? The show is a proven winner with nearly four decades of history. It's also a starmaker, as seen when SNL's "Lazy Sunday" clip catapulted YouTube to global success virtually overnight. It's a two-way street -- that viral video was good to YouTube, and YouTube boosted SNL's public image even as NBC tried to shut the unlicensed clip sharing down. I'd imagine that a symbiotic relationship with Netflix would be great for both parties, too. If nothing else, Netflix can compare and contrast the current situation with SNL's viewing performance in early 2011.

I don't mind Apple (Nasdaq: AAPL  ) iTunes charging a premium for piping-hot content, fresh off the presses. Coinstar's (Nasdaq: CSTR  ) Redbox can dish out brand-new DVDs a month before the Netflix mailing service ships 'em out, and it's no big deal. That's just how Netflix rolls. But presenting Saturday Night Live this way is nearly pointless, and a waste of money unless Netflix got an absolutely terrific discount. Unfortunately, rumor has it that Netflix actually paid handsomely to renew the NBC library.

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Fool contributor Anders Bylund owns shares of Netflix and has created a bull call spread atop those shares, but he holds no other position in any of the companies mentioned. Check out Anders' holdings and bio, or follow him on Twitter and Google+. The Motley Fool owns shares of Netflix and Apple. Motley Fool newsletter services have recommended buying shares of Coinstar, Netflix, and Apple. Motley Fool newsletter services have also recommended creating a bull call spread position in Apple and a bear put ladder position in Netflix. The Motley Fool has a disclosure policy.

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  • Report this Comment On October 02, 2012, at 6:06 PM, matthewluke wrote:

    I don't understand why Netflix would pay up for Saturday Night Live when people can view it for free on and free non-premium Hulu (and of course the free OTA broadcast).

    Unless they work out a deal where it would be exclusive to ONLY Netflix, why would any company pay up for SNL in that situation?

    Paying for content is one thing. But needlessly paying UP for content (that is free everywhere) is another.

  • Report this Comment On October 03, 2012, at 5:15 AM, TMFZahrim wrote:

    Mm, because people want to watch it on their big screen TV perhaps. Free Hulu and videos just aren't available on most Blu-ray players, connected TVs, media boxes, or video game consoles. Netflix is.


  • Report this Comment On October 03, 2012, at 10:48 AM, dlchase24 wrote:

    Getting content from or (free) onto your TV isn't difficult, though they don't try and make it easy on you.

    Regardless, I do think the issue presented in the article represents an ongoing issue with Netflix's TV offerings. Yes it's a great way to discover a new show (Sons of Anarchy, Breaking Bad were just a couple for me) but when you're always a season behind what's airing, I think people are going to start looking for alternatives to catch up.

    Of course, I think they are moving to position their streaming library as more of a "premium channel" along the lines of HBO or Showtime than be a cable replacement. With no desire to go to tiered pricing or a pay per view model, I don't see them positioning themselves to have day after or even week after content.

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