Thanks to some major mergers and new streaming competitors, life has gotten a little more complicated for Netflix (NASDAQ:NFLX) this past year. The company has long been the largest and most important streaming service around. But it hasn't grown to boast a user base far larger than those of runners-up like Hulu and Amazon's Prime Video on its own -- it had help from content partners. Netflix's early arrival on the streaming scene helped it land major hits from studios owned by companies like Disney and NBCUniversal (which is now owned by Comcast).

In retrospect, it's very telling that Netflix's first rival -- Hulu -- was founded by media companies. Hulu's founding members, which included Disney and NBCUniversal, recognized early on that it made sense for companies with studios to own streaming services, as well. And Hulu's founding partners have gone on to plan future services that may be poised to take a larger chunk out of Netflix's market share than Hulu has thus far. These developments could challenge Netflix's hold on quality licensed content, because content creators like NBCUniversal are likely to want their biggest hits on their own streaming platforms -- which is how we find ourselves here today, learning that Netflix is losing The Office.

Coins falling through a businessman's hands.

Image source: Getty Images.

No surprise

This is not a great development for Netflix, for reasons that we'll explore in more depth in just a moment. But this news also doesn't come as a surprise. The increasingly tribal nature of streaming services means that, for the most part, you can expect Disney shows and movies to turn up on Disney+ (and Hulu), WarnerMedia properties to stream on WarnerMedia's upcoming streaming service, and so on. So when Comcast announced that its streaming service would be coming out within a couple of years, Netflix ought to have known that The Office was on the clock.

But sorting out all of these properties into their most efficient homes will take time. Some may be on long-term contracts. (Netflix doesn't usually share contract details -- it announces departures ahead of time, but it's hard to know the difference between an expiring contract, a non-renewal, and a renegotiation.) Not all of these future streaming services even exist yet -- in fact, most of them don't. I saw the departure of Pretty Little Liars as a sign that the trickle of departures was beginning, but the biggest pains may remain in Netflix's future. Now the company knows exactly when one will arrive: 2021. That's when NBCUniversal says it will move The Office from Netflix to its own streaming platform.

This one hurts

I've written about Netflix's tricky situation before: how Netflix's original content (once a great bonus on a platform full of licensed hits) may have to bear a much bigger burden as licensed content departs -- and how Netflix might try to revive shows its new rivals have abandoned in order to acquire "original" content that has fans outside of Netflix.

But this story -- the departure of The Office -- is the big one. That's because The Office is Netflix's single most important show, according to independent analysts.

 Back in 2017, analysts found that licensed content accounted for 80% of Netflix viewing in the United States. But not all shows are created equal, of course. Netflix can afford to lose some shows more than others.

The best and most recent analysis that's publicly available seems to be a 2018 study from analysis firm 7Park. And it says that The Office was the single most-watched show on Netflix in November of 2018.

Rank (by Play Count) Title Content Owner
1 The Office (U.S.) NBC
2 Chilling Adventures of Sabrina Netflix
3 Friends Warner
4 Grey's Anatomy ABC
5 House of Cards Netflix


 There's no reason to assume that November of 2018 was a particularly extraordinary month for The Office, which has been off the air for more than half a decade and has been available on Netflix for years (that's not the case, incidentally, with Netflix original Chilling Adventures of Sabrina -- November of 2018 was its first full month on the platform.)

The Office's huge play count is due, no doubt, to the willingness of its fans to rewatch episodes -- there are, obviously, no new ones. Fans of The Office are a dedicated bunch who remain active on social media websites like Twitter and Reddit. Frequently, the subjects of their posts are how much and how often they watch and rewatch their beloved sitcom.

The Office has loyal fans, some of which may subscribe or unsubscribe to streaming services based on the fate of their show. It also serves a less glamorous purpose: It chews up content hours. It's not likely to be a coincidence that Netflix's own viewer metrics, released in this time of uncertainty for licensed content, are calculated in such a way as to ignore binge-watching and repeat viewing. Netflix wants us to see the numbers that way for the same reason that The Office tops the 7Park study, which focuses on play count: Fans of The Office watch the show over and over again.

Netflix's grim countdown

Netflix works hard to give its viewers plenty to watch, but it's easy to see why a show that devours viewing hours like The Office would be a huge help. And given that Netflix doesn't usually offer per-play bonuses in its streaming contracts, high play counts on The Office likely didn't cost Netflix a thing.

Of course, Netflix will have until January of 2021 to convince The Office fans that there is still plenty for them to love about Netflix. However, of all the licensed content Netflix is destined to lose -- from Marvel Studios films to CBS dramas -- the loss of The Office may hurt the most.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.