Netflix (NFLX 8.74%) grabbed the streaming rights to all nine seasons of Seinfeld two years ago. The ultra-popular "show about nothing" is finally making its way to the leading video-streaming platform for the first time, having completed a six-year contract with Walt Disney's competing service, Hulu.
Can Jerry Seinfeld's culture-defining colossus fill the shoes of '90s rival Friends, which left Netflix for a new home on HBO Max at the start of 2021? We're about to find out, but something tells me that the relative success of a single show won't make much of a difference for us Netflix investors.
Not that there's anything wrong with that.
Grabbing an iconic cash machine
Seinfeld really does cast a large shadow on American culture. If you ever worried about double-dippers at the chips and salsa table, you tapped into a classic Seinfeld episode. The same goes for regifting an unwanted present, or explicitly choosing not to run a race, or calling for "serenity now!" Yada, yada, yada.
The show is also a financial juggernaut. Jerry himself is said to have pocketed $400 million in royalties for each syndication cycle, and Seinfeld is currently running through its sixth such multiyear cycle on TBS, a subsidiary of AT&T. All told, syndication fees were thought to have topped $2.7 billion by 2010 and $4.1 billion in 2017. The wheel is about to turn again, sending the syndication rights to Viacom (PARA 1.67%) and its Comedy Central entertainment hub. Both that move and Netflix's 180-episode premiere will fall on Oct. 1, marking a double payday for the show and its producers.
The business impact of licensing popular shows
No single show has the power to make or break Netflix's streaming fortunes on its own. No, not even massively popular hits from the 1990s. Letting Friends go to HBO Max was not an easy decision, but the departure didn't exactly crush Netflix's subscriber growth. The company signed up 5.5 million net new paid customers in the two quarters since Rachel, Joey, and Ross packed up and left. The subscriber growth just keeps on ticking.
Netflix reportedly paid more than $500 million for the rights to 9 seasons and 180 episodes of Seinfeld. That's a generous budget, but the company paid about that much to produce just four seasons of The Crown. The '80s-flavored supernatural extravaganza of Stranger Things won't run for 180 episodes. But if it did, the total production budget would add up to more than $2 billion.
That's where Netflix's true loyalties lie. It doesn't hurt to have a tried-and-true classic hit like Seinfeld or Friends under your belt, but it's more important to create original in-house productions that can keep audiences enthralled for many years to come. Controlling the purse strings to its original shows and films makes Netflix less reliant on other studios. That's the secret sauce in the company's recipe for sustained customer growth, and Seinfeld just doesn't factor into it.
This launch is no game-changer after all
Seinfeld is coming to Netflix on Oct. 1 -- and it's no big deal. Co-CEOs Reed Hastings and Ted Sarandos are generally quite happy to talk up a storm around upcoming releases that they believe will make a difference to the top and bottom lines. Still, those efforts are almost always restricted to Netflix Originals. Seinfeld came up exactly once in a brief earnings call when the deal was first announced in the fall of 2019.
The radio silence never really ended. There was no pre-launch hype in July's earnings release or conference call, and the launch date itself didn't even get a press release. Instead, Netflix simply posted a teaser trailer for Seinfeld on its corporate YouTube channel. The title could hardly have launched under any lesser pomp and circumstance, and for good reason. Not even the biggest third-party show on the market really matters all that much in the grand scheme of things.
So the Seinfeld premiere looks like business as usual for Netflix. The show is a fantastic cash machine for its producers but not necessarily for Netflix. Investors should shrug it off and focus on the third-quarter earnings report that will follow later in the same month. These pretzels are making me thirsty.