How Netflix Content Spend Seems to Be More Cost Conscious

Illustration of a belt being tightened around a Netflix logo
Cheyne Gateley/VIP+

Every major entertainment company has spent much of the last decade trying to emulate Netflix. Now Netflix seems to be emulating, of all companies, Warner Bros. Discovery.

Stay with me. Since its historic stock correction in April, Netflix has been moving to curtail its expenses, which thus far has manifested in layoffs, reduced office space and even new limits on employees’ complimentary merch (according to a Wall Street Journal report).

But now, signs are starting to pile up that indicate the streamer is taking new measures to rein in its content costs — some of which seem to be taken from, or at least inspired by, the David Zaslav playbook.

Netflix executives have stated that its spending on content will remain steady over the next few years, in the “ZIP code” of $17 billion, as CFO Spencer Neumann put it on July’s Q2 earnings call. But to do so, some expenses will naturally have to be trimmed, especially if the streamer hopes to continue spending on lavishly budgeted series such as “Stranger Things” and “The Crown.”

Though Netflix has yet to can a nearly-completed project, a la “Batgirl,” Deadline reported Tuesday that the streamer had canceled the upcoming series “Grendel” despite “the bulk of its filming” having already been completed. This is an aggressive move even for Netflix, which, of course, is famous for axing shows after one or two seasons.

Nor is WBD the only company quietly erasing original content from its streaming platform: Netflix recently announced that one of its earliest original series, “Hemlock Grove,” would be removed from the service in October.

Unlike many of the streamer’s more recent originals, Netflix did not own “Hemlock Grove” outright; the series was licensed from Gaumont International Television, which owns the rights. Netflix’s 10-year licensing deal for the series expires in multiple countries in October, a representative for the streamer confirmed to VIP+, and Netflix has apparently opted to let the deal lapse rather than continue paying to host “Hemlock Grove.”

Again, this is a less extreme case than WBD’s recent maneuvers, which have largely consisted of removing HBO Max content — including plenty of content the streamer owns outright — in order to take tax write-offs on it. Nor is this the first time a “Netflix Original,” ostensible fixtures in the streamer’s notoriously fickle catalog, has been removed. But this instance may indicate a larger strategic shift on the way, though a Netflix spokesperson denied any such shift was taking place.

Many of Netflix’s early original series, including hits like “House of Cards” and “Orange is the New Black,” were licensed from other distributors (in those cases, Sony TV and Lionsgate TV, respectively) with fixed terms. This doesn’t mean that such hits will start dropping off Netflix left and right when their licensing deals expire; it would behoove both parties to keep many of these shows in place, at least for now. But it’s possible that Netflix will increasingly opt to stop licensing lesser-watched original programming or content that is no longer drawing in new subscribers.

Indeed, tracking site What’s on Netflix cites more than 60 instances of Netflix originals that have disappeared since 2019, most of which were removed because of expired licensing deals. Notably, nearly half of these originals fell off the service in 2022 alone.

But this doesn’t mean Netflix will be exclusively hosting content it owns, either. Last month, the Wall Street Journal reported that the streamer has begun to change the way it pays for comedy specials, striking two-year agreements with some comedians to license the specials rather than buying them. This reduces the cost to Netflix; per the Journal, the streamer pays about $200,000 to license specials, whereas it previously spent “as much as $1 million” to buy them outright.

This charts a potential path forward for Netflix: while the streamer will certainly continue to spend aggressively to produce content it will own, in pursuit of blockbuster series like “Stranger Things,” smaller investments, such as comedy specials, could be reduced by reallocating those costs back toward licensing. Thus, the company’s content spend will be re-optimized, helping to maintain its level at that $17 billion “ZIP code.” (As others have argued, the company would be well served to generate additional revenue by taking another page from Zaslav’s playbook, and licensing more of its own series out to other distributors.)

It's an apt strategy for a company looking to rein in costs that have soared wildly over the past decade or so. But it’s also a sign that the Zaslav method, which has generated such a furor — cutting back on spending through creative content accounting and targeted small cutbacks that (hopefully) add up — may be becoming the industry standard.