The Weight Of The World

Shares of Netflix touched $349.29 this week, raising its stock market value to $153 billion, eclipsing Disney’s $152 billion and making the streaming service, briefly, the most valuable entertainment company in the world.

Netflix’s stock has been the top performer in the S&P 500 so far this year, surging nearly 70 percent since January. But a bullish forecast put out last Friday by Bank of America analyst Nat Schindler suggested the peak is yet to come, fueling this week’s rally.

“We believe Netflix still has a considerable opportunity ahead if it can achieve reasonable penetration levels internationally,” Schindler said in a note to clients. “Netflix will face varying levels of competition, regulation and economic conditions in each individual market it participates in, but its content scale should allow it to become the dominant streaming player in virtually all markets.”

Schindler predicts that Netflix’s global subscriber base can continue to grow by 8 percent annually, reaching 360 million by 2030, as consumers in a growing number of markets get access to broadband. Netflix currently pegs its global subscriber rolls at 125 million.

As Schindler noted, Netflix’s rapidly growing scale gives it the resources to overwhelm competing streaming services in the race to buy up the best content. But the sheer weight of its numbers is beginning to tell in other, less measurable ways as well.

As the Hollywood Reported reported this week, Netflix has also been throwing its weight around in the contest to sign Hollywood’s best producing talent. In the past year, Netflix has signed two of TVs top showrunners, Shonda Rhimes and Ryan Murphy to multiyear, nine-figure deals, luring them away from their long-time production deals at ABC and Fox, respectively.

“The Shonda deal was a shot across the bow, and the Ryan Murphy deal was a punch in the face,” was how one business affairs exec at a traditional TV studio described the moves to the Reporter.

Netflix isn’t the only streaming service chasing A-list talent these days, however. Amazon recently inked deals with showrunners Robert Kirkman (The Walking Dead), Amy Sherman-Palladino (The Marvelous Mrs. Maisel) and Jill Soloway (Transparent), while Hulu has both a hit in Handmaid’s Tale and a deal with its showrunner, Bruce Miller.

Netflix itself this week unveiled a new, multiyear production deal with Barack and Michelle Obama for a reported “high eight figures.”

The deals are not simply about the money, however. Netflix, and to a lesser extent Amazon and Hulu, can offer creative talent the sort of global platform  that no American television network (or that of any other country) can offer — a point Barack Obama made in announcing the Netflix deal.

“One of the simple joys of our time in public service was getting to meet so many fascinating people from all walks of life, and to help them share their experiences with a wider audience,” the former president said in a statement. “That’s why Michelle and I are so excited to partner with Netflix — we hope to cultivate and curate the talented, inspiring, creative voices who are able to promote greater empathy and understanding between peoples, and help them share their stories with the entire world.”

Traditional TV studios are trying to fight back, according to the Hollywood Reporter, by structuring deals that carry echoes of the music industry’s co-called 360 deals, in an effort to offer creative talent a bigger canvas to work on.

In a 360 deal, a record label would provide funding for, and take an interest in, an artist’s entire creative output, including live performances, publishing rights, merchandising and other activities, in addition to recording. In a similar vein, Viacom recently struck a deal with Tyler Perry and Daily Show host Trevor Noah that includes TV, film, and short-form video projects.

Saturday Night Live executive producer Lorne Michaels struck a similar deal with NBCUniversal.

NBCU’s parent company Comcast, in fact, is seeking to wrest 21st Century-Fox from Disney’s clutches, due in large measure to Fox’s interest in the U.K.’s Sky and Star India, which would provide a foundation on which Comcast can build the sort of global distribution platform it currently lacks.

As I wrote back in 2013, in a piece for GigaOm, “the real long-term threat to the traditional TV networks from OTT services like Netflix is not a question of distribution, it’s a question of where the A-list creative talent decides to set-up shop. The audience will follow the talent, wherever it ends up.”

That’s even more true today.