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Showtime Pulling Dexter, Californication From Netflix

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So now we know why Netflix (s NFLX) has decided to go-it-alone and license new original programming directly from production companies: It’s soon going to see some popular scripted series from cable networks such as Showtime (s CBS) begin disappearing from its streaming library.

According to a report in Crain’s New York Business, Showtime will stop making early episodes of popular TV series’ Dexter and Californication available to Netflix streaming customers by the middle of this year. (Hat tip to TV by the Numbers for the link.) That move comes as cable networks are increasingly looking to TV Everywhere as the distribution model for on-demand content online and on connected devices.

Cable networks like Showtime increasingly view Netflix as both a competitor and a threat to their businesses, a vast change from the attitude they had just a few years ago. In 2009, Showtime used Netflix streaming as a promotional vehicle, running the season premieres of The United States of Tara, The L Word and Secret Diary of a Call Girl on the video service. But now, speaking to Crain’s, Showtime CEO Matthew Blank had this to say:

“We’re more conscious of [the competition] now… With all the options out there, we want to be sure people know they have to subscribe to see Dexter or The Borgias.”

Of course, it’s easy to understand why Showtime might want to limit viewership of current or even recent seasons of popular shows, ensuring that viewers are either pay TV subscribers or purchasers of show DVDs. However, by pulling back episodes of those series from Netflix, Showtime is undermining a popular discovery mechanism for its TV series. For those, like me, who rely on Netflix to introduce us to new content, having a season or two of a show that we’ve never seen before is a powerful method of creating new viewers.

Currently, just two seasons of Dexter and Californication are available through Netflix streaming, but in both cases that was enough to get me hooked and make me want to watch subsequent seasons of the shows. While I personally didn’t subscribe to cable in order to catch later seasons, I did purchase season passes for the shows through iTunes (s aapl) to catch up on the future adventures of Dexter Morgan and Hank Moody. (Coincidentally, in the run-up to the final season of Lost, I also used Netflix to catch up on all previous seasons before watching the linear broadcasts of the show.)

Not only are cable networks like Showtime losing the promotional aspect of running previous episodes of their current shows through alternative services like Netflix, they’re also passing up on potentially lucrative licensing fees to do so. That might not be the best solution for some basic cable networks, but premium cable nets like HBO and Showtime could potentially fare better.

Instead of licensing fees from Netflix, Showtime and others are counting on additional fees from companies like Comcast, (s CMCSA) Time Warner Cable (s TWC) and Verizon (s VZ) for the ability to build multiplatform video services built around the concept of TV Everywhere. If you’re a Showtime subscriber, that means you get access to all episodes from the most current season of Dexter and Californication — along with episodes from the network’s newer series like Shameless and The Big C.

The departure of some cable network programming means that Netflix will have to get creative to keep its 20 million-plus subscriber base happy. Original scripted dramas has been a big part of the company’s success with subscribers, so losing shows like Dexter could have an impact on its ability to grow. Perhaps knowing this was coming, Netflix has increasingly sought to differentiate itself from cable networks by grabbing exclusive rights to content that no one else has.

Last year, it struck deals with Relativity Media and other independent studios for exclusive rights to films in what is normally the pay TV window, giving it access to movies like The Fighter that would otherwise have shown up on HBO or Showtime.

Netflix followed that up with a deal to license a new show called House of Cards from production company Media Rights Capital — its first foray into original scripted TV programming. While it’s too early to tell if House of Cards will be successful, we can probably expect Netflix to do more deals like is as a way to bring new interesting content online without having to depend on the cable networks for their shows.

16 Responses to “Showtime Pulling Dexter, Californication From Netflix”

  1. the days of subscriber premium cable are coming to an end
    these greedy outfits replay over and over the same tired movies
    year after year
    there are so many quality movies that I have seen through netflix that i would never find on, etc..even the on demand lists are lame
    they are not geared to make the consumer happy but more interested in their bottom line
    which by the way will be their downfall
    not to far behind will be these cable and satellite providers who bundle together content that no one watches but you pay for it anyway

  2. V4Vendetta14

    They are really short sighted. I pay for Showtime on Verizon FIOS and they only offer season 4 of Californication to watch on-demand. Do they think I am going to go out and buy the previous seasons? No, I’m going to rent from Netflix (and preferably watch online). I completely understand that they wouldn’t want to give their intellectual property over to another provider too soon. But they are just hoarding their IP, giving nothing to their subscribers. Nobody like the kid that took his ball and went home… At least have seasons they don’t provide available to Netflix. It will only generate interest for people to pay for Showtime to see the current stuff (which is why i subscribed). Showtime is basically pulling a move that didn’t work out for the music industry. They want to do things their way, and refusing to adapt to the industry. Stop hoarding your old shows. The same goes for all the cable providers.

    • Ryan Lawler

      There’s definitely an argument to be made that viewers learn about shows through Netflix and other services. I started watching Dexter through Netflix, and when it wasn’t available past Season 2, I bought the next two seasons through iTunes. Netflix also converted me to a viewer of Lost and 30 Rock. There’s a lot to be said for the promotional value of older seasons on subscription VOD and ad-supported platforms.

  3. So… Who is to say I wont go ahead and burn every copy of dexter to DVD and start handing the set over to anyone who asks, on my dime. It would cost me pennies and make many people happy. I like to make people happy. I like to make me happy. Showtime, you should learn to make people happy, like me. Because if I am not happy, then you are not happy. Tread lightly showtime.

  4. Free samples are one thing, but when you upset your entire economic model for it, you’re getting into a different conversation altogether. Look at the facts:
    1. Programmers get anywhere from 60-80% of the revenue from license fees from cable companies. Cable doesn’t like Netflix. Are you going to piss off your major customer for an upstart like Netflix? It’s a BIG upstart, but it’s still an upstart, and here’s why…
    2. The days of $7.99 streaming are coming to an end. They can’t continue to pay what they’re paying for content and still charge so little. And to be honest, they’re not paying as much for content as the Comcast/Time Warner Cable/DirecTV’s of the world. It’s simple addition and substraction, it doesn’t work. Plus throw in the Level 3 fiasco, they’re going to charge more.
    3. The current network can’t handle the amount of bandwidth that would be required if/when Netflix’s streaming truly got popular. Who is going to have to pay to build that out? That’s right, the cable companies.

    Go ahead and be pissed Ric, because you’re going to be pissed for a long time when it comes to Netflix.

    • V4Vendetta14

      I have every premium channel on FIOS. WHY THE [email protected] don’t they let you watch old seasons for the premium cable channels? FIOS has unlimited on-demand for the channels you subscribe to. So if Showtime only offer last season (of a long running show), I’m off to find a new outlet to give me that content. Is that wise of them? They don’t care about their subscribers, despite how much we spend every month. If Showtime is not able to provide every season of a show, they should contract out a “hosting provider” such as Netflix to host it for them. This is 2011. Every episode is available on the internet, legal or otherwise. Give people a reasonable way to legally watch a show, and they will do it. iTunes proved that people will pay for music if you drop the full album model. The music industry bitched and moaned, but they ended up making money in the long run. They could have made a lot more money if they invested in the infrastructure to deliver music the way people wanted it. But they refused to adapt to a new model of business. Showtime would be wise to look at lessons learned. (All the premium channel operators have the same short-sightedness.)

  5. I live in an apartment that supplies basic cable with no on-demand, for me to up-grade my cable I would have to get my own cable contract and add the premium channels.. it’s not worth the extra $30 or $40 a month to watch one seasonal series. I don’t want showtime all year and why pay extra for on-demand to see the one show I want to see. I’ll wait for it to come out on DVD… and borrow it from whichever one of my friends gets it first… I say borrow not because I’m too cheap to buy it, but because I refuse to be swindled by a multi-million dollar industry that preys on the public… Showtime will not get me to subcribe to their network or purchase the DVD by pulling it off netflix… I will still enjoy my netflix and I will still watch Dexter… but I already pay for a subscription to netflix and I enjoy it, I’m not paying to have showtime for one measly show.. I WILL have my cake and EAT it too. Besides, the truth is one of my friends will probably buy it simple because they want it and a bunch of us will watch it together… it’ll be a Dexter Party, I’m sure I’m not they only one who’ll be doing this.

    • Showtime is being incredibly greedy in my opinion. I totally agree. We aren’t idiots and most of us aren’t going to fall into their trap. We’re going to watch Dexter either way.

      • I agree that Showtime is being greedy. I always resented paying extra for “premium” channels on cable. I also resent the nasty “ma bell”, where else will you go attitude they had. Now I use Netflix and all Showtime will accomplish is that I won’t watch their programs at all.

  6. Fuqc you Showtime and Fuqc you cable. Your relevance as a sole provider is at an end and if I want these programs I will get them elsewhere and will STILL use Netflix.

    I however, have long dismissed you as a viable content delivery system and as Mr Fanning once said, “Again, its adapt or die.”
    When you ignore the convenience factor when dealing with me as a potential customer then you make your leverage as a provider irrelevant. Good luck on bucking the new paradigm Showtime, youre going to need it.

  7. Those samples aren’t free, at least I’m sure Netflix is paying for the rights to stream those shows. It is a good question as to whether the fees are high enough to be sustainable. We’ll see if the Netflix original content pays off. I still think withdrawals like this are disappointing.

  8. I’d argue that they do know exactly how important their free samples are: a one or two seasons sample of a show goes a long way. I guess I just agree with the article’s point that you don’t have to give the entire cow away to get people to drink the milk, so for Showtime to promote the new season by getting people hooked and buying the DVDs to catch up, that may be a more sustainable business model in the long run. Netflix loses just as much from Showtime when they can’t get current Showtime shows, it’s just that in the long run, Netflix will only get stronger on the backs of all the other content they have while Showtime will slowly get weaker as the audiences for its shows gets smaller.

    • V4Vendetta14

      Very few people are going to buy all the season on DVD/Bluray, especially for a show they know little about. They are going to rent them at best. I just started watching Californication. Netflix has season 1, and Showtime offers season 4. They are out of their mind if they think I’m rushing out to buy seasons 2 and 3. It makes me wonder why i even subscribe to Showtime…

  9. I think that the premium channel providers don’t really appreciate how important fee samples are to their business model. Just look at how much of an impact it has when the can’t get cable to upsell the channel to their subscribers. The thing that they are missing about Netflix is that it’s hard to miss what you don’t see. With so many other shows to watch, there’s zeri incentive for me to subscribe to cable + pay extra fees just to check out shows that I’ve never seen. There may be a few subscribers who enroll in Netflix specifically because of a single show or two, but those subscribers already pay Showtime because they’re into the show. Removing the earlier episodes won’t drive more interest even if it does make the cable companies happy. I could understand this if Showtime had a $8 per month internet tier where you could get the show instead, but by making their product harder to find, it will only drive more consumers to pirate the show.