"Friends" Forever? Depends on How Good They Are

Despite the fact that “Friends” aired in 1994, more than twenty years ago, the series made headlines this week when news broke that Netflix agreed to pay an excess of 100 million dollars to keep the show on their platform through 2019. The show was originally due to leave Netflix at the end of this calendar year with their contract expiring December 31. Prior to this new agreement, Netflix paid about $30 million annually. The big question is not why did they do it, but is it really worth it?

Perhaps the most notable aspect of the contract renewal is not the huge increase in price, nor the enormous price itself, but the fact that the contract was “re-signed…on a non-exclusive basis,” which means that ‘Friends’ could go on our platform as well." I find it incredibly interesting that Netflix is paying a huge amount of money for an old show that’s running on other networks (and by the way, those other networks are getting advertising dollars). N.B. I use the word “networks” because in fact, Netflix is a network.

According to Ad Age, “At its peak, ‘Friends’ averaged north of 28 million viewers per episode on NBC, of whom a staggering 17.2 million were members of the adult 18-49 demo.” And, while Netflix rarely (if ever) releases viewer stats, Nielsen reports that “2.2 million people last week watched the four ‘Friends’ repeats that ran on Nick at Nite.” That’s a pretty impressive number for a 20+ year old show, but again, how does that translate into making money for Netflix?

As much as I love Netflix, I have my reservations about their continuing sustainability without another revenue stream i.e. advertising (I believe they will eventually have to make adjustments to their model if they want to survive). But whatever the deal actually yields for Netflix, the lesson in their decision to pay big bucks for a non-exclusive contract with “Friends” is clear. Good content is everything. As I’ve written about many times before, solid content—good stories—are key to connecting to a human audience. Obviously Netflix gets the message, and one could argue, is concerned about the quality of their content.

It’s clear that it was “Friends” remarkably loyal cult audience that persuaded Netflix to keep the show on its platform no matter the cost. As the Wall Street Journal writes, “Although ‘Friends’ ended its run on NBC in 2004…the show is a strong performer for Netflix. When the ‘Friends’ page on Netflix was updated to say the show would be leaving the service at year-end, many fans took to social media-sites such as Twitter to complain.” I wonder how Netflix viewed that in terms of revenue.

It’s also important to note that the cast of friends continues to feel the love of their many fans. According to USA today; “‘Friends pulls’ in a whopping $1 billion each year for Warner Bros. Here's the kicker though: That translates into about a $20 million annual paycheck each for Jennifer Aniston, Courteney Cox, Lisa Kudrow, Matt LeBlanc, Matthew Perry and David Schwimmer, who each make 2% of that syndication income.” I am curious how much they will be making in this new Netflix deal.

This episode involving Netflix and “Friends” is a remarkable demonstration of the power of great content. So many platforms dedicate huge resources to cranking out a massive quantity of original content every year. According to some, Netflix will be spending 13 billion dollars this year on creating content. But as this incident illustrates, quality content is far more important than the quantity of content. Listen:

“Quality is never an accident. It is always the result of intelligent effort”—John Ruskin

In 50 years from now, most people will not recall “13 Reasons Why,” but they will recall (and probably still be watching) “Friends.” It’s as true for television as it is for film and literature. My question for Netflix now is will they be able to produce their own “Friends” instead of simply streaming beloved, syndicated shows? And when will they begin monetizing that sort of content—and if not—what’s the point? Hosting “Friends” is a good way to keep some users and maybe attract some new ones—but how does that actually grow the platform in a meaningful way? That’ll require quality original content. What do you think?