Threat Level Midnight: What losing ‘The Office’ means to Netflix

"The Office" is leaving Netflix in 2021 and heading to NBCUniversal's new streaming service for five years. (NBCUniversal)

“The Office” reaction GIFs flooded Twitter after news broke that NBCUniversal was taking back “The Office” from Netflix and putting it on its own streaming service, starting in 2021.

This is not great news for Netflix and the many, many Netflix subscribers who watch “The Office.” According to NBCUniversal, “The Office” is the number one series on SVOD. In 2018, it was streamed for more than 52 billion minutes, and in April 2019, it was viewed nearly twice as much as the next most-viewed program on SVOD.

“‘The Office’ has become a staple of pop-culture and is a rare gem whose relevance continues to grow at a time when fans have more entertainment choices than ever before,” said Bonnie Hammer, chairman of NBCUniversal direct-to-consumer and digital enterprises, in a statement. “We can’t wait to welcome the gang from Dunder Mifflin to NBCUniversal’s new streaming service.”

NBCUniversal’s streaming service is due to launch in 2020. It will be free with ads for the company’s pay TV subscribers at Comcast and Sky. For other consumers, it will be a subscription service, reportedly priced around $12 per month.

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For NBCU, having “The Office” provides an immediate boost to the prospects for its streaming service, which will be going up against lots of other high-profile streaming services launching soon from Disney, WarnerMedia and Apple. But for Netflix, the losses of valuable licensed IP are beginning to pile up. The service is losing Disney content like the Marvel, Pixar and Star Wars films, and odds are that WarnerMedia is seriously considering taking back “Friends,” which Netflix paid a reported $100 million to keep on its platform through 2019.

Netflix played it cool with the news about “The Office,” and even got in a jab at NBCU for including ads on its upcoming streaming service.

But, a Netflix without “The Office” and other big licensed content is no laughing matter.  Morning Consult last month polled 2,200 adults and found that 49% of Netflix subscriber ages 18-29 would cancel their subscriptions if “The Office,” “Friends,” the Marvel movies and Disney content were all removed from the service.

Alan Wolk, co-founder and lead analyst at TV[R]EV, said that while the loss of licensed content and increased competition probably won’t kill Netflix all together, it could lead to elevated churn.

“A lot of it is going to come down to programming and whoever has the hits,” Wolk said, likening what’s to come for the “flixes” to what the big broadcast networks used to go through, taking turns sitting on the primetime throne.

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Without cultural phenomena like “The Office,” and maybe “Friends,” more pressure will be put on Netflix’s projected $15 billion content budget to churn out hits.

Netflix has produced some big shows like “Stranger Things,” “Orange is the New Black,” “Black Mirror,” “The Crown” and “House of Cards.” The service has also found success with its original movies. Last week, the company announced that nearly 31 million accounts watched the new comedy “Murder Mystery.”

Netflix also has a domestic subscriber base totaling more than 60 million and years of goodwill built up as a one-stop-shop for everything from scripted drama to comedy specials to feature films to sitcoms to reality television to documentaries, all without traditional advertising breaks.

So, losing “The Office” clearly hurts Netflix but the company seems to have built a sturdy enough foundation to withstand it. And Netflix’s rivals pulling back their biggest IP and foregoing all that licensing revenue shows that Disney, NBCU and others are just a little afraid of how much people love Netflix. — Ben | @fierce__video