Studios Line up for Piece of Ad-Supported Netflix

As Netflix prepares to launch the ad-supported version of its services, Hollywood studios have begun negotiating with the company for more revenue for the right to stream their content.

That’s according to a Wednesday (Nov. 2) report by the Financial Times, citing unnamed sources. One source said that some studios could wait to see how well the new ad-based version of Netflix performs before agreeing to add their shows.

“It could be weeks after they launch, when they know more about what’s working and what’s not” before agreements are made, one source said.

Some of the most popular shows on Netflix — Seinfield, for example — are owned by rival studios like Sony. The licenses for these shows were granted before Netflix had even considered ads, and do not allow for the programs to be shown on an ad-supported version of the service.

Netflix was not immediately available for comment Wednesday

Sources told the FT that studios such as Sony have been negotiating for months with Netflix about licenses for the service.

“If you’re Sony, they’re going to take a pound of flesh out,” an executive at an investment group that purchases media copyright royalties said in the report. “It’s like going to a hotel. This [room] has a view of the ocean as opposed to a view of the mountains. You’re going to have to pay more money.”

Netflix’s new service — which charges $6.99 per month for viewers who don’t mind watching ads — is one of the company’s tactics for getting people to sign up for its platform amid rising competition for streaming dollars.

Last month, Netflix COO Greg Peters said the company anticipates the service “will bring in a lot more members, then we’re quite confident in the long term that this will lead to a significant incremental revenue and profit stream.”

See also: Streaming Services Struggle With Loyalty Amid Rising Costs and Pricing

This is happening as the number of consumers subscribed to streaming services has begun to wane, according to the September report “The Subscription Commerce Conversion Index: The Challenge of Cheaters,” a PYMNTS and sticky.io collaboration.

The study, drawing on a July survey of a census-balanced panel of more than 2,000 U.S. consumers found that 63% of respondents subscribed to streaming services, a substantial drop from the 70% who had subscriptions in May. The report noted that streaming services had shed 10% of their subscriber base on average.