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Netflix to make comedians pay production costs in licensing deals

Yahoo Finance's Allie Canal discusses the terms of Netflix's two-year licensing deals with comedians as it looks to reduce production costs.

Video transcript

BRAD SMITH: Netflix is looking to cut back costs in the comedy department. The streaming giant has begun changing its compensation plan for the specials, now licensing some for two years for $200,000, according to the Wall Street Journal. Yahoo Finance's Allie Canal joins us now. OK, Allie, what do we know about this so far?

ALEXANDRA CANAL: Well, Brad, this really is part of Netflix's larger goal to cut costs for the sake of profitability. So according to this Wall Street Journal report, this new licensing plan will shift some of that financial burden onto the comedian. So they will have to pay for their own production costs, which is something Netflix previously covered. In return, though, the comics will have more control over their work.

So once this two-year licensing period ends, they will regain full ownership of that content and can then shop that out to other outlets and platforms. We know comedy has been such a crucial element for Netflix. They've heavily invested in this space, hosting specials from Dave Chappelle, Bill Burr, Pete Davidson, just to name a few. Whitney Cummings was cited by the Journal as one of the comedians who will receive this two-year licensing deal.

And just to put this into further perspective, the streamer previously bought these comedy specials outright. So they would pay performers a lump sum. That lump sum could amount to as much as $1 million to help with some of those production costs, sometimes more, depending on the comic. So this is really just another option. Certainly, more cost effective for Netflix. There are some pros and cons there for performers. So we'll see.

I think Netflix will want to buy some deals outright, especially for some of those more popular standup comedians. But the flexibility of choice very important here, as Netflix gets more aggressive with cutting costs. And also important to note that some of those other streamers that you're seeing on your screen, like Amazon, Apple TV+, they'll now have greater access to some of this talent. So perhaps it could shake up the landscape a bit there, too.

BRAD SMITH: All right, a lot to keep track of in the streaming space as of right now. Allie Canal, thanks for keeping tabs on it and breaking it all down for us.