Netflix’s catalog of third-party content will shrink even more in 2019. Production studios are not renewing their license deals with Netflix, preferring to move their best products within their own streaming services. These moves could be bad news for Netflix. Will Netflix subscribers follow the content, or will Netflix’s original content be compelling enough to stay?

Licensed Content Matters to Netflix

When it comes to headlines and social media trends, Netflix Originals get all the attention. But licensed content is a big reason people keep Netflix between binges. A study in early 2018 found that shows produced elsewhere comprise 80% of Netflix viewing. Moreover, less than 20% of Netflix subscribers spent most of their time watching Netflix Originals.

This goes a long way to explaining why Netflix paid $80 million to keep streaming Friends in 2019. It also explains why the prospect of Netflix losing Friends and other third-party titles is getting a lot of attention from media industry analysts.

Bringing Friends Back Into The Fold

Bad news for Netflix, Friends might leave
Source: Netflix

By 2020, there’s a good chance Friends will disappear behind the paywall of WarnerMedia’s yet-to-be-named streaming service. Scheduled to enter beta testing later this year, the new subscription service will formally launch in 2020. Parent company AT&T sees the studio’s own content as a key part of its streaming strategy.

“We are going to have to take a lot of the great content we own that’s been licensed elsewhere and bring that back into the fold,” AT&T CEO Randall Stephenson recently told investors.

And it isn’t just Friends. The CW, a joint venture between WarnerMedia and CBS, decided not to renew its licensing deal with Netflix. Under the old agreement, Netflix got first shot at any shows on the network. Episodes of the popular comic book adaptation Riverdale appeared on Netflix within days of airing on The CW.

Now, Deadline reports, Netflix will have to compete for content along with every other streaming service. For some of The CW’s content, Netflix won’t even get a chance to bid. The CW’s upcoming series Batwoman is wholly owned by WarnerMedia and probably destined for the new streaming service.

Michael Scott is Coming Home

Bad news for Netflix, The Office may leave
Source: Netflix

With shows like The Office as well as Parks and Recreation, NBCUniversal is another source of popular content on Netflix. Yet that content seems destined for NBCUniversal’s own subscription streaming service when it launches next year.

Addressing advertisers at the company’s upfront presentations this week, NBCUniversal head of advertising Linda Yaccarino said, “The shows that people love the most and stream the most are coming home.”

Yaccarino’s comments mirror comments from NBCUniversal CEO Stephen Burke on parent company Comcast’s latest earnings call. “A lot of companies will try to enter [the streaming business] with their own unique strengths, leveraging their own unique assets,” Burke said. “Given all the content we have and the real strengths we have, we look at this as a way to grow our company… for decades to come.”

Step into the Mouse’s House

Jessica Jones is canceled
Source: Netflix

In addition to licensed content from Disney’s many studios, Netflix scored several successes with Originals based on the Marvel Cinematic Universe. But the writing has been on the wall for Jessica Jones fans ever since Disney announced its Disney+ on-demand streaming service.

Disney+ will be the exclusive home for films and TV shows from Disney’s animation studios, Pixar, Lucasfilm and Marvel. In addition, content from the Fox acquisition, including FX and National Geographic, will stream only on Disney+.

“I realize that we could license [the Fox content] to third parties and make money on it,” Disney CEO told CNBC. “But it’s much more efficient for us to do it this way and have it be part of a service that’s also creating new content,”

Content that’s too edgy for the family-friendly service will find its home on Hulu. Disney cemented its control of Hulu last week when it agreed to buy out Comcast/NBCUniversal. As part of that agreement, NBCUniversal properties that are now Hulu exclusives will also be available on NBCUniversal’s new streaming service.

Will They Stay or Will They Go?

With so much popular content flowing away from Netflix, there’s an open question whether subscribers will choose to stay. The Hollywood Reporter recently surveyed a thousand Netflix subscribers and got results that could be troubling for Netflix’s executives. Almost a third of them said they would cancel their subscriptions if the content from Disney, WarnerMedia and NBCUniversal was no longer available to stream.

The party line from Netflix CEO Reed Hastings gives investors is that this is all part of the plan. “We’ve expected this decline of [licensed] content, been ready for it, anticipating it,” Hastings said on the latest Netflix earnings call. “In fact we’re eager to be able to have more and more of our money be able to do spectacular new titles.”

Chief Content Officer Ted Sarandos then explained that Netflix decided to shift strategy seven years ago “when we thought it was likely that the studios and networks would like to keep their [content] for themselves…. So increasingly our business is about creating and telling great stories around the world that are exclusively on Netflix and giving opportunity for new storytellers all over the world.”

Originals Are Not Enough

Avengers Endgame
Source: Marvel

However, the success of US-made originals like Stranger Things and internationally-produced shows like Korean zombie drama Kingdom may not be enough. For all the billions Netflix spends on content, its competitors can spend just as much. RBC Capital Markets analyst Steven Cahall told Variety that, in comparison to the $14 billion Netflix plans to spend on original content in 2019, Disney alone spend $19.4 billion and NBCUniversal will spend $14.3 billion.

Moreover, Netflix does not get the same return on its investments. In only three weeks, Disney’s Avengers: Endgame grossed $2.5 billion in worldwide box office sales and will generate even more in merchandise sales and theme park tie ins. When the movie hits Disney+ in December, dedicated Marvel fans may not have much use for Netflix.

Hastings and his team at Netflix say they aren’t worried, but walls are rising all around it. Competitors with much deeper catalogs of popular content will give subscribers plenty of reasons to leave. What remains to be seen is whether Netflix has established a strong enough reputation to keep its customers.

Chris Casper is a former tech industry product manager who escaped from California for New Mexico. Now he writes about science and tech while searching for the perfect green chile sauce.