Shonda Rhimes' Netflix Deal Ups the Stakes in Hollywood's Battle for Ownership

Shonda Rhimes - Getty - H 2017
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Four years after entering the high-end scripted originals business, Netflix continues to disrupt the television industry — only now it may be more focused on ownership than bidding wars.

On Aug. 13, the streaming giant revealed that it had lured prolific showrunner Shonda Rhimes away from her 15-year home at ABC Studios with a four-year overall deal that one industry observer estimates could be worth $100 million. Under the pact, the Grey's Anatomy and Scandal mastermind will create new projects for Netflix, which will now be the exclusive home to Rhimes' Shondaland.

Additionally, Rhimes, 47, will score a rare percentage of the backend on programming she creates for Netflix. (She will remain involved in pre-existing shows at ABC, including Grey's, its upcoming spinoff, the final season of Scandal, as well as How to Get Away With Murder and the forthcoming legal drama For the People, among others in development.)

"You had a streaming company that was outbidding everybody for top shows, and now there's about to be a war for talent," says one top exec, adding that Amazon's first-look deal with The Walking Dead creator Robert Kirkman is evidence of a larger trend among the premium streamers. "This is an example that they're not content to win a project anymore; they're looking to own the talent and make sure these projects are exclusive to them."

With Rhimes, Netflix adds a showrunner whom its audience already has embraced. The streamer boasts a library that includes Scandal and Grey's, the latter of which became ABC's top drama thanks in part to a new generation of viewers who first found the show on the streaming platform. (ABC Studios, it should be noted, released Rhimes from her $10 million-a-year deal a year early.)

Netflix will now be able to avoid steep licensing fees on future hot projects from top creators and instead score the financial windfall that comes from either streaming or selling programming around the world. "Some level of financial diligence is starting to creep into their massive spending," one studio insider says of Netflix's $6 billion annual content budget (and staggering $20 billion debt) that has generated 100 million global subscribers.

That Netflix would look to own more of its content comes as Disney said it will yank its content from the streamer and broadcast and cable networks continue to vertically align with their studio counterparts. It's an attempt to help turn a profit as the line between a hit and a flop continues to blur amid dwindling viewership and increased competition. FX owns a large swath of originals via FX Productions, with the same being true for TNT and Studio T, as well as AMC and AMC Studios.

Says Sam Armando, lead investment director at Spark Foundry, "This is becoming the way of life across the board." 

Rhimes, meanwhile, scores expanded creative freedom and the ability to stretch her wings outside of broadcast for the first time. Since creating Scandal, Rhimes and Shondaland partner Betsy Beers have focused on grooming a stable of top writer-producers — many of whom remain at ABC Studios — including Pete Nowalk (How to Get Away With Murder), Stacy McKee (the Grey's spinoff), Don Todd and Paul William Davies (For the People), Mark Fish (Scandal), Mark Wilding (the Grey's spinoff), Bill Harper (Grey's) and Allan Heinberg (The Catch). Now the question becomes what Rhimes' first act at Netflix will be.

A version of this story first appeared in the Aug. 16 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.