Netflix signed Ryan Murphy, creator of hits such as American Horror Story and Glee, to a contract to make series and films, wresting him away from 21st Century Fox in a dramatic reordering of the TV business.
Murphy and his production company will get $300 million over five years, according to a person familiar with the matter. He follows Shonda Rhimes, the former ABC megaproducer behind Grey’s Anatomy and Scandal, and Mark Millar, the comic-book wunderkind, on a rapidly expanding roster of creative talent Netflix is opening its wallet to assemble.
The Murphy deal is likely to add more pressure on Fox (fox) and its deal partner Walt Disney (dis), which had both been lobbying to retain him, to show they have the right strategy to fend off their big-spending rival from Silicon Valley. The financial terms of Murphy’s contract are also likely to add to the chorus of Netflix (nflx) skeptics who argue the company’s $8 billion-a-year programming budget isn’t sustainable over the long term.
Murphy, 52, had been expected to re-sign with Fox but began to waver after the company agreed to sell much of its entertainment assets to Disney in a $52.4 billion deal, people familiar with the matter told Bloomberg in December. Disney Chief Executive Officer Bob Iger personally called Murphy after the acquisition was announced to assure him the family-friendly home of Mickey Mouse wanted the kind of edgy programming Murphy produces, Murphy said last month.
Netflix shares rose as much as 2.2% to $264 in early New York trading. The stock is up more than 80% in the past 12 months.
Netflix will burn through about $4 billion cash this year, and plans to increase its borrowing, in a quest to rapidly assemble a consistently fresh library of programming to keep its 117.6 million subscribers happily paying. Disney and other companies are busy pulling their programming off of Netflix to provide their own streaming services, putting more pressure on the Los Gatos, California-based company to come up with its own material.
Fox has been Murphy’s home for the past eight years and is where he has made almost all of his biggest hits. But the merger mania overtaking the media industry, where Time Warner, Scripps Networks Interactive, and Starz agreed to sales in the past 18 months, is changing the calculus for top talent in the industry, making Netflix and Amazon look like relatively safe bets with their deep pockets and long-term commitments.
Rhimes is one of many producers and filmmakers who have received offers of tens of millions of dollars from Netflix and Amazon to stray from traditional TV. Amazon poached The Walking Dead creator Robert Kirkman from AMC, the network that airs the zombie show, while Netflix has signed more expansive deals with Stranger Things producer Shawn Levy and Orange is the New Black creator Jenji Kohan.
Rhimes left Disney because she craved creative freedom she couldn’t find at ABC, a broadcast network that has to avoid some adult themes, grittier language and nudity because of its broad audience and government standards for the use of public airwaves. Fox also owns a broadcast network and has FX, a cable network renowned for dramas such as The Americans and Legion. Murphy has earned four Emmy Awards and 26 nominations, compared with just three nominations and zero wins for Rhimes.
Recruiting Rhimes and Murphy could help Netflix attain elusive Emmy wins of its own — or at least add to its library of exclusive, buzzworthy shows. Two Murphy-produced programs are already on the way on the streaming service — a One Flew Over the Cuckoo’s Nest prequel called Ratched, and a comedy series, The Politician. Murphy shows on Fox networks, such as FX’s American Crime Story, will continue on those channels.