September 26, 2011
Netflix To Offer Streaming DreamWorks Titles
Netflix has struck a deal with DreamWorks Animation to begin giving subscribers streaming access to the film company´s array of movies and television specials beginning in 2013, the New York Times reported Sunday.The deal is a landmark event for Netflix, as it is the first time a major Hollywood studio has opted for Internet streaming over traditional pay TV. The move will give Netflix the rights to blockbuster movies such as “Shrek” and “Kung Fu Panda.”
Jeffrey Katzenberg, CEO of DreamWorks, told the NY Times that the deal was worth $30 million per picture over a number of years. He said it was “game-changing” and represented a bet that viewers would soon no longer make distinctions between content streamed from the Internet or through cable.
“We are really starting to see a long-term road map of where the industry is headed,” Katzenberg said in an interview with the NY Times. “This is a game-changing deal.”
DreamWorks took the Netflix deal over a less lucrative deal with HBO. The studio will abandon its long-running contract with the premium network when it moves to Netflix in 2013. The Netflix deal was cited by the newspaper as being worth $30 million per picture to DreamWorks over a number of years.
The content agreement comes days after Netflix sealed another deal to broadcast TV programs from Discovery Communications Inc.
Netflix needs to add more content to bring in new customers and fend off challenges from other companies jumping into the streaming foray, including Apple, Amazon, Google and US satellite television company DISH Network. DISH Network said Friday it has teamed with Blockbuster to stream films in a direct challenge to Netflix.
Netflix shares have fallen sharply over the past two months as the company struggles to reverse a recent string of bad business decisions. The company´s CEO, Reed Hastings, who has come under fire for those bad decisions from both customers and investors, has also apologized for failing to explain the moves adequately, and the company is trying to win back lost customers.
Netflix had another setback when earlier this month Starz Entertainment decided to not renew its contract to stream its vast library of films and TV shows through the company. That deal ends in March.
Netflix was quick to accept the DreamWorks deal, according to the NY Times.
“This is one of the few family entertainment brands that matter,” Netflix´s chief content officer Ted Sarandos was quoted as saying. “It's also a signal to people that we are in no way moving away from movies. Our programming is just reflecting more and more what people want.”
“You´re seeing power moving back into the hands of content creators. When a company like DreamWorks ends a long-running pay TV deal – when a new buyer in the space steps up – that´s a really interesting landscape shift,” said Sarandos.
Netflix, which has lost an estimated one million of its 25 million subscribers, has also lost nearly half of its value -- about $8 billion worth -- in the past two months. But Katzenberg believes the new deal is a move in the right direction for the struggling company.
He called Netflix´s decision break up the company into two separate ventures “a very tough and very strategic call that will ultimately prove to be the right one for long-term success.” He said that maybe it could have been handled better. But added that “there are always bumps when you´re looking around a corner.”
The studio plans to release three titles in 2013 to Netflix: The “Croods,” a prehistoric comedy; “Turbo,” about a garden snail; and “Peabody & Sherman,” an adaptation of Rocky and Bullwinkle. It will release titles from the DreamWorks library, including “Shrek” and “Antz,” over time, the companies said.
Netflix pursued the DreamWorks deal aggressively to try and secure exclusive access to some of the biggest film successes available. The opportunity would also bolster its children and family offerings, another reason it was so aggressive.
The deal comes with one major perk for DreamWorks. Netflix will allow it to continue selling digital downloads of the movies and shows it streams; a perk that was not allowed in the HBO deal. HBO requires its studio partners to suspend digital sales of movies during its exclusive window.
The loss of DreamWorks probably won´t hurt HBO too much. HBO´s studio partners are increasingly making animated films and HBO recently brought in Summit Entertainment, the studio behind the “Twilight” films, as a new partner.
Netflix is also spending $100 million to create a series called “House of Cards” and acquiring the American rights to overseas properties.
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