Big Movies, Big Bill: Netflix Pays Up for a Disney Exclusive
The answer comes via a deal industry folks have been buzzing about for a while: Starting in 2016, Netflix will get exclusive access to all of Disney’s big movies — including the Pixar movies and the ones based on Marvel superheros — in the “pay window.”
That is, after they’ve been available for rental and for sale. Or in other words, when pay TV channels like HBO and Showtime get their big titles.
That’s not the first time Netflix has landed a deal like this — it had already inked similar ones with Dreamworks Animation and Relativity — but it’s by far the most important one.
It fills an important hole in the Netflix catalog that opened up last year when the company lost access to Sony and Disney movies it used to get via a deal with Starz. And it’s particularly valuable for Netflix, which already has a reputation as a cheap way to entertain/pacify kids. And it helps bolsters the claim that CEO Reed Hastings has been making for a while: We’re just like HBO (or any other cable channel people like).
Next pressing question for Netflix: Can it afford to pay for stuff people want to watch?
Today, investors seem to think it can, since they’ve bumped up Netflix shares by 14 percent. But Netflix investors are a fickle bunch, so hold off on reading much into that.
Netflix and Disney won’t disclose the deal terms. The Los Angeles Times’ plugged-in reporters quote a “person close to the matter” (likely on the Disney side of the table) who says “Netflix could ultimately pay more than $300 million” a year for the movies.
That figure seems plausible, at the very least: A year ago, Netflix said it was willing to pay $200 million or more a year for the Starz/Sony/Disney deal. This deal doesn’t include Sony and Starz’ stuff, but it does include a lot more content from Disney, including the studio’s direct-to-video deals, along with a selection of classics like “Dumbo” that will be available immediately.
Since the Starz deal fell through, Netflix has been arguing that the loss wasn’t that big a deal, since it has increasingly become a place to watch TV shows instead of movies; it’s also been playing up its upcoming foray into original productions, like “House of Cards.” And CEO Reed Hastings repeatedly said that while he liked having the Disney and Sony movies, they didn’t account for a whole lot of streaming hours.
So Hastings and company may have to do a bit of finessing here: They need to convince Wall Street that they’re happy to get this stuff, but that they weren’t buying it at any price. And, crucially, that the new titles will help bring in new subscribers and hang on to existing ones, so that Netflix can afford its steadily increasing content tab.