Netflix to get Disney films in TV distribution deal

Tue Dec 4, 2012 6:32pm EST
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By Ronald Grover and Sue Zeidler

(Reuters) - Netflix will provide TV viewers with live and animated Disney, Pixar, Marvel Comics and Lucasfilm movies starting in 2016, as Walt Disney Co on Tuesday became the first major studio to choose Netflix over cable TV networks.

Netflix shares jumped 14 percent on the news, as investors saw the Disney deal as an important endorsement of the DVD rental and streaming service, which has struggled with slowing subscriber growth and higher costs for content distribution. Liberty Media Corp, whose Starz group now distributes Disney movies on TV, fell almost 5 percent.

"An exclusive deal with Disney differentiates the Netflix content from Hulu Plus and Amazon Instant Video," said Anthony DiClemente, an analyst with Barclays Capital.

But some analysts worried that Netflix paid too much to get Disney's movies. Tony Wible, an analyst with Janney Montgomery Scott, estimated in a report that Netflix paid more than $350 million a year for Disney's movies and said "we would not be surprised if would need to raise capital."

By comparison, HBO agreed to pay an estimated $200 million annually in its so-called "output," or movie licensing deal, with 20th Century Fox earlier this year, according to the Los Angeles Times.

Disney movies will be available for streaming on Netflix beginning in 2016, after its current deal with Liberty Media's pay-TV channel Starz expires. The deal is for both new movies from Disney's studios and library content such as "Dumbo" and "Alice in Wonderland."

The deal gives Netflix streaming rights to movies from Disney's live-action and animation studios, including those from Pixar, Marvel, and the recently acquired Lucasfilm. On October 30, Disney announced a $4 billion deal to purchase the famed studio founded by George Lucas, which will now make new episodes in the blockbuster "Star Wars" series that Lucas created.

"This deal brings to our subscribers some of the highest quality, most imaginative family films being made today," said Ted Sarandos, Netflix's chief content officer, in a statement. "It's a leap forward for Internet television."   Continued...

A sign is shown at the headquarters of Netflix in Los Gatos, California September 20, 2011. REUTERS/Robert Galbraith