Netflix's Ted Sarandos: Disney deal a 'game changer'
Dec 05, 2012 (Los Angeles Times - McClatchy-Tribune Information Services via COMTEX) --
Netflix's day-old deal to be the exclusive pay-TV home for new movies from Walt Disney Studios is a "game changer" for the streaming video company and was "the highest value deal" possible for the entertainment giant, executives from the two companies said Wednesday.
Speaking at the UBS Global Media and Communications Conference in New York, Netflix Chief Content Officer Ted Sarandos said bidding away those rights from premium cable channel Starz beginning in 2016 was particularly valuable to his company because of its large family audience.
"The movies that constantly performed well for us are those big, animated features," Sarandos said. "There's lots of repeat viewing. It's a safe brand halo."
Netflix has been courting families -- especially younger viewers, for whom streaming video services come as second nature. It created a "Just for Kids" interface that relies heavily on images -- to remove any barriers for finding shows. Netflix also has been striking content deals to bring popular children's television offerings to the service, such as Nickelodeon's "SpongeBob SquarePants" and Disney Channel's "Phineas and Ferb," as well as full-length movies such as "Shrek" and "Madagascar" from DreamWorks Animation.
Indeed, family fare plays well around the world -- including in emerging markets such as Latin America, where children's programs are less available.
For many, the idea of an Internet company outbidding established cable channels for the rights to movies from giant brands like Disney's Pixar, Marvel, and Lucasfilm marks an inflection point in the media landscape.
"It is a game changer," said Sarandos, who spoke at the conference with Weinstein Co. Chairman Harvey Weinstein.
Speaking soon after Sarandos, Walt Disney Co. Chief Financial Officer Jay Rasulo said his company "broadly surveyed the market" before agreeing to the Netflix partnership.
"There are a lot of factors we put into the calculus of how we ... decided to do this deal," he explained. "At the end of the day we thought for the content we create, the value and windowing chain we create, this was the best and highest value we could create for the company. We're thrilled to have done it and expect great things from it."
Rasulo declined to discuss terms of the three-year agreement, which some analysts have pegged at potentially more than $300 million per year, depending on the number of movies Disney releases and their box office performance.
Netflix stock, which jumped 14% Tuesday after news of the Disney deal, was down 3% at $83.99 in midday trading Wednesday amid a broader market slump.
Media analyst Tim Nollen of Macquarie Securities wrote that gaining exclusive streaming access to Disney films addresses complaints over the service's "thin film offering." Bulking up on family fare makes the service attractive for consumers paying a low monthly fee, he added.
But Nollen expressed qualms about the cost of the deal -- which he pegged at about $300 million annually -- and wondered whether the infusion of big blockbuster movies from Disney will come too late to shore up Netflix's domestic subscriber base, which is growing more slowly than the company initially forecast.
"The heart of the deal doesn't come into effect for more than three years," Nollen wrote. "This isn't nearly close enough to shore up subscriber numbers, which we view as Netflix's No. 1 problem."
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