11 Comments

Summary:

Dreamworks is parting with HBO snd giving its movies to Netflix instead: Starting in 2013, Netflix customers will be able to stream both new and catalog titles of the animation studio. Netflix was apparently willing to pay significantly more than HBO currently does.

dreamworks

Updated. Netflix has signed an exclusive deal with Dreamworks Animation to stream the studio’s box office hits to its customers, the New York Times reported today. Dreamworks previously supplied the movies to HBO, but Netflix outbid the TV network, paying an estimated $30 million per film title.

Netflix won’t be able to stream Dreamworks titles until 2013, according to the Times. However, the deal will enable the service to offer both new content — Dreamworks is planning to release three new movies that year — as well as catalog titles like Kung Fu Panda. Also part of the package are TV specials produced by Dreamworks.

For Netflix, this partnership couldn’t come at a better time: Its handling of the spin-off of its DVD division, complete with a badly communicated price increase, not only angered consumers, who have been canceling in droves. Recent news that Netflix wasn’t able to renew its contract with Starz also didn’t exactly bode well with investors, and the company’s stock has taken a sharp dive from a high of $304 earlier this year to a low of $125 last week.

A high-profile deal like this one should help to ease the concerns of investors, even if it won’t be able to appease consumers right away. Netflix is signaling to both its investors and Hollywood that it doesn’t need to buy content from TV networks like Starz, but that it can compete with the likes of HBO by offering up heaps of cash direct to the studios.

The deal also comes with a bit of a sugar coating for Hollywood. From the Times story:

“HBO requires its studio partners to suspend digital sales of movies during its exclusive window, but Netflix will allow DreamWorks to keep selling digital downloads.”

Netflix knows that subscription revenue dwarfs digital digital download sales, but this concession is also part of a bigger business philosophy. The company’s chief content officer Ted Sarandos has said in the past that Netfix doesn’t actually like to do exclusive deals. It does so when it has to compete with the likes of HBO. However, it won’t spend extra to get online exclusivity, prefers instead to invest its money in other content deals.

Speaking of deals: Netflix CEO Reed Hastings said in his recent apology that “actions speak louder than words” to regain lost trust. This deal may have been a first big step towards that goal, and who knows? A few more deals like this one, and we might speak of Netflix as a comeback kid a few months from now.

Updated to clarify that Netflix struck the deal with Dreamworks Animation, not Dreamworks Studios.

  1. Dreamworks and Dreamworks Animation are 2 different companies. This article is misleading.

    Share
    1. We certainly didn’t mean to mislead anyone. Netflix struck the deal with Dreamworks Animation, not Dreamworks Studios. We updated the article accordingly.

      Share
      1. To clarify further, it might be worth noting that HBO walked — and earlier than they were obligated to (“HBO even let DreamWorks out of its contract a year early so it could sign with Netflix, according to reports and a source with knowledge of the negotiations.” per Cnet)

        “Stole” is a massive overstatement.

        Share
  2. Stephen Simpson Sunday, September 25, 2011

    “this partnership couldn’t come at a better time”

    Actually, 2012 would be a lot better than 2013…. just sayin’!

    Share
  3. Definitely this deal is shot in the arm for Netflix.

    Share
  4. The reason this deal is pushed so far into the future (2013) is because Hollywood studios have output deals with pay TV networks such as HBO. DreamWorks Animation’s output deal with HBO doesn’t end until the end of 2012.

    These output deals will prove to be a real hurdle for Netflix. They won’t be able to obtain streaming rights from any of the studios for the pay TV window until the studios current output deals expire. This will likely prevent them from getting a deal with Sony and Disney directly since those two studios presently have output deals with Starz. Of course, as their current output deals expire, Netflix will be a welcome suitor for the pay TV streaming rights, especially since it will cause the licensing fees to increase.

    Share
  5. You left out the fact HBO let Dreamworks out of their contract. That IS misleading. But hey, don’t let the facts get in the way of your argument.

    Share
  6. How does an old story get covered again? Smells like Netflix PR to me. A few months ago there were a number of articles that covered that HBO let dreamworks out of it’s deal 2 years early because they are a pretty big cost for only 2 or 3 movies a year. Money they I’m sure HBO is choosing to invest in the next True Blood. Hardly a “steal”

    Share
  7. Here’s a more balanced article on what really happened. Janko, your desire to go rail against the status-quo despite the business issues, challenges, and revenue streams that all parties face is alarming and prevents you from being an unbiased observer.
    http://news.cnet.com/8301-31001_3-20111431-261/netflix-dreamworks-deal-is-more-spin-than-win/?tag=mncol;posts

    Share
  8. Is it just me or does $30M a title seem like they are massively overpaying?

    Share
  9. With Netflix making deals with Dreamworks and Amazon making deals with Fox, where does this leave the brands that used to advertise during video content? http://contagionfilms.com/2011/09/27/amazon-and-netflix-battling-to-own-media/

    Share

Comments have been disabled for this post