Netflix (s nflx) is expanding its catalog of exclusive streaming content with a deal that will give its subscribers access to films from Nu Image/Millennium Films during what was traditionally known as the “pay TV window.” The deal, with the studio behind such movies as The Expendables, The Black Dahlia and Righteous Kill, marks the second time Netflix has been able to score exclusive access to first-run movies ahead of cable networks.
Under the new multiyear deal, Netflix expects get five to 10 theatrical films per year available through its streaming service, just a few months after they’re released on DVD. Among the first titles Netflix will get are the 2011 releases Son of No One, which stars Channing Tatum, Al Pacino and Katie Holmes, and Elephant White, which stars Djimon Hounsou and Kevin Bacon.
This is the second deal Netflix has done that gives it exclusive access to movies in the pay TV window; the first, with Relativity Media, was announced in July. The deals are being made as Netflix is pitching itself as a new kind of online distribution channel for studios like Relativity and Nu Image/Millennium. Instead of having their movies available through premium cable networks — like HBO (s TWX) or Showtime (s CBS) — after the DVD windows, these studios are taking those titles to Netflix’s streaming audience instead.
From a distribution standpoint, it makes sense, as Netflix now has an audience online that rivals many of the big cable companies and cable networks. At the close of the second quarter, Netflix had more than 15 million subscribers, of which more than 60 percent viewed online video as part of its streaming service.
What’s more, many of those subscribers are connecting to the Netflix streaming offering on their living room TVs, as Netflix has expanded availability of its streaming service through integration with consumer electronics devices such as connected TVs and Blu-ray players, TiVo (s TIVO) DVRs, Roku broadband set-top boxes and major gaming consoles such as Microsoft (s MSFT) Xbox 360, Sony (s SNE) PlayStation 3 and Nintendo Wii. Netflix expects to be streaming to more than 100 different CE devices by the end of the year.
For Netflix, the deal underscores the rapid expansion of its streaming library, as it signs deals to help it compete with the big cable providers. In addition to direct deals with the studios, Netflix recently struck a deal with premium cable network Epix to make its library of more than 3,000 streaming titles available to subscribers. It still has a deal with Starz to make its cable TV content available for streaming.
Netflix’s future depends on growing its streaming library and the number of users who use that service, as it transitions away from its original DVD-by-mail subscription service. As a result, the company has become very aggressive in lining up deals for streaming content, in part because unlike its DVD business, the cost of its streaming business lies mostly in its ability to secure content, not the delivery of it. That means better economics and greater ability to control costs in the long run.
So far, Netflix’s big bet on streaming is paying off, as the company has seen customer adoption of its streaming service grow from 37 percent of its users a year ago to 61 percent in the second quarter 2010. That’s translated into a big traffic boost, as the number of visitors to the Netflix website spiked 46 percent year-over-year in June, according to Citi research.
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