I don’t know many video subscribers — TV or or streaming — who make decisions based on whether or not their package includes Shrek 2. But Netflix (NSDQ: NFLX) subscribers want signs that CEO Reed Hastings is putting his money where his mouth is and a deal with DreamWorks Animation SKG, particularly one that values the streaming service over HBO, sends one.
DreamWork Animations isn’t churning out a vast annual film slate that directly makes up for losing access to Sony (NYSE: SNE) or Disney (NYSE: DIS) when its deal with Starz Play expires next year. (First-run Sony movies aren’t available now because Starz already has hit its streaming cap.)
But the deal, confirmed by the NYT Sunday night and announced Monday, does for Netflix what it did for HBO — adds some high-quality, brand-name content that becomes part of the value of subscribing, and, in some cases, a tipping point for signing on, particularly for families. HBO, which is letting DWA out of its deal a year early, won’t miss the animated entries as much as Netflix can benefit from having the first-run films, the library titles and the TV shows. The deal covers access on TVs, tablets, computers, and mobile phones.
It was the second programming expansion announced by Netflix since Hastings told subscribers not only would the company be splitting streaming and DVD subscription plans, it would be spinning the DVD business into new subsidiary Qwickster. The company already projects it will lose 1 million domestic subscribers in Q3 over the subscription change, which sent prices up 60 percent for those getting both. The backlash has been loud and the stock price is down more than 50 percent. Extending and expanding its Discovery Communications (NSDQ: DISCA) package and this deal with DWA bolster Hastings’ promise to put money into adding more streaming content.
I’ve seen some mentions of how DWA is voting for streaming with this deal or how it’s a mistake to limit its U.S. first-run movies to Netflix instead of HBO or another traditional movie network. Actually, DWA is voting for money — $30 million per new release by some analyst estimates (although that could be high), compared with $20 million or so.
And both are betting that “the exclusive subscription television service” for DWA, as Netflix calls itself in the press release, will be the streaming equivalent of those more established networks in a video universe where the pictures are sharp but the lines are blurred.
Competition in Brazil: Netflix kicked off September by extending its international footprint to Mexico, Latin America and the Caribbean starting with Brazil. In addition to various pay TV services, it already had some competition in the form of subscription video service NetMovies Entertainment; think Netflix before the split with options for streaming only or streaming plus DVDs and Blu-Ray by mail. The streaming-only subscription is R$9.99 while Netflix charges R$14.99 — the NetMovies rate for a combo subscription.
Now NetMovies is getting a big boost to its offerings by signing a multi-year deal with Disney Media Distribution for movies and series from the Disney/ABC Television Group. Netflix has some Disney rights in Brazil but the amount of overlap isn’t clear.