Netflix and Disney: A marriage

by Colin McGuire. 0 Comments

Just when you think December is reserved for nothing more than gifts, celebrations, half-done work and family members you haven’t seen since 2006, Netflix up and lands a deal with one of the most profitable entertainment entities in the universe. From The Associated Press …

“Netflix’s Internet video service has landed the U.S. rights to show Disney movies shortly after they leave theaters, a coup that could turn into a costly mistake if the deal doesn’t bring in more customers,” the news outlet’s Michael Liedtke wrote Tuesday. “The multiyear licensing agreement announced Tuesday represents a breakthrough for Netflix as it tries to secure more exclusive programming for a popular service that streams video over high-speed Internet connections. The approach is making Netflix more like traditional pay-TV channels such as HBO, Starz and Showtime.”

Wow. Who knew the Internet television world could provide such bombshells during such a lackadaisical time?! What’s next? Temperatures reaching 70 degrees in December?!


Anyway, the details are as such: Netflix will pay Disney more than $350 million annually for the rights to a mouse with large ears. The biggest impact of the move will essentially fall on neither of the two companies at hand — that honor goes to Starz, of all things, because the channel failed to re-up with good, old Walt, and it turns out, the whole exclusive element of this thing sort of gets in the way of other companies’ abilities to showcase Snow White and all her adorable dwarfs. Naturally, this made very rich people happy as Netflix’s stock rose 14 percent at the end of the day Tuesday. Starz, on the other hand, saw its value become dwarfed (see what I did there!?) by five percent. Hey, at least you still have “Boss,” right guys?

Ooops. My bad.

The juicy stuff comes when you dissect how Starz was one of the main components of Netflix’s ability to get into instant streaming in the first place. On that end, it kind of feels like a backstabbing, ruthless business decision that is making some trust-funded 30-somethings drink cheap vodka tonight in a dark room while lighting fire to red envelopes. Outside of that … boy, Netflix landed a heck of a coup.

As Liedtke points out, this is the first time that one of Hollywood’s major studios has sold its first-run rights to Netflix. DreamWorks had a similar deal in place, but let’s face it — DreamWorks ain’t Disney. Plus, that whole ordeal doesn’t go into effect until next year, and there isn’t a $5 movie bin in the world that doesn’t carry “Almost Famous” and “Catch Me If You Can,” anyway. So, as far as DreamWorks goes … well, yeah.

Brooks Barnes of The New York Times took a second to break it down the other day. And because he presumably makes $93 trillion dollars a year at the most influential newspaper on the planet, let’s see what he had to say …

“The agreement is the first time one of Hollywood’s big studios has chosen Web streaming over pay television,” he wrote. “Netflix has made similar ‘output’ deals with smaller movie suppliers like DreamWorks Animation and the Weinstein Company. But all of the majors — Disney, Paramount, Universal, Warner Brothers, Sony and 20th Century Fox — have stayed with Starz, HBO or Showtime until now.”

He goes on to point out that Starz will still have Sony, but, as we all know, that’s kind of like expecting a 1990s Chicago Bulls team to win a championship during the years Michael Jordan wanted to go play Mickey Mantle. “They shouldn’t worry,” hockey fans said. “They still have Scottie Pippen.”

Taking the basketball analogy even further, the move is a slam dunk for Netflix. Or, well kind of, at least. The problem, of course, is that this is an awfully expensive venture. The company is going to need more customers, moving forward, if the minds behind it don’t want this to blow up in their faces. As it goes, the Red Envelope Machine reported 21.5 million streaming subscribers through September of last year, while that number climbed to 25.1 million through September of this year. They are going to need to see that figure climb by this time next year, and that increase is going to have to be substantial in order to justify this move. Or, in other words, you can’t average a double-double if you are making triple-double money.

OK. I’m out of basketball analogies now.

“These costs are going to sink Netflix,” Wedbush Securities’ Michael Pachter said in what I’m going to guess was a grumpy tone. The subscribers won’t offset the gigantic fee, he said while setting fire to a copy of “The Lion King” on DVD. Sell your stock now, he insisted, or Simba dies.

That may be, but annoyed cynics notwithstanding, you can’t deny one thing: This is probably the biggest development in the history of Netflix (cough, Qwikster, cough), a company that happens to be the most popular and successful streaming service throughout all the land. That in mind, this can also be described as one of the five most important pieces of news the young world of Internet television has ever heard. Detract the deal all you want, but at least somebody is making moves to try and forward the medium. And even if it proves to be a colossal failure, at least this niche can look back and say that something colossal was even considered.

Or, in other words, simply getting in the game in the first place can sometimes mean so much more than air-balling your only three shot attempts of the night.

OK. Seriously. Completely out of basketball analogies now.

Specific financial details of the entire thing, as one may guess, are currently unknown.


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