DreamWorks Animation has reportedly signed a deal to bring its films and TV specials to Netflix's online streaming service, marking the first time that a major Hollywood company has chosen Web streaming over pay television. The planned deal is valued at $30 million per picture over an unspecified number of years, according to The New York Times.
We are really starting to see a long-term road map of where the industry is headed, says Dreamworks CEO Jeffrey Katzenberg. This is a game-changing deal.
Starting in 2013, Netflix will begin streaming Dreamworks' most popular children's and family offerings, including hits like Kung Fu Panda and Antz, as well as a prehistoric comedy called The Croods, a Rocky and Bullwinkle adaptation called Peabody and Sherman, and a story about a garden snail called Turbo.
This is one of the few family entertainment brands that matter, said Netflix's Chief Content Officer Ted Sarandos. It's also a signal to people that we are in no way moving away from movies. Our programming is just reflecting more and more what people want.
The deal comes at a good time for Netflix, which has lost about one million customers and half of its $8 billion value in the past two months after making several controversial changes this summer.
First it was a 60 percent price hike, as Netflix decided to increase its streaming and DVD rental offering from $9.99 a month to $15.98 per month.
Given the huge changes we have been recently making, I should have personally given a full justification to our members of why we are separating DVD and streaming, and charging for both, Hastings said in a letter apologizing to Netflix customers on Sept. 19.
Then, in the same apology letter, Hastings announced the company would split off its DVD-by-mail service and rename it to Qwikster. This angered customers even further because the new deal would mean current Netflix customers who wished to retain both services would have to split off their queues for DVD rental and instant streaming.
We think the separate Web sites (a link away from each other) will enable us to improve both faster than if they were single Web sites, Hastings said. We already have two queues. The two 'sites' are a click between each other, so we think not that much different than two tabs on one site.
Netflix needs to find more ways to prevent its subscribers from jumping ship, especially with the influx of online streaming competitors. Apple, Amazon, and Vudu, a streaming service owned by Wal-Mart, are quickly gaining ground on Netflix. Dish Network has announced a partnership with former movie rental king BlockBuster to form Dish Network with Blockbuster Movie Pass.
Set to debut this Saturday, Dish Network with BlockBuster Movie Pass will be a $10 monthly add-on for existing Dish Network customers and will offer access to streaming movies and TV shows, as well as DVD, Blu-ray, and video game rentals by mail.
In the short term it will probably be good for the price of content, said Michael Nathanson, a media analyst for Nomura. More importantly, Nathanson points out that more competitors for Netflix in the long term may accelerate changes in consumer behaviors.
Netflix will need to secure more deals like the one with Dreamworks. Since the company failed to renegotiate its deal with premium cable channel Starz, Netflix will lose the right to stream films from Sony Pictures Entertainment and Walt Disney Studios starting in February 2012.
To supplement the failing movie deals, Netflix is working on adding more television content. Last week, Netflix renewed its deal with Discovery, which owns channels like Animal Planet and TLC, and the company is also working on acquiring the American rights to various overseas properties. Netflix has already spent $100 million to create a series called House of Cards.