Fending off angry customers and competition from a resurgent Blockbuster, Netflix has inked a deal worth about $30 million with hit movie studio Dreamworks Animation, according to a report from The New York Times on Sunday.
The deal will allow Netflix customers to begin streaming Dreamworks movies beginning in 2013, the same year that the studio is expected to release three new movies. Dreamworks’ past hits include the lucrative “Shrek” series, “Madagascar” and “Kung Fu Panda” and its sequel, but those aren’t expected to become available until later, “over time,” in the words of company sources.
Still, the move marks an important shift in thinking from a major studio, apparently the first occasion that a company “has chosen Web streaming over pay television,” with the implication that Netflix will have exclusive rights to stream the new movies.
“We are really starting to see a long-term road map of where the industry is headed,” said Dreamworks CEO Jeffrey Katzenberg, the Times reported. “This is a game-changing deal.”
And yet, analysts and tech writers were are more sober in their assessments of what it means for both the companies and customers.
“DreamWorks is at most 10% as big as Sony and Disney (the Starz partners), and their content is not particularly ‘mature,'” wrote Michael Pachter, entertainment analyst at Wedbush Securities, in an email to TPM Idea Lab. “It’s a nice to have deal, not enough to turn the tide [of negative news].”
For Netflix, the motivations are clear enough: The company has struggled lately after introducing a 60 percent price hike in early September that drove away 1 million customers, and undertaking the radical and, thus-far, unpopular decision to rebrand its movie-by-mail service as a separate entity called “Qwikster.” Netflix has also seen an important content provider, Starz (which owns the rights to distribute Disney and Sony Pictures movies), walk-out on contract renegotiations.
But Netflix is trying to give customers and investors more of a reason to applaud, though, introducing new integrated Facebook streaming in Canada and Latin America at the f8 conference on Thursday (the company hopes the U.S. will be soon to follow, but it is currently hampered by a section of the U.S. code that prevents video rental companies from sharing customer information, which is obviously antithetical to Facebook’s entire ethos).
“The Facebook announcement could be big, but I’m not sure I want to watch movies via Facebook or watch with my Facebook friends (too hard to coordinate),” Pachter said. “I don’t need a Netflix link to recommend movies to my friends. My gut is that Facebook is also pretty small.”
Netflix stock was up over two percent Monday morning at the time of this posting.
It’s worthing noting that for its recent successes, Dreamworks has also had a rough and tumble past. Dreamworks began as a live-action and animated film studio, co-founded by Katzenberg, a former Disney executive, record mogul David Geffen and Steven Spielberg in 1994. After a string of misfires, Dreamworks Animation SKG was spun-off as a separate company in 2004.
