Netflix Notches a Win with DreamWorks Animation Deal

It won't give them many movies, but it does show they can beat out the likes of HBO for content

Netflix has a pretty rough string of news--it angered customers by raising prices, announced that it will lose a chunk of its streaming library after its deal with Starz expires in February, and it split its brand in two. But this morning had a bit of good news for the home entertainment service: The New York Times's Brooks Barnes and Brian Stetler report that it has won rights to stream the DreamWorks Animation slate. "The Netflix accord, which analysts estimate is worth $30 million per picture to DreamWorks over an unspecified period of years, is billed by the companies as the first time a major Hollywood supplier has chosen Web streaming over pay television," they write.

With Netflix now exclusively about streaming video--the old DVD-by-mail business was split off and dubbed, hopelessly, Qwikster--but that is exactly where the company is weakest. Its deal with Starz allowed it to piggyback on the cable network's contract for access to new releases and catalog material from Sony Pictures Entertainment and Walt Disney Studios. But Starz declined to renew those terms which could mean a smaller selection at Netflix coming this February. That's why over the last few weeks, Netflix has been trying to ensure it still has content by then. Last week it announced a deal with Discovery, and in 2013 it will add the DreamWorks Animation content.

If Netflix wants to stay relevant, it needs to beat out other bidders, which traditionally have been the pay-cable giants like HBO. DreamWorks Animation may only releases a few films each year, but getting a studio to leave a cable TV station for Netflix shows that content providers can be wooed away from their traditional partners. "We are really starting to see a long-term road map of where the industry is headed," DreamWorks CEO Jeff Katzenberg told Barnes and Stetler. If Netflix wants to lure customers, it needs to keep it up, adds TechCrunch's Erik Schonfeld.

This is exactly the kind move Netflix needs to be doing right now to bring streaming up to par with cable TV. Netflix will have to cut many more deals like this with other studios to make that happen, but this suggests it will be more aggressive in the future. Normally, Netflix purchases streaming rights for later time windows, usually after premium cable channels get to show the movies.

If it can continue to take content away from TV and put it online, only to be found (legally) on Netflix, the company will add something unique and valuable. But perhaps the move is too little too late. Netflix loses its Disney and Sony movies in early 2012, and the DreamWorks films won't show up until 2013. Some might peace out facing a whole year without anything fun to watch.