Netflix says it won't raise prices after Disney deal

NEW YORK Wed Dec 5, 2012 12:56pm EST

NEW YORK Dec 5 (Reuters) - Netflix Inc doesn't plan to pass along the cost o f the rights to Walt Disney Co movies to subscribers, a senior Netflix executive said on Wednesday.

Netflix, which analyst s estimate paid more than $3 5 0 million for the exclusive rights to stream Disney movies to TV beginning in 2016, is not considering a price increase to he lp finance the deal, said Ted Sarandos, the company's chief content officer, at the UBS Global Media and Communications Conference. [ID: nL1E8N4CZ6]

"We are not contemplating" raising the $8-a-month subscription fee for unlimited online viewing," S arandos said d uring a n interview with filmmaker Harvey Weinstein.

The deal gives Netflix streaming rights to movies from Disney's live-action and animation studios, including those from Pixar, Marvel, and Lucasfilm.

Netflix suffered from a consumer backlash and stock plunge after it announced an unpopular price increase in July 2011.

But Netflix's rising content costs have raised worries on Wall Street, w ith some analysts concerned that Netflix paid too much to get Disney's movies. Tony Wible, an analyst with Janney Montgomery Scott, estimated in a report that Netflix paid more than $350 million a year to secure the deal.

Sarandos called the arrangement with Disney a "game changer" that for the first time will bring new movies from a major Hollywood studio to an Internet-streaming service rather than a cable channel suc h as HBO or Showtime. C alling Disney a "near-perfect" media company, he said the two bega n discussing a de a l before Disne y acqu ired Lucas film and anno unced plan s for new "Star Wars" movies.

Disney's movies will bolster one of Netflix's most popular types of content - animated children's movies, Sarandos said. Netflix had a previous deal to stream Disney movies through an agreement with Liberty Media's Starz network, whi ch cur rently holds the excl usive rights to dist ribute new Disney films on T V.

"When we looked at the data of when we used to have Starz, the ones that constantly performed for us were those big animated features, lots of repeat viewing," Sarandos said. "It's a nice, safe brand halo when you put your kid in front of an iPad."

Netflix would like to bring more, fresher content from other studios to its service, Sarandos said.

The agreement received applause from Weinstein, who called it "probably the biggest content deal in the history of our business." He joked he had used Netflix as a "babysitter" at times with his two-and-a-half year old child. "Moving into the family area is a very smart play in terms of you almost cornering the market," Weinstein said.

Sarandos said he had not heard any response to the deal from Carl Icahn, the activist investor who recently purchased a 10 percent stake in the company. Netflix adopted a poison pill defense to prevent a takeover.

"This relationship is pretty new," Sarandos said of Icahn. But he said Icahn has been "publicly and privately very supportive" of Netflix.

Netflix shares, which rose 14 percent when the deal was unveiled on Tuesday, g ave some of those gains back in Wednesday trading. Its shares were down 2.8 percent, or $2.44, to $84.21 in early afternoon trading on the Nasdaq. Disney shares wer e up 35 cents, or less than 1 pe r cent, to $49.63 on the New York Stock Exchange.