* Disney movies will be available on Netflix beginning 2016
* Deal sends Netflix shares soaring 14 percent
* Analysts estimate Netflix is paying more than $350 in deal
(Recasts to add analysis, additional quotes)
By Ronald Grover and Sue Zeidler
Dec 4 Netflix will provide TV viewers
with live and animated Disney, Pixar, Marvel Comics and
Lucasfilm movies starting in 2016, as Walt Disney Co on
Tuesday became the first major studio to choose Netflix over
cable TV networks.
Netflix shares jumped 14 percent on the news, as investors
saw the Disney deal as an important endorsement of the DVD
rental and streaming service, which has struggled with slowing
subscriber growth and higher costs for content distribution.
Liberty Media Corp, whose Starz group now distributes
Disney movies on TV, fell almost 5 percent.
"An exclusive deal with Disney differentiates the Netflix
content from Hulu Plus and Amazon Instant Video," said Anthony
DiClemente, an analyst with Barclays Capital.
But some analysts worried 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 for Disney's movies and said "we would not be
surprised if would need to raise capital."
By comparison, HBO agreed to pay an estimated $200 million
annually in its so-called "output," or movie licensing deal,
with 20th Century Fox earlier this year, according to the Los
Disney movies will be available for streaming on Netflix
beginning in 2016, after its current deal with Liberty Media's
pay-TV channel Starz expires. The deal is for both new movies
from Disney's studios and library content such as "Dumbo" and
"Alice in Wonderland."
The deal gives Netflix streaming rights to movies from
Disney's live-action and animation studios, including those from
Pixar, Marvel, and the recently acquired Lucasfilm. On Oct. 30,
Disney announced a $4 billion deal to purchase the famed studio
founded by George Lucas, which will now make new episodes in the
blockbuster "Star Wars" series that Lucas created.
"This deal brings to our subscribers some of the highest
quality, most imaginative family films being made today," said
Ted Sarandos, Netflix's chief content officer, in a statement.
"It's a leap forward for Internet television."
Movies from Steven Spielberg's DreamWorks Studios are not
included in the deal, as that studio distributes its movies
through CBS's Showtime on TV. Disney recently signed a
deal to distribute DreamWorks' films theatrically after the
studio's deal with Viacom's Paramount Pictures expired.
The deal allows Netflix to stream Disney movies beginning
seven to nine months after they appear in theaters, as Starz
does now under Disney's prior agreement. The deal does not cover
DVD rentals of Disney movies.
Disney said in November that it would shut down its own
video streaming service, Disney Movies Online, which had failed
to catch on with users. A message on the 'Disney Movies Online'
website said it would shut down on Dec. 31.
Netflix, which started its streaming business with mostly
older films, has been moving to add more original programming
and produces TV shows such as "Lilyhammer," which stars
"Sopranos" actor Steven Van Zandt as an American gangster who
starts a new life in Norway. The company also struck a
high-profile deal with actor Kevin Spacey for "House of Cards."
The Disney pact follows similar deals Netflix has inked for
new films with smaller studios, including Relativity Media, The
Weinstein company and DreamWorks Animation.
The agreements have saddled Netflix with nearly $5 billion
in contractual commitments over the next three years for deals
its made for streaming content, the company said in its most
recent quarterly earnings report.
Netflix's struggles over the last year, which have included
missed subscriber guidance, an ill-fated attempt to split the
DVD and streaming operations, and a swooning stock price,
recently attracted the attention of billionaire activist
investor Carl Icahn. Icahn disclosed in regulatory filings on
Oct. 31 that he had amassed a nearly 10 percent stake in the
video company and suggested it should pursue a sale. Netflix
responded by adopting a poison pill defense.
Losing Disney's movies means Starz is left with only Sony
Pictures for film content. The pay-TV channel cast the ending of
its agreement with Disney as its decision, saying it preferred
to use the money for original programming creation.
In a statement, Starz said it now has an "opportunity to
implement our plan to dramatically ramp up our investment in
exclusive, premium-quality original series which will best meet
the needs of our distributors and subscribers."
Netflix shares jumped $10.6491, or 14 percent, to $86.6491.
Liberty Media shares fell $5.49, or almost 5 percent, to
(Reporting By Ronald Grover; Editing by David Gregorio; Editing
by Peter Lauria, Tim Dobbyn and David Gregorio)