September 21, 2011 / 11:05 AM / 8 years ago

Netflix, Discovery in streaming deal for TV shows

NEW YORK (Reuters) - Netflix Inc and Discovery Communications reached an agreement to bring episodes of popular TV adventure shows including “Man vs. Wild” and “River Monsters” to the streaming service, the companies confirmed on Wednesday.

Netflix's Chief Executive Officer Reed Hastings speaks during an interview with Reuters in Buenos Aires September 7, 2011. REUTERS/Enrique Marcarian

The deal is the first major move by Discovery to make full episodes of its TV shows available for instant streaming, expanding well beyond the short clips that are now available on video sites such as YouTube

The two-year deal covers only material from prior seasons of the TV shows and is limited to Netflix subscribers in the United States. Discovery has an option for a third year.

Financial terms of the agreement could not be learned.

Home to some of the biggest hits on cable TV, Discovery Communications’ networks include Discovery, TLC and Animal Planet, ID: Investigation Discovery, Science and Military Channel. But Chief Executive David Zaslav has long shied away from making full episodes of Discovery’s shows available on the web, saying it failed to make economic sense.

Instead, he has chosen to use the web largely as a promotional tool to draw new viewers to its programs, while concentrating on expanding the TV business overseas.

The deal with Netflix, however, allows Discovery to sell a big chunk of its programing library, rather than just one or two of its recent hits. None of the content from Oprah Winfrey’s OWN Network — in which Discovery has a 50 percent stake — has been included.

Under the deal, Netflix will also provide a search function that makes it possible for a customer to simply enter the words Discovery Communications into a search bar and get a list of all the available programs from TLC, Animal Planet or the other networks.

The agreement comes during a rough stretch for Netflix, which needs to add more content to its streaming service to keep drawing in new customers and fend off competition.

But adding customers is suddenly proving difficult, with Netflix the subject of heated complaints from customers upset over a price hike it announced in July. Since then, the stock has dropped by around 50 percent.

Netflix Chief Financial Officer David Wells said on Wednesday that the company’s “core thesis was intact” despite the recent customer backlash.

“We are still well-positioned to take advantage” of opportunities in domestic and international streaming markets, Wells said at the Goldman Sachs Communacopia Conference. “We are still the market leader.”

Wells said price reductions or short-term discounts were “in the realm of possibility, but I don’t think it’s going to win back the customers that we’ve lost.”

“The biggest thing we can do is continue to add content, continue to improve” the service, he said.

That could prove costly, with Netflix under pressure from Hollywood studios and cable programmers to pay much more for content. Negotiations with Liberty Media’s Starz were recently called off because the two sides could not reach an agreement on pricing terms.

Earlier this week, Netflix unveiled plans to further concentrate on its streaming service by splitting off its DVD-by-mail business, renaming it Qwikster. The decision, however, set off another round of complaints from customers.

Additional reporting by Lisa Richwine in Los Angeles; Editing by Bob Burgdorfer, Derek Caney and Carol Bishopric

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