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Disney has become the first major studio to bypass major cable providers like Starz and HBO in favor of an Internet content provider with its home releases -having entered into a multi-year licensing agreement with Netflix for the exclusive right to stream content to its U.S. subscribers. Financial terms weren't disclosed, but analysts estimate that Netflix will pay Disney more than $350 million annually.
Is this the death knell for Big Cable in the USA?
Strong Internet content providers and film studios will benefit, while the premium cable channels will have to learn to adapt to an industry that will begin changing more rapidly than ever now Disney is apparently driving change.
According to the terms, starting 2016, Netflix would be able to stream movies from the Disney Studio and its associated studios instantly after release. Moreover, Netflix would gain access to Disney's direct-to-video releases starting 2013.
The New York Times reports:
The agreement is the first time one of Hollywood’s big studios has chosen Web streaming over pay television. Netflix has made similar “output” deals with smaller movie suppliers like DreamWorks Animation and the Weinstein Company. But all of the majors — Disney, Paramount, Universal, Warner Brothers, Sony and 20th Century Fox — have stayed with Starz, HBO or Showtime until now.
Library titles like “Dumbo,” “Alice in Wonderland” and “Pocahontas” will become available on Netflix immediately, Disney said. Netflix will begin streaming new release Disney films starting in late 2016, when the current accord with Starz expires. The deal announced on Tuesday includes direct-to-DVD movies…With the Disney deal, Netflix will be able to offer customers exclusive access to a pipeline of films that are reliably some of the year’s biggest box-office successes. Netflix has also made it a priority to strengthen its children’s and family offerings.
The current deal is a big positive for Netflix and has come at a crucial time and more partnership agreements with Hollywood studios and the overall improvement in content now make its streaming services distinguishable from other service providers such as HBO and Amazon Prime Instant Video.
Netflix shares surged $10.65, or 14 percent, to close Tuesday at $86.65, its highest closing price since April. The stock of Starz's owner, Liberty Media Corp., sank $5.49, or nearly 5 percent, to $105.56. Disney shares added a penny to $49.30.
"But the agreement is a credit negative development for Starz that highlights its vulnerability in the evolving content distribution landscape and could create downward pressure on Starz's ratings," it said.