Netflix Inc., the online movie service trying to add users after a price increase alienated some customers, gained rights to stream films from DreamWorks Animation SKG Inc., the maker of “Madagascar” and “Shrek.”
The agreement covers new releases starting in 2013 from Glendale, California-based DreamWorks, the companies said today in a statement. Netflix, the world’s largest online film-rental service, replaces the cable channel HBO as DreamWorks’s partner.
The deal bolsters Netflix’s streaming content after talks to renew movies from the Starz cable channel broke down. Los Gatos, California-based Netflix estimates it lost more than a half-million U.S. customers after raising the price 60 percent for those who purchased both online streaming and DVDs by mail. The company is splitting the two sides of its business into two separate companies, Netflix Chief Executive Officer Reed Hastings said Sept. 18.
“This deal will be just one of a number of deals we’re likely to see over the next six months as Netflix continues to spend on streaming,” said James Cordwell, an analyst at Atlantic Equities in London who recommends Netflix shares. “That will be what drives a return to stabilization and subscriber growth.”
Netflix and DreamWorks didn’t disclose the terms of their agreement. Netflix, which has fallen more than 50 percent from a July 13 high of $298.73, added $1.84 to $131.20 at 10:32 a.m. New York time in Nasdaq Stock Market trading. DreamWorks rose 5 cents to $18.79 and had lost 36 percent this year before today.
Content spending
Netflix has money to spend on content after failing to come to an agreement with Starz on deal that could have been worth $300 million, according to analysts at Piper Jaffray Cos. Netflix’s content spending will rise to more than $2 billion in 2012 from about $800 million this year, according to Michael Pachter, an analyst at Wedbush Securities in Los Angeles.
The DreamWorks deal probably won’t affect near-term customer churn because it doesn’t add new content until 2013, Cordwell said.
Time Warner Inc.’s HBO, which has added Summit Entertainment films to its premium-cable programming, agreed to allow DreamWorks out of contract that runs through 2014, paving the way for the move to Netflix, a person with knowledge of the situation said on July 24.
Netflix has signed digital distribution deals giving it streaming rights to films from Viacom Inc.’s Paramount Pictures, Lions Gate Entertainment Corp. and Miramax.
