Netflix secures first Disney film runs

It’s a major coup for a platform trying to compete with cable and satellite television providers.

On-demand internet streaming service Netflix has signed an agreement with Walt Disney Studios so its subscribers will get to watch the latest releases straight after their release on DVD.

In an agreement described as “a bold leap forward for internet television” by Netflix’s chief content officer, Ted Sarandos, classic titles like Cinderella and Bambi will be available immediately.

From 2016, the agreement, which will be worth hundreds of millions of dollars to Walt Disney Studios, will mean consumers get new films first.

“We are incredibly pleased and proud this iconic family brand is teaming with Netflix to make it happen,” added Sarandos.

The deal will cover movies made by Marvel and Pixar Animations, which are both owned by Disney. As Disney is also set to buy the Star Wars franchise from Lucas Films, this should be a big draw for fans, although the first new Star Wars episode is actually due to be released before the agreement begins.

At the moment, the agreement will only benefit Netflix subscribers who live in the US because the negotiations are done on a country-by-country basis. But Netflix has already indicated it wants to win similar rights in the UK to put it in a stronger position to compete with broadcasting giant Sky.

It is the first time new movies are being brought from a major Hollywood studio to an Internet-streaming service rather than a major cable channel like HBO or Showtime.

Sarandos said Disney was a “near-perfect” media company and revealed Netflix began talks with Disney before the firm acquired Lucas Films.

Most of Netflix’s 30 million subscribers across the globe watch their movies on a Sony PlayStation 3.

News of the deal pushed Netflix shares up by 14 per cent, although the following day they dipped again by 2.8 per cent. Analysts have questioned whether Netflix, which charges less than a third of satellite and cable providers per month, can afford to stay on the same playing field.

No financial terms of the agreement have been disclosed, but experts estimate Netflix will be paying $250 million or more each year, possibly as much as $500 million.

Michael Pachter, who is an analyst at Wedbush Securities, said: “Due to the steep long-term price tag of the Disney deal, the back end-loaded nature of content availability, and Netflix’s unclear financial performance over the next few years, we view the announcement as a short-term fix to recent pressure on the company’s shares.”

Despite the concerns, Netflix has already said it doesn’t intend to pass the cost of the deal on to its subscribers. The promise comes after Netflix suffered a backlash from customers when it announced a price increase in July 2011.

Filmmaker Harvey Weinstein is among those who have welcomed the agreement. Miramax co-founder Weinstein said: “Moving into the family area is a very smart play in terms of you almost cornering the market.”

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