Netflix shares have been rising after news hit the market of Disney selecting Neflix’s video service to stream Disney’s first-run movies, bypassing traditional industry biggies like HBO and other premium channels. The news has also impacted the fortunes of Liberty Media Corp with share prices falling. Currently Liberty Media’s Starz group distributes Disney movies on TV.
The move was unexpected for many investors as recently Netflix had been suffering from slowing growth of subscribers and increasing expenses. However, there would be little instant changes for subscribers, as Disney’s current deal with Starz is in place up to 2016. Netflix would be able to stream Disney movies only after the current Disney-Starz deal expires.
Though the move by Netflix seems wise, as reflected in rising prices of shares, it is possible that Neflix might have to raise more capital in order to fund its acquisition of the Disney contract. According to industry reports, Neflix has paid more than $350 million to bag the contract, while similar deals, like that between HBO and 2oth Century Fox, made earlier this year, was close to $200 million.
However the exclusive deal with Disney puts Neflix in a more secure position than before, as the deal also includes rights to stream all library content as well as new movies like “Dumbo” and “Alice in Wonderland.”
Considering that Disney has gained a significant new audience by acquiring the Star Wars franchise from George Lucas, and the contract also includes rights to movies from Pixar and Marvel, this seems like very sound investment for Netflix, that will help it to differentiate itself from rivals like Hulu Plus or Amazon Instant Video.
In a publicly issued statement, Neflix’s chief content officer, Ted Sarandos, said “This deal brings to our subscribers some of the highest quality, most imaginative family films being made today … It’s a leap forward for Internet television.