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News Corp. COO: Fox Open to Selling ‘Right’ Content to Netflix

4 May, 2011 By: Erik Gruenwedel

Studio Q3 operating income plunges against ‘Avatar’ comps

News Corp.’s 20th Century Fox studio and television units are the latest content owners to revise their licensing policies toward Netflix and the emerging subscription-based video-on-demand market.

The day after CBS Corp. CEO Les Moonves said the network was aggressively negotiating license agreements for Netflix’s pending Latin America service launch, Time Warner Inc. CEO Jeff Bewkes reiterated a willingness to cooperate — on his terms — with the online disc rental pioneer.

Media reports say the Walt Disney Co., Lionsgate and Paramount Pictures have all jumped aboard the Netflix bandwagon eager to license content and tap into the streaming service’s bulging coffers.

During a May 4 fiscal call, News Corp. president and COO Chase Carey said 20th Century Fox Home Entertainment’s previous agreements with Netflix have been incremental, despite their measured scope of content. Carey said Netflix’s business model has created incremental revenue opportunities for library content and thus requires flexibility on the part of content owners.

“We’re taking advantage of new competition from Netflix and other emerging platforms, which are creating a new and incremental source of revenue for library rights to our [TV] shows,” Carey said. “In many ways libraries have been underexploited, it is one of the positives of Netflix.”

Carey said he believes the rapidly evolving digital distribution will provide many more opportunities beyond Netflix. He said the platform has created a viable market for content didn’t have one in the past.

“As more of the digital platforms arise in different shapes and forms, it provides an opportunity to capture real value off of unique product that just didn’t have appropriate outlets in the past,” he said. “One of the reasons we are participating [with Netflix] is that we have a pretty clearly defined view of what is the appropriate type of [streaming] product … what should be sold in one place and what should be sold in a different place.”

Carey said the key to licensing deals with emerging digital markets is to not get locked into something long-term for upfront dollars that in the end everyone regrets.

“It pays to not grab a quick buck [that is] not quite as an attractive buck literally 12 to 18 months later,” he said. “If we can’t get fair value, we aren’t going to do it.”

Meanwhile, News Corp.’s filmed entertainment unit reported third-quarter (ended March 31) operating income of $248 million, which was down 50% from record operating income of $497 million during the same period last year. The year-ago period included the ongoing largess afforded by Avatar — the all-time box office revenue generator, which contributed more than 50% of the unit’s operating income.

A notable driver in the quarter was Oscar winner (Best Actress Natalie Portman) Black Swan, which has generated more than $300 million in global box office. The studio has high hopes for Rio in the fourth quarter. The animated film already has generated more than $370 million in global box office.

Revenue for the quarter dropped 36% to $1.6 billion from $2.4 billion last year.

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