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Netflix CEO: We Will 'Certainly' Bid for Disney Movies When Starz Deal Expires

23 Oct, 2012 By: Erik Gruenwedel

Netflix said it will enter a bid to license movies from Walt Disney Studios when the studio’s premium TV and digital distribution deal with Starz Entertainment expires in 2015, CEO Reed Hastings told analysts during the subscription video-on-demand service’s third-quarter fiscal call.

Starz Entertainment currently distributes Disney, Sony Pictures and other studio content to cable and digital distribution channels through its Starz/Encore-branded channels.

It was Starz’ groundbreaking (and controversial) digital distribution agreement with Netflix — which ended in February — that helped the rental service establish the SVOD market. Renewal of the four-year agreement with Starz had been projected to reach $300 million annually — 10 times the original fee.

Netflix now is looking at getting Disney movies directly from the studio — as it does with DreamWorks Animation, The Weinstein Co. and Relativity Media.

“It’s a little premature, but we would certainly be bidders for [Disney fare] for [the premium TV window] as we have with others in the past,” Hastings said.

CFO David Wells said that while TV programming dominates SVOD content choices, movies remain important to the content portfolio. He said Netflix has been able to expand its market share through episodic TV programming — a reality he said that does not mean the service is turning its back on movies.

“Even in our DVD business, about a third of our shipments are new releases, and two-thirds don’t fall in any release category,” Wells said. “I think subscribers just want something good to watch and are less engaged in the freshness of the content.”

Netflix recently gave up SVOD exclusivity for Epix movies (now shared with Amazon Prime Instant Video) after management determined the renewal rate was too expensive.

Hastings said Netflix would go after direct deals with Universal, Disney and Sony Pictures — strategies he said the SVOD service won’t act upon for at least the next two years due to the studios’ current third-party agreements.

The CEO said Netflix analyzes studios’ increased desire to bundle licensed content (new release and catalog) in its entirety as to how much viewing will it generate. It then determines a “clearing price” for that set of content, which then leads to back-and-forth negotiations.

“It’s all part of the give-and-take we have with the hundreds of [license] agreements,” he said.

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