Netflix and DreamWorks Animation Sign ‘Game-Changing Deal’

Coming just a week after a boatload of bad PR with the announcement of Qwikster among other faux pas, Netflix has just inked a deal that could begin to change the landscape in the rental industry. The company has agreed to terms with DreamWorks Animation, replacing the company's long-standing deal with HBO. This marks the first time a major studio has opted to go with an exclusive agreement with a streaming web service over pay-TV. 

Netflix Chief Content Officer Ted Sarandos said, 

“You’re seeing power moving back into the hands of content creators. When a company like DreamWorks ends a long-running pay TV deal — when a new buyer in the space steps up — that’s a really interesting landscape shift.”


According to the New York Times, analysts estimate the deal is worth "$30 million per picture to DreamWorks over an unspecified period of years." DreamWorks Animation head Jeffrey Katzenberg called it a "game-changing deal" based on where things seem to be headed in the future. He acknowledged Netflix's recent tiff with its subscriber base and the PR hit it took, but said it "will ultimately prove to be the right one for long-term success.” 

DreamWorks Animation offers 10-plus years of celebrated animated content from Antz and Shrek to Kung Fu Panda that will begin to slowly appear on Netflix beginning in 2013 including its planned 2013 films, prehistoric family comedy The Croods and Turbo, about a racing garden snail.

Frankly, it's not a lot of content. It would be one thing if DreamWorks SKG signed the deal and you had all of the studio's live-action titles such as Transformers up for grabs. Still, the presence of DWA could influence more families to take up Netflix once more of the library makes its way online. However, it will hardly fix the hole in content Netflix faces in February when its deal with Starz ends after an unsuccessful re-negotiation (Starz got burned the first time) and consequently all of its Disney titles and Sony titles disappear.

But to be fair, the move isn't about content, it's about changing the precedent for where studios take their post-theatrical release business, especially in an age where DVDs are fading. If DWA can do it, perhaps other dominoes will fall or Netflix will return to the table with some other high-profile studios. 

It also helps them keep a leg up on the legion of new online streaming competitors Netflix has. Apple and Amazon have joined the game as well as Wal-Mart's new Vudu service and in the wake of Netflix's news last week, Dish Network and that little company it saved, Blockbuster, have announced a new streaming and by-mail service, but it won't be available to non-Dish Network customers initially. 

Although premature, Netflix also hopes to compete at the same level as pay-TV channels such as HBO through original content. The NYT says Netflix spent $100 million to produce the show House of Cards and Sony Pictures Television has been actively talking to the company about original programming.