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Tuesday, December 4, 2012

Netflix Reaches Deal to Show New Disney Films in 2016

Ted Sarandos, Netflixs chief content officer, called the deal with Disney Evan Agostini/Associated Press Ted Sarandos, Netflix's chief content officer, called the deal with Disney “a bold leap forward for Internet television.”

LOS ANGELES - Walt Disney Studios said on Tuesday that it had completed a deal to show films from its Disney, Pixar and Marvel banners on Netflix, replacing a less lucrative pact with Starz.

The agreement is the first time one of Hollywood's big studios has chosen Web streaming over pay television. Netflix has made similar “output” deals with smaller movie suppliers like DreamWorks Animation and the Weinstein Company . But all of the majors - Disney, Paramount, Universal, Warner Brothers, Sony and 20th Century Fox - have stayed with Starz, HBO or Showtime until now.

Library titles like “Dumbo,” “Alice in Wonderland” and “Pocahontas” will become available on Netflix immediately, Disney said. Netflix will begin streaming new release Disney films starting in late 2016, when the current accord with Starz expires. The deal announced on Tuesday includes direct-to-DVD movies.

Financial terms were not disclosed, but analysts estimated that the deal could be worth about $300 million annually for Disney. The deal does not include films from DreamWorks Studios, which has a theatrical distribution arrangement with Disney but relies on Showtime as a pay-TV partner. Nevertheless, the deal will include movies from Lucasfilm, which Disney is acquiring.

Ted Sarandos, Netflix's chief content officer, called the deal “a bold leap forward for Internet television.” Janice Ma rinelli, president of Disney-ABC Domestic Television, said in a statement, “Netflix continues to meet the demands of its subscribers in today's rapidly evolving digital landscape.”

The so-called pay TV window is one of the entertainment industry's most important business tools. In the past, Starz, HBO and Showtime paid about $20 million a picture for exclusive rights a few months after films arrive on DVD. But Netflix - capitalizing on a consumer shift to streaming content on computers, tablets and Internet-connected televisions - has been aggressively going after the business by offering more lucrative terms.

With the Disney deal, Netflix will be able to offer customers exclusive access to a pipeline of films that are reliably some of the year's biggest box-office successes. Netflix has also made it a priority to strengthen its children's and family offerings.

As for Starz, anything that increases the marketplace clout of Netflix is damaging. Moreover, Starz does not have the original programming strength of HBO or Showtime to fall back on.

Starz will continue to have films from Sony, but the absence of Disney movies will be a hole in its offerings. In a statement on Tuesday, however, Starz said that it had decided to part ways with Disney, not the other way around.

“Our decision not to extend the agreement for Disney output past that time allows us the opportunity to implement our plan to dramatically ramp up our investment in exclusive, premium-quality original series, which will best meet the needs of our distributors and subscribers,” the company said in the statement.