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Netflix Signs Exclusive Deal With Dreamworks

samzenpus posted more than 2 years ago | from the let-there-be-movies dept.

Businesses 199

tekgoblin writes "Netflix has signed an exclusive deal with Dreamworks Animation which will allow them to stream content from the studio to Netflix. The deal will allow Netflix to stream content from Dreamworks, which previously supplied content to HBO. The contract was negotiated at approximately $30 million per Dreamworks film title."

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$30 mil per movie title! (5, Insightful)

firex726 (1188453) | more than 2 years ago | (#37514700)

$30 mil per movie title!
That just seems insanely expensive to me.

Re:$30 mil per movie title! (1)

mkraft (200694) | more than 2 years ago | (#37514746)

Considering Netflix recently lost half their market value, I wonder how they are going to afford this? Are they only going to stream a handful of Dreamworks titles?

Re:$30 mil per movie title! (4, Informative)

mr1911 (1942298) | more than 2 years ago | (#37514792)

Market cap is not working capital or cash flow.

Re:$30 mil per movie title! (0)

Anonymous Coward | more than 2 years ago | (#37514960)

Besides why must Netflix negotiate with Dreamworks?

Isn't there an MPAA precisely so that it can bargain on behalf of the studios, so an outfit like Netflix or a traditional theater etc need not separately negotiate with each individual studio? You think for once they could do something useful and constructive instead of suing their customers?

Re:$30 mil per movie title! (1)

Grave (8234) | more than 2 years ago | (#37515022)

Useful and constructive to whom? The MPAA represents the studios, not the public. They can only see as far as the nearest link on the chain, I'm afraid. The connection between the MPAA and the paying public is too far off for them to comprehend.

Re:$30 mil per movie title! (1)

bws111 (1216812) | more than 2 years ago | (#37515030)

No, the MPAA is not a licensing organization. And what customers have they sued?

Re:$30 mil per movie title! (1)

Reverand Dave (1959652) | more than 2 years ago | (#37515136)

Maybe this one [betanews.com] . The MPAA is just as sue happy as the RIAA and as sinister.

Re:$30 mil per movie title! (2)

bws111 (1216812) | more than 2 years ago | (#37515682)

Um, if you are either downloading from unauthorized sources, or especially if you are uploading, you are not a customer. And when the guy says he doesn't watch movies, that really takes him even further out of the 'customer' category. So again, what customers, acting in their role as customer, have they sued?

Re:$30 mil per movie title! (0)

Anonymous Coward | more than 2 years ago | (#37515384)

Isn't there an MPAA precisely so that it can bargain on behalf of the studios

No. The MPAA was created to represent the studios in other matters where there is an advantage to acting in a united fashion, but licensing their works is not one of those matters.

Besides why must Netflix negotiate with Dreamworks?

That's a good question, but it's not the MPAA that Netflix should be negotiating with. Instead, Netflix should be pushing congress to set CARP rates as they have for webcasters streaming audio. There's no reason why Netflix should have to negotiate with all the copyright holders individually. There should be compulsory rates that are fair to both copyright holders and streaming video providers alike.

Re:$30 mil per movie title! (2)

bws111 (1216812) | more than 2 years ago | (#37515928)

And what interest would Netflix possibly have in doing that? This way, they get an exclusive deal, which gives them a leg up on the competition. With CARP rates they are essential in a commodity, race-to-the-bottom industry.

Re:$30 mil per movie title! (2)

C_Kode (102755) | more than 2 years ago | (#37515040)

Market cap is not working capital or cash flow.

This is true, but they are generally tied to each other. For instance if a company has poor cash flow and working capital, their stock value tends to drop which knocks their market cap down. While the opposite occurs when a company has cash flow and capital.

The original poster does have a point. Many times a company will sell stock help finance large investments like this. $30M per title. You've got to ask, exactly how many titles are they purchasing the rights too? Currently Dreamworks has released 22 films. That's $660M. They have eight more films due to be released by 2014. That is another $240M. Is Netflix about to invest $900M on 30 movies?

Re:$30 mil per movie title! (0)

mr1911 (1942298) | more than 2 years ago | (#37515516)

This is true, but they are generally tied to each other.

Citation needed.

Re:$30 mil per movie title! (1)

binarylarry (1338699) | more than 2 years ago | (#37515544)

Netflix's stock price dropped because of two things: loss of an important supplier (Starz) and a very bad PR move. They've found a new supplier in Dreamworks and put out a bunch of new PR and member perks, so it looks like they're actively fixing the previous issues.

I bought NTFX stock when it hit bottom because they have a good service, they just had a few set backs. Hopefully these attempts to correct their current woes pan out. ;)

Re:$30 mil per movie title! (1)

RingDev (879105) | more than 2 years ago | (#37515650)

This is true, but they are generally tied to each other.

No, they aren't. Stock value is only tied to stock holders' desire to retain their stock, and non-owners to want to buy their stock.

Having low capital is one way to make less owners want to hold on to their stock and would be buyers less interested in purchasing it, but it is far from the only means.

Market instability, economic issues, significant real world events, etc... will all cause a stock to lose value even as the company it is part of is performing well above expectations.

Is Netflix about to invest $900M on 30 movies?

Netflix has roughly 25M customers paying a minimum of $10 a month. If they paid for nothing else, they could amort out that $900M and have it paid off in 4 months.

So yeah, they could. Odds are though, that they'll license select movies for a period of time. $120M for 3-4 movies over a 6-12 month period. At the end of which, they'll switch to a different set of movies for another 6-12 months.

For a company with a gross revenue of ~$3 Billion, that would work out to be about 4-8% of their revenue stream.

-Rick

Re:$30 mil per movie title! (1)

bhagwad (1426855) | more than 2 years ago | (#37515376)

But how does this work out There must be thousands of movies. Each one paying 30 mill means dozens of billions of dollars!

Re:$30 mil per movie title! (1)

blahbooboo (839709) | more than 2 years ago | (#37514836)

Considering Netflix recently lost half their market value, I wonder how they are going to afford this? Are they only going to stream a handful of Dreamworks titles?

And loss of market value means what to their cash flow? Unless they plan to start selling stock it really doesn't effect the amount of money they have to spend after the IPO etc

Re:$30 mil per movie title! (1)

hedwards (940851) | more than 2 years ago | (#37515142)

No, however, it does affect what what the shareholders think and how they vote when the shareholders meeting pops up and the executives come up for a vote. Vaporizing half the share price by making some pretty mind blowingly stupid mistakes and then giving us Qwikster is unlikely to be conducive to them winning their elections or getting any slack from the shareholders.

Re:$30 mil per movie title! (-1)

Anonymous Coward | more than 2 years ago | (#37514858)

Typical Slashdotter economic pig ignorance. STFU, idiot.

Re:$30 mil per movie title! (1)

mosb1000 (710161) | more than 2 years ago | (#37514954)

The reason they lost half their market value is because they raised their prices, which they obviously did so they could afford to buy movies this way.

Re:$30 mil per movie title! (3, Insightful)

Antisyzygy (1495469) | more than 2 years ago | (#37514986)

Stock prices don't affect revenue and assets (except for the stock held by members of the company) of a company who issues the stocks, its the other way around. Netflix took a hit to its stock because people are not confident they will continue to grow as a company, however there was not an instantaneous change in their revenue. They still had as many subscribers after the stock took a hit as before +/- a few thousand probably.

Re:$30 mil per movie title! (1)

larry bagina (561269) | more than 2 years ago | (#37514748)

If they just streamed it without licensing, statutory damages would probably be under $100,000 per movie.

Re:$30 mil per movie title! (0)

Anonymous Coward | more than 2 years ago | (#37514804)

per movie per stream. thirty people stream and you have your 30 mill.

Re:$30 mil per movie title! (1)

moozey (2437812) | more than 2 years ago | (#37514908)

FTFY, 300 people stream and you have your 30 mill.

Re:$30 mil per movie title! (1)

weirdcrashingnoises (1151951) | more than 2 years ago | (#37514926)

i hate waking up on mondays only to realize that 30x100,000 = 30,000,000...

wait no it doesn't. today's ganna be a good day after all!

Re:$30 mil per movie title! (2)

Yvan256 (722131) | more than 2 years ago | (#37515262)

Today's ganna be a good day after all!

No it's not.

Re:$30 mil per movie title! (1)

yodleboy (982200) | more than 2 years ago | (#37515296)

nah. would probably be $100,000 per stream of the movie.

Re:$30 mil per movie title! (2)

jimbolauski (882977) | more than 2 years ago | (#37514814)

Netflix has 25 million subscribers, little more then a dollar per subscriber per movie isn't all that bad once you consider $96 per subscriber per year and this is probably a multi-year deal so the cost is 0.30-0.40 per person per movie. The real news is that they lost Starz so their digital library will take a serious hit so instead of bolstering their library it is shrinking.

Re:$30 mil per movie title! (1)

Anonymous Coward | more than 2 years ago | (#37514962)

So 25 million subscribers at $8 a month, with the ~$30 million per title precedent set by this deal, Netflix will be able to afford a whooping 6-7 new movies a month! Can't wait to tune into El Dorado and Shark Tale because I've seen everything else.

Re:$30 mil per movie title! (1)

Yvan256 (722131) | more than 2 years ago | (#37515294)

Even so, eight dollars per month for 6 new movies per month isn't that high if you compare it to the prices your cable or satellite company demands for on-demand movies.

Re:$30 mil per movie title! (0)

Anonymous Coward | more than 2 years ago | (#37515736)

If I only intend to watch 2 of those movies, then the Netflix price per movie to me is more expensive than on-demand or itunes rental. 2 quality new movies a month is not unreasonably low for Netflix.

Re:$30 mil per movie title! (1)

jimbolauski (882977) | more than 2 years ago | (#37515870)

How did you come up with that number? Do you think the 30 mill is a monthly rate?

Re:$30 mil per movie title! (1)

AkaKaryuu (1062882) | more than 2 years ago | (#37515104)

Taking this a step further, it will cost a total of 2.16 BILLION (30 Mil * 72) dollars for all 72 Dreamworks Films http://en.wikipedia.org/wiki/DreamWorks [wikipedia.org] . Dividing that total cost by the 25 million subscribers arrives at a net cost of $86.40 per subcriber. This year they will only make 9.60 per subscriber, not including operating expenses.

Re:$30 mil per movie title! (1)

maxume (22995) | more than 2 years ago | (#37515196)

The summary says Dreamworks Animation, do the articles vary?

That's a much smaller catalog aimed right at the most extreme repeat viewers.

Re:$30 mil per movie title! (1)

bws111 (1216812) | more than 2 years ago | (#37515204)

Wait, did you really think that you were going to continue to be able to get more content than your $100/mo cable service offers for only $8/mo? People aren't really that dumb, are they?

Re:$30 mil per movie title! (1)

firex726 (1188453) | more than 2 years ago | (#37515702)

As I recall from the initial price increase, their entire revenue before the increase was like 2.3 Billion, and their licensing fees were expected to increase from ~$300 Million to 2.0 Billion.

Re:$30 mil per movie title! (1)

jimbolauski (882977) | more than 2 years ago | (#37515804)

That would only be true if the contract is for one year, or the 30mil per movie is a yearly cost. Who knows how many years this deal is for a 5 year deal drops the cost significantly.

Re:$30 mil per movie title! (0)

Anonymous Coward | more than 2 years ago | (#37515980)

But you don't pay per movie, you pay a flat rate. And netflix is a client of other studios that need to be paid.

Re:$30 mil per movie title! (1)

LoverOfJoy (820058) | more than 2 years ago | (#37515902)

It depends. There are a lot of factors that could influence price.

Time. How long does this last? Does $30 mil get them a years worth of access? 5 years? 10 years?
Exclusivity. Is Netflix going to be the only ones who have access to these movies via streaming? Do others get rights, too, but Netflix gets to show first? How long before someone else can show the movies?
Same price for each movie or average? Are some new release movies costing them $50mil while others only $3 mil?

People keep bringing up the loss of Starz but I suspect that once that contract expired Starz started asking for a much larger (undisclosed) amount. The amount they paid Starz for movies was undoubtedly going to go up now that they have many more subscribers.

It sounds great (1)

GrumpySteen (1250194) | more than 2 years ago | (#37514712)

Except I've seen already seen everything Dreamworks Animation has ever produced.

Re:It sounds great (1)

weirdcrashingnoises (1151951) | more than 2 years ago | (#37515158)

You saw Shark Tale?

I am truly sorry for your loss.

Re:It sounds great (4, Insightful)

tag (22464) | more than 2 years ago | (#37515186)

But my kids will watch them over and over, ad nauseum.

Re:It sounds great (1, Insightful)

said213 (72685) | more than 2 years ago | (#37515554)

Why would you let them do that?
No disrespect intended, but seriously... Want remarkable children? Learn to tell your kids no.

Re:It sounds great (0)

Anonymous Coward | more than 2 years ago | (#37515722)

The Slashdot Parenting Brigade is here to cast judgment on how you raise your kids! Behold! For it is Said213, the shining beacon of perfect parenting! Deviate not from his teachings, lest Child Protective Services be called upon you!

Re:It sounds great (2)

said213 (72685) | more than 2 years ago | (#37515892)

Don't be a moron. Letting your kid watch the same goddamn movie in a loop is about as stimulating as letting them stare at a wall.
I would wager that kids who are guided by their parents grow up with the ability to sign in to a web account.
Kids who get to watch Cars or whatnot 5x/day grow up to post AC.

Re:It sounds great (1)

gid (5195) | more than 2 years ago | (#37515894)

I take it you don't have kids. Young kids learn understand and understand a lot through repetition. My son used to watch Sesame Street and Toy Story ad nauseum and I could seem him pick up more and more every time we watched it. Of course you tell them no from time to time, but shit, I gotta do things too like wash the dishes, take a shower, etc, so I turn on a show or movie sometimes so he can be entertained while I get some work done.

Re:It sounds great (0)

said213 (72685) | more than 2 years ago | (#37515966)

I do have kids. And they get to watch videos as a reward, to them, for achievement... Not as a reward, to me, for being too busy to be more creative and engaged in their development. I was commenting on the "Ad Nauseum" part of the comment... whether or how I approve of the use of a screen as a babysitter has little to do with the thousands of alternatives to pressing replay.

Re:It sounds great (0)

Anonymous Coward | more than 2 years ago | (#37515672)

The kicker in our house to not axe Netflix streaming recently was the quantity of preschool to elementary school aged product available on demand.

Adding Dreamworks animation is a huge cost savings in my household. :)

I would also not that the summary, nor either article in the chain, report how long the contract is for ( I expect a few years ) and if this is a one time fee per flick or if there will be ongoing fees. $30 Mil a flick a year seems bad. $30 Mil a flick for 5? Now it is looking smart.

Re:It sounds great (0)

Anonymous Coward | more than 2 years ago | (#37516002)

it's better than the alternatives, general mayhem and destruction of the house!

What? (0)

Anonymous Coward | more than 2 years ago | (#37514724)

So, instead of Netflix streaming movies to me, Dreamworks will stream movies to Netflix and Netflix will relay them to me? Also, doesn't $30,000,000 seem kind of fucking insane? ET was a good movie and all, but I'll take a few thousand Starz licensed movies for $600,000,000 over twenty Dreamwrosk movies for $600,000,000.

so how long will it take (1)

fredan (54788) | more than 2 years ago | (#37514728)

for Dreamworks to realize that Netflix is making more than $30 million per movie and still wants more?

This is a good deal for Netflix and a bad one for Dreamworks.

Re:so how long will it take (0)

Riceballsan (816702) | more than 2 years ago | (#37514850)

I am actually very currious how netflix intends to recoup 30 million per movie. For this deal to pay off, every dreamworks movie they add to their streaming, needs to convince 4 million people to subscribe. Considering recent changes have lost almost half of their customers, that is going to be a huge leap foward to hope for.

Re:so how long will it take (1)

FunkyELF (609131) | more than 2 years ago | (#37515048)

For this deal to pay off, every dreamworks movie they add to their streaming, needs to convince 4 million people to subscribe.

For this to pay off they just need to sit back and collect money. Its about keeping existing customers happy, not necessarily getting new ones.

Re:so how long will it take (4, Informative)

bws111 (1216812) | more than 2 years ago | (#37515054)

Lost half their customers? Where did you get that nonsense? They lost about 4% of the customers, which they made up for in revenue with higher prices.

Re:so how long will it take (1)

hedwards (940851) | more than 2 years ago | (#37515190)

It's likely to get worse. They lost about 4% of their customers with rather anemic competition, just imagine how many they're likely to lose in the future as the somewhat moribund Blockbuster keeps making progress. Dish has apparently decided to add a better streaming plan to the Blockbuster offerings, right now it's Dish subscribers only, but they are reportedly planning on offering something to everybody else in the near future.

Not to mention the streaming options that are starting to appear to suck up any and all money that Netflix leaves on the table

Re:so how long will it take (1)

bws111 (1216812) | more than 2 years ago | (#37516076)

What makes you think Blockbuster (or anyone else) is going to get a better deal than Netflix? Right now we are in a transition phase. A lot of contracts were done before streaming was popular, so streaming providers are currently getting a great deal (at the expense of the studios). As those contracts end and are renegotiated, no-one is going to be getting those cheap deals anymore, and their choices will be a) absorb the loss (not likely), b) pass the higher cost to the customer (what Netflix is doing), or c) don't offer the content.

Re:so how long will it take (1)

ElectricTurtle (1171201) | more than 2 years ago | (#37515326)

They're still leaving, and expect another exodus now that they're breaking the synergy between physical media and streaming. It's hard to say how long and how far the domino effect will go.

Re:so how long will it take (2)

babywhiz (781786) | more than 2 years ago | (#37516008)

I am probably one of the minority that wasn't negatively affected by the split. I was annoyed at not having a 'streaming only' option, mostly because the family unit would order a DVD, then it would get lost in the car, under the couch, etc. I welcomed the time in which I didn't have to go looking for the red envelope under the guinea pig cage.... Not a Netflix shill, I'm just sayin'.....one less thing to keep up with physically....in my world.....where things mysteriously disappear....only to reappear a billion miles from where it was expected to. I think I either have an infestation of gnome rogues, or someone has been playing with teleportation devices.

Re:so how long will it take (0)

Anonymous Coward | more than 2 years ago | (#37515106)

For this deal to pay off, every dreamworks movie they add to their streaming, needs to convince 4 million people to subscribe. .

I must have missed the other Netflix announcement, the one where they announced that instead of a monthly fee, it was a one time charge of $7.50.

Re:so how long will it take (0)

Anonymous Coward | more than 2 years ago | (#37515576)

Not to mention that it is setting a price point precedent that other content owners will want for their catalogs as well. For $30M per movie Netflix it would almost be cheaper for Netflix to start producing their own unique films than buying them from the studios.

Re:so how long will it take (1)

jimbolauski (882977) | more than 2 years ago | (#37514862)

This is not an exclusivity deal so Dreamworks can sell digital content to others as well.

Re:so how long will it take (0)

Anonymous Coward | more than 2 years ago | (#37515180)

I believe it is, on the early release rights. They outbid HBO.

Re:so how long will it take (2)

jimbolauski (882977) | more than 2 years ago | (#37515960)

FTFA

Now under the Netflix contract they will still be able to sell those digital downloads while providing streaming content to Netflix. So the deal with Netflix is relatively “sugar coated” and will allow Dreamworks to keep profiting off their content.

Re:so how long will it take (1)

kelemvor4 (1980226) | more than 2 years ago | (#37515978)

for Dreamworks to realize that Netflix is making more than $30 million per movie and still wants more?

This is a good deal for Netflix and a bad one for Dreamworks.

Because it's always a good idea to charge your resellers enough that they cannot make a profit? Dreamworks should have realized Netflix is not a charity up front.

Nice slashvertisement (0)

damn_registrars (1103043) | more than 2 years ago | (#37514736)

Good to see that after all the negative publicity Netflix has pulled in for itself over the past several months, they can still find a way to slasvertise here. This clearly will heal all the wounds of the rate hikes, the company split (with our customer information split too), the loss of starz programming, the random cycles of titles being acquired and lost for streaming, etc.

Yep, we all love netflix now for sure!

Re:Nice slashvertisement (4, Insightful)

J-1000 (869558) | more than 2 years ago | (#37514896)

Netflix is pioneering the new TV landscape. This nerd, for one, wants to hear news about them.

Re:Nice slashvertisement (0)

Anonymous Coward | more than 2 years ago | (#37515114)

Torrents already pioneered that landscape a decade ago.

Re:Nice slashvertisement (2)

Yvan256 (722131) | more than 2 years ago | (#37515386)

It pioneered how networks, shows, actors, writers and workers don't get paid a single dime.

It might work in the short term for a small number of viewers, but unfortunately it's not a viable plan in the long term for all viewers.

Re:Nice slashvertisement (1)

lexman098 (1983842) | more than 2 years ago | (#37515738)

It pioneered getting individual shows or entire seasons (along with movies of course) at the highest quality, without commercials or DRM, and on demand at speeds that max out whatever broadband connection you have. The studios still do not offer this at any price, much less the reasonable price of $0. People like supporting content creators. They don't like getting fucked by lock-ins, ridiculous prices, and having to subsidize reality TV.

Re:Nice slashvertisement (1)

bws111 (1216812) | more than 2 years ago | (#37515878)

Pretty damn easy to 'pioneer' that stuff when you have zero cost because you are freeloading off the people who actually do the work. Oddly enough, it appears that most stolen and counterfeit items are cheaper than legally obtained things. I guess all the thieves and counterfeiters are also 'pioneers' in your mind too?

Re:Nice slashvertisement (1)

MobileTatsu-NJG (946591) | more than 2 years ago | (#37515432)

Yet ppl are ditching torrents for Hulu and Netflix.

BFD.

Re:Nice slashvertisement (0)

Anonymous Coward | more than 2 years ago | (#37514956)

Are you this miserable of a person offline as well?

Re:Nice slashvertisement (0)

Anonymous Coward | more than 2 years ago | (#37515078)

Would you rather see obnoxious ads flashing around the edges of your screen? How would you run a multi-million user site and make ends meet?

Re:Nice slashvertisement (1)

lpp (115405) | more than 2 years ago | (#37515108)

Do you seriously think this article is going to have a significant effect on Netflix at all? Positive or negative? I imagine most people have already made up their minds about Netflix and those that haven't might want to know that Netflix is actually doing something to make their product more enticing. If the post was entirely one long "SQUEE" of jubilation over the wonder that is the Netflix experience, extolling the corporate virtues and bashing anyone who opposed them, then maybe you would have a point. As it is, this is a potential coup for a major company attempting to shift how we view video programming further toward an online streaming experience, which is to say 'News for Nerds, Stuff that Matters'.

Re:Nice slashvertisement (0)

Anonymous Coward | more than 2 years ago | (#37515138)

Yes, because sites should only post about things that some random geek shitbag on Slashdot approves of.

The rate hikes were the splitting of the streaming and the DVD service because, as you can fucking see clearly in this story, of the greedy studios. The split sucks, and separating into two independent sites is stupid, but anyone who thought streaming would be a free addition forever was a total and complete moron. People were laughing at the weepy little whining fools. Another for the "problems pampered, entitled white people have" bin, complaining about $8 a month with their $50 a month internet connections and $1000 computers while sipping their $5 coffee.

Now STFU, you weepy little girl.

Re:Nice slashvertisement (0)

Anonymous Coward | more than 2 years ago | (#37515402)

So what? People actually want to hear if they are getting better or worse, personally preferring better because if one of the largest digital streaming services goes the way of the Dodo, that'll be one more nail in the coffin for a while.
Might not matter to us directly, but you can bet your damn ass that corrupt companies will use it to their advantage in pulling strings and lies.
"Oh the market never wanted it, see, Netflix died.", to quote a potential future.

"$30 million per Dreamworks film title" (0)

Anonymous Coward | more than 2 years ago | (#37514796)

...how in the world is this economically feasible?!?!?

Re:"$30 million per Dreamworks film title" (1)

Rockoon (1252108) | more than 2 years ago | (#37515076)

This is probably a 4 year contract.

25 million subscribers, $8 per month, 48 months = $9.6 billion in revenue over the period.

At $30 million a pop, thats is less than 1/3rd of 1% of their revenue per movie.

I really don't get it. (1)

taxman_10m (41083) | more than 2 years ago | (#37514856)

Does Dreamworks have that much stuff? I look at the Netflix top 100 and only 6 of the movies are streaming. Netflix appears to be circling the drain to me.
http://www.netflix.com/Top100?lnkctr=mhT100 [netflix.com]

Re:I really don't get it. (1)

hedwards (940851) | more than 2 years ago | (#37515252)

That's why I switched to Blockbuster, none of the streaming services have much content compared with either Netflix's or Blockbuster's DVD library. And several of the ones that do exist are free. I might have kept the subscription with Netflix for streaming, but the library sucks. I wanted to watch a few back episodes of Eureka on streaming and only specific seasons were available for streaming. And the same often goes for other series as well.

They can still pull out of their recent tailspin, but it's going to require them to recognize that they're losing their monopoly and are going to have to give people something that's compelling. It's relatively easy for them to spend $30m a title when they have so many fewer titles than they do in their DVD library and yet charge the same amount.

Loss Leader (2)

tgeek (941867) | more than 2 years ago | (#37515652)

That's all it is. Netflix is betting that they've locked up exclusive rights to some blockbuster (no pun intended) titles for the next few years. Do they think they'll make money on the specific Dreamworks titles they've licensed? Nope. But if it works out that those titles become "must-see" titles, it'll bring subscribers in. And then hopefully they'll have some strategy in place to retain those subscribers. It's no different than a department store advertising an item at a loss in order to get people into the store. Or a network buying a sports package (example: Fox taking the NFC football contract in the early-mid 90's) knowing that while they may not make money on the games, it'll be a positive benefit for the network overall (promoting their network during games, games as a lead-in to other programming, etc.)

financial numbers (0)

Anonymous Coward | more than 2 years ago | (#37514872)

22 titles. $30 million per title. So, they are paying $660 million?

Anyone know how long the contract is for? Seems to be a relevant tidbit. All I found is that it is $30 million per picture over an UNSPECIFIED number of years

Netflix had $2.6 billion in revenues prior to their "price changes". They make about $250 million in FCF (what they actually add to the bank). Seems that only 4% of customers left Netflix due to the pricing changes.

I hope this is a 10 year deal or something because Netflix will need more contracts over time. You would think that they would be smart enough to do the contract in a pay-per-view manner. Strange.

Re:financial numbers (0)

Anonymous Coward | more than 2 years ago | (#37515128)

Seems that only 4% of customers left Netflix due to the pricing changes.

Yeah, 4% outright left the company. But how many stayed but downgraded to disc only? For purposes of the financial effect on the cost/profit of the streaming part of netflix, you might as well just count those people as having left too (and if you read between the lines of the whole qwikster announcement, that seems to be exactly what's happening...netflix is going to be ditching those customers). So what is the percent of people who left + people who downgraded to DVD + people who will soon be leaving because the inconvenience of having to manage 2 queues and 2 rating systems that have no interconnection once the Netflix/Qwikster split happens? I suspect it will be substantially bigger than 4%.

Re:financial numbers (1)

taxman_10m (41083) | more than 2 years ago | (#37515176)

And there's people like me. I'm hanging on a little while longer just to see what happens. Right now I'm scrapping the bottom of the barrel on my Instant queue. In the next few weeks I'll probably quit or suspend my Instant service and go disc only.

Re:financial numbers (1)

hedwards (940851) | more than 2 years ago | (#37515278)

Only 4% left, but a bunch of other people switched to less expensive plans and as a result, Netflix is getting less revenue from them. On top of that, the move has been a God send to Blockbuster and a few of the other services which would otherwise have had a really hard time getting the initial subscribers to get going.

Not until 2013 (0)

Anonymous Coward | more than 2 years ago | (#37514890)

Wow, the article is only about a paragraph long and the summary missed the most important part - Netflix can't even stream any of the movies until 2013! With content deals like this, they'll be dead long before they're allowed to show anything

isn't this.... (1)

borkthafork (2468858) | more than 2 years ago | (#37515004)

Dreamworks! The poor man's Pixar!

This is why Netflix is doomed (3, Interesting)

jandrese (485) | more than 2 years ago | (#37515012)

So Dreamworks has produced a little over 100 titles, so that would be a 3 billion dollar deal to get a tiny sliver of the movies they're about to lose with the Stars deal back. That is not sustainable by any measure. For comparison, with the DVD rental business the Disks would have cost somewhere on the order of $2 million. Back when the Streaming was just a sideshow for the disk rental business this didn't matter, but now that the company is split in two it's clear just how badly Netflix is screwed. The studios don't like it, and they ultimately have control over the business thanks to the fact that internet streaming to one household is considered "broadcasting".

It doesn't even matter if this is the future of movie rentals. Studios have shown time and time again that they'll prefer to kill off any new and disruptive technologies instead of trying to profit off of them. They had to be dragged kicking and screaming by court rulings into the VHS and DVD era, and they're not going to go quietly into the streaming era either. Not that they'll have to anyway. They learned their lesson the first time and bought all of the congressmen and FCC executives they need to prevent them from ever having to face inevitable change anyway. Can you imagine legislation that would reclassify streaming in a sane manner from this congress or FCC? The thought is ludicrous.

Re:This is why Netflix is doomed (2)

CastrTroy (595695) | more than 2 years ago | (#37515140)

What's the legality associated with renting out movies that you own physical copies for? Netflix might find a better deal buying a copy for each movie they plan to stream online at the same time. It would work the same as their mail order service, except that they could deliver the DVD instantly (or the data contained there-in) and you could return the movie instantly. I'm not sure how well this could work out in real life, but I has to be cheaper than spending 30 million per title. Think of how many physical copies they could have for that price. Anyway, it's probably not legal, but at that price, there must be some workaround you can use, such as having a robot physically move disks between machines for each user who is streaming the movie.

Re:This is why Netflix is doomed (1)

imunfair (877689) | more than 2 years ago | (#37515288)

Zediva tried that and got smacked around for it - they might still be in court about it, but last I heard it wasn't looking good for them. Maybe a company with more money and clout would have better success, but that's a big risk for a profitable established company to fight the industry they rely on for content.

Nteflix needed stream deals before hikes/Qwikster (1)

swb (14022) | more than 2 years ago | (#37515082)

...not after.

If Netflix had been on a run of announcing a half-dozen studio deals for streaming, they could have gotten away with the price hikes and the Qwikster split.

As it stands now, especially with the sunset of the Starz deal, Netflix streaming is of marginal value. Most of the movie content is lame and the TV content is even hit or miss -- all of Mad Men and Lost, but I gotta get DVDs for Barney Miller, a show off the air for 30 years with a cast that's half dead and no complicated licensing issues like music?

I'm just not convinced that Netflix has the market muscle, cash, talent, connections or relationships with studios to negotiate streaming deals in the face of studio greed.

Netflix forced themselves into this deal (1)

jdev (227251) | more than 2 years ago | (#37515098)

Due to Netflix's recent blunders, they aren't growing as fast as they forecasted and are at risk of losing streaming customers. (I dropped my DVD account after the rate hikes and then dropped my streaming account since it wasn't very useful as a standalone service.) On top of all this, Netflix couldn't renew their contract with Starz, which is going to cause their streaming selection to be even more lame by February. If Netflix hadn't signed something of worth, more streaming customers were going to leave.

This does set an interesting precedent though for their future negotiations. Will all other movie studios consider their new releases to be worth $30 million each? Don't see how Netflix could sustain that.

2013!!!! (5, Informative)

Crock23A (1124275) | more than 2 years ago | (#37515100)

According to the article, no streaming content from this deal until 2013. Maybe I'll reactivate my account sometime around then but in all likelihood, I'll have found a much better alternative by then.

Blog Spam (1)

Anonymous Coward | more than 2 years ago | (#37515148)

Rather than visiting the submitter's own web site where they just re-hash what they already got from GigaOm, how about just going to the source?

http://gigaom.com/video/netflix-steals-dreamworks-from-hbo/ [gigaom.com]

Torrents? (1)

nam37 (517083) | more than 2 years ago | (#37515214)

Hollywood is trying to kill Netflix as quickly as they can. Sometimes I think they would prefer us all to just use torrents.

Re:Torrents? (0)

Anonymous Coward | more than 2 years ago | (#37515664)

That's kind of obvious, since the torrented copy of everything I've gotten, has never had DRM on it, and the untorrented copies always do. They are trying to kill every single distribution channel (optical disks (Blu-Ray), IP streaming (Netflix), cable multicast/broadcast (HBO)) in favor of bittorrent.

What's interesting is that they don't charge for bittorrent, so they're replacing for-pay distribution with for-free distribution. How they expect this to be profitable, I'm not sure. But they sure as hell pushing hard, to encourage every customer upgraded to the new method. Maybe it saves on their costs (with bittorrent, someone else pays for the servers), but without any revenue at all, how does that really help?

They need to start selling private tracker memberships, and get their copies out before the pirate release groups do. As long as they keep the DRM and ads out, Movie.2011.x264-SONY.mkv could beat the shit out of Movie.211.x264-PIRATED00DZ.mkv.

Re:Torrents? (0)

Anonymous Coward | more than 2 years ago | (#37515860)

Sure why not when you can get 200k per song out of someone... Hell a movie is about 60x bigger! So that is 12 million per movie. Get about 200k people to sue and you can have enough to balance the US Federal budget.

Also I think netflix is trying to kill netflix... Its like 'ok we won against blockbuster lets give them the ball back'.

Starz was only 200-300 mil/year... (3, Interesting)

mj1856 (589031) | more than 2 years ago | (#37515274)

I don't get it. Netflix drops Starz over 200-300mil/year [tekgoblin.com] but signs Dreamworks at 30 mil per movie? I'm sure Starz delivers more than 10 movies in a year. Do Netflix execs really think their audience will prefer cartoons over serious content?

Re:Starz was only 200-300 mil/year... (2)

Xphile101361 (1017774) | more than 2 years ago | (#37515552)

Starz dropped Netflix. They wanted Netflix to charge an additional fee to get Starz content, so that their label would remain "exclusive." Netflix said no

Does that include Netflix Canada? (1)

Yvan256 (722131) | more than 2 years ago | (#37515472)

You don't expand a thing like Netflix worldwide by letting all the middle men in control of someone else's works. I hope Netflix are smart and signing world-wide deals, not only USA-only rights. Maybe that's why they went to Dreamworks directly, to bypass all the layers of middle men?

I blame Hollywood and Blockbuster (0)

Anonymous Coward | more than 2 years ago | (#37515658)

I think it was pretty obvious that Netflix and Redbox were doomed once you start to see ads like "rent it 28 days before (insert competitor name here)!"
Blockbuster can afford to do deals like those when they charge $3 for new releases. Exclusivity deals only benefit the businesses involved, and never the consumers.

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