DreamWorks Animation, the company behind successful movie franchises like Madagascar and Shrek, said it had completed a deal to pump its films and television specials through Netflix, replacing a less lucrative pact with HBO.
The Netflix accord, which analysts estimate is worth $30 million per picture to DreamWorks over an unspecified period of years, is billed by the companies as the first time a major Hollywood supplier has chosen Web streaming over pay television.
It is also a bet by Jeffrey Katzenberg, the animation studio?s CEO, that consumers in the near future will not distinguish between the two. ?We are really starting to see a long-term road map of where the industry is headed,? Katzenberg said. ?This is a game-changing deal.?
Ted Sarandos, Netflix?s chief content officer, added: ?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.?
The DreamWorks contract comes as Netflix is trying to navigate a dense thicket of challenges. Competition from the likes of Apple, Amazon and Vudu, a streaming service owned by Walmart, is increasingly fierce; Dish Network, which plucked Blockbuster out of bankruptcy earlier this year, on Friday announced a Blockbuster streaming and DVD-by-mail service.
As a ?tidal wave? of Netflix competitors enter, said Michael Nathanson, a media analyst for Nomura, ?in the short term it will probably be good for the price of content?, because more bidders mean that media companies can charge more for the rights to stream movies like Avatar and shows like Modern Family.
More important, ?in the long term it may accelerate changes in consumer behaviors?, Nathanson said, as more people choose to watch more video online.
Access to movies and TV shows is what matters most to Netflix, and Hollywood, after helping to build up the company with generous deals, is starting to play hardball. Next February, Netflix is expected to lose the right to stream films from Walt Disney Studios and Sony Pictures Entertainment, as a result of a failed renegotiation with the premium cable channel Starz.
But Netflix?s biggest challenge at the moment is self-inflicted. This summer, in an attempt to raise cash to license more streaming content, the company increased the price for its combination internet streaming and DVD service, angering customers. On September 18 it abruptly said it would split up the two services, frustrating fans of both.
About one million of its 25 million customers in the US are believed to have dropped the service in this quarter. Katzenberg said he was confident about the direction Netflix was heading, calling the company?s decision to split streaming and DVD ?a very tough and very strategic call that will ultimately prove to be the right one for long-term success.?
Netflix will begin streaming DreamWorks films starting in 2013.