Tuesday, September 27, 2011

Netflix - Dreamworks deal not as a big as you might think

Netflix needs some good news, as it's had such a tidal wave of bad news, lately. On Monday, the company announced it's managed to pry Dreamworks loose from cable network HBO, with movies and specials coming to Netflix.

It's reportedly the first time that a a major Hollywood studio has chosen Web streaming over pay TV. Analysts estimate the deal is worth $30 million per picture to DreamWorks, with an unspecified deal period.

Interestingly, the New York Times report says that it might not be as big a deal as some are making this. For one, HBO let DreamWorks out of its contract two years early so it could sign with Netflix. They didn't put up much of a fight.

Additionally, the report added that "HBO’s studio partners are increasingly making animated films and HBO recently brought in Summit Entertainment, the studio behind the 'Twilight' films, as a new partner. HBO notably allowed DreamWorks out of its contract two years early."

Netflix stock (NFLX) was down $1.22 to $128.14 or -0.94 percent in late Monday morning (PDT) trading. More importantly, Netflix stock is down from a 52 week high of $304.79, established in mid-July, before Netflix announced its pricing changes, the loss of Starz, and its more recent announcement that it would spin-off its DVD service from its streaming service

Roku + Netflix = Instant Movies on your TVNetflix badly misjudged how angrily subscribers would react to the price hike announced in July, and that showed when the company had to lower previous estimates about the number of subscribers the company would report in the third quarter --- by 1 million.

The content it received from Starz involved many more films, and two major Hollywood studios (Walt Disney Studios and Sony Pictures Entertainment). The company is by no means bleeding subscribers like wireless carrier T-Mobile is, but it is bleeding, and the Dreamworks deal is unlikely to staunch the flow.



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