Disney said today that it has signed an exclusive film distribution deal with Netflix starting in 2016.
Netflix will become the only U.S. subscription TV service to offer films from Pixar, Marvel, Walt Disney Animation and Disneynature. Wall Street seemed overjoyed by the news. Netflix shares rose 14 percent following the announcement.
To help readers better understand the deal, CNET has put together this FAQ.
Why is this agreement special?
It's the first time that Netflix has acquired access to relatively newer movies from one of Hollywood's top six film studios. Netflix has plenty of titles produced by the major studios, but they're decades old. In three years, Netflix's streaming service will offer access to movies from Disney right after they're made available for sale and rental. This is a period when Hollywood typically makes new releases available to pay-TV services, such as Starz, Epix, and HBO.
In this case, however, Netflix has exclusive access to Disney's movies during the so-called pay-TV window.
Why does Netflix have to wait three years for Disney's films?
Many of the titles are currently locked up in a licensing agreement with Starz, but that deal runs out in 2016 and Netflix outbid Starz for the future rights.
Doesn't Netflix already offer some Disney content and hasn't Netflix offered Disney films in the past?
Yes to both questions. Netflix has licensing agreements for television shows from ABC and other Disney properties. As for movies, Netflix obtained Internet rights from Starz in 2008 to hundreds of movies from Disney and Sony Pictures. Netflix's contract with Starz expired earlier this year and the titles were pulled from Netflix.
What did Netflix pay Disney for this latest agreement?
Financial terms weren't disclosed but, The Los Angeles Times, citing an anonymous source, reported that the agreement is for three years and that Netflix could "ultimately pay more than $300 million annually."
Break it down for me: who are the winners and who are the losers?
Netflix users are winners, at least three years from now when the deal kicks in. One of the biggest gripes from Netflix subscribers is that the streaming service lacks enough newer titles. Netflix's leadership is showing that it will pay big to improve the selection.
But Netflix investors may be the losers if the company over paid or if it turns out that managers there could have renewed their deal with Starz and acquired many of the same Disney titles -- in addition to those from Sony Pictures -- for the same amount that they will pay for just Disney's fare.
Didn't Netflix CEO Reed Hastings say last year, after Netflix lost the Starz deal, that Disney and Sony's movies weren't that popular with his subscribers?
Right again. Today, Netflix called Disney's movies "the highest-quality, most imaginative family films being made today." In October 2011, after Starz announced that the deal with Netflix would not be renewed, Hastings downplayed the impact that the loss of titles from Disney and Sony Pictures would have on his streaming service.
He said the content acquired from Starz accounted for only about 10 percent of the service's total viewing hours. In a letter to investors, Hastings wrote: "Netflix has about 10 times the streaming content selection of ...Starz in terms of what consumers actually choose to watch."