Netflix-Disney deal expected to hit movie channels, BDUs

A deal between Netflix Inc. and Walt Disney Co. that will see Walt Disney Studios’ movies appear on Netflix’s Canadian streaming service as soon as eight months after they hit the theatres will affect premium movie channels most directly, though it will also have a “trickle-down” effect on the whole TV system, said broadcasting analyst Mario Mota. Netflix said in a release Thursday that it has reached a “multi-year licensing agreement that will make Netflix the exclusive Canadian subscription television service for first-run Disney live-action and animated feature films.” The deal, which will begin in 2015, involves Disney-owned studios like Pixar, Marvel and Lucasfilm. Netflix spokeswoman Jenny McCabe said in a phone interview that this means TV providers will be still be able to offer the movies on their pay-per-view services, but not on free video-on-demand (VOD) services or on movie channels. “It will be all —everything that comes from those properties that goes into the movie theatre, for a very long time, will come to Netflix,” she said. McCabe said Netflix has previously secured this type of deal for individual movies on a title-by-title basis, “but nothing quite as broad as this Disney deal.” She added it includes content for kids, teenagers and adults, and movies such as the next installment of Star Wars. She would not comment on how many movies the deal involves or how long Netflix would have exclusive access to the movies, but said it was a “relatively considerable amount of time.” McCabe said one complaint about Netflix from customers has been that the movies on the service are older, noting that due to “the way the window structuring of Hollywood has been put in place, it’s typically almost about 18 months to two years before you’re able to watch a film that was in the theatre on Netflix.” “And that’s a long time … which is why we like this kind of a deal,” she said. “This is significant in that these really high-quality movies will come to Netflix and not a movie channel.” She said it’s part of the company’s strategy to emphasize content that is exclusive to Netflix, such as original series like Orange is the New Black. “We’re continuing to drive that strategy,” she said, noting that she expects Netflix to have, by 2016, about 22 original pieces of content in addition to its other, non-exclusive content. Mota, an analyst with Boon Dog Professional Services in Ottawa, said the move was “another step in the evolution of the service in Canada.” Netflix does not disclose its Canadian subscriber numbers, though a recent report from CBC/Radio Canada's Media Technology Monitor said about a third of Canadians subscribe to the service. “It will have an impact definitely on, I think, the pay-TV movie services, so in Eastern Canada, The Movie Network, and in Western Canada, Movie Central, because those are the traditional first-run players for these types of movies,” Mota said. TMN is owned by BCE Inc.’s Bell Media division and Movie Central is owned by Corus Entertainment Inc. Bell Media declined to comment while Corus did not respond to a request for comment. Mota said that “when consumers start to catch onto the fact that you can get first-run somewhere else, then they’re going to start shopping around and looking at Netflix as an alternative to what they currently get.” He noted that a bright spot for TMN and Movie Central is that the Netflix-Disney deal doesn’t kick in until 2015, and so they won’t feel the impact until late 2015 or 2016. “There’s obviously quite a bit of lead time there for the marketplace to get ready and adjust and react,” he said. Mota said that while Bell Media and Corus Entertainment will be most affected by the new deal, there is also potential for a spillover effect into the cable, satellite and IPTV market. “They obviously offer TMN and Movie Central in their respective markets. ... If subscription levels … start to decline, then it not only has an impact on TMN and Movie Central, but it has an impact on the TV providers that offer those channels,” he said. “So it does have a trickle-down effect on the marketplace,” he said. “If Netflix starts to do more and more of these exclusive deals, then ultimately that will have a broader impact on the Canadian broadcast system.” He noted that the channels are “pretty pricey” at $20 or more a month and have somewhat of a niche market, but they also contribute revenues into spending on Canadian programming. “They are the primary supporters of Canadian feature films in the television broadcasting environment,” he noted. “They’re in the premium TV series business as well, dramas and comedies and such, and if ultimately Netflix starts eating away at their business model … then they could have less available to them to fund the Canadian content,” he said. Netflix and other over-the-top (OTT) services are not currently required to make Canadian content contributions, and the company told the CRTC in a recent intervention in the commission’s TV review that OTT services should remain unregulated. Barry Kiefl, president of Canadian Media Research Inc., said in an email that the deal could be “a significant blow to Canadian premium channels, who depend on family films,” while giving a “huge boost to Netflix subscriptions if they promote it heavily. If that happens, then it will affect all Canadian channels.” — With reporting by Anja Karadeglija at akarad@thewirereport.ca and editing by Derek Abma at dabma@thewirereport.ca

Netflix-Disney deal expected to hit movie channels, BDUs

Broadcast | July 17, 2014

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Netflix-Disney deal expected to hit movie channels, BDUs

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