by Jeff Reeves | December 4, 2012 2:21 pm
A report is out today that Netflix (NASDAQ:NFLX) just added programming from Disney (NYSE:DIS) in a multi-year licensing deal.
The Disney Netflix deal apparently will begin in 2013 with the mouse house’s direct-to-video releases, and eventually cover its 2016 theatrically released feature films and animations that include Marvel, Pixar and Walt Disney Animation brands. Most interesting to current subscribers will be the presence of favorites like Dumbo, Pocahontas and Alice in Wonderland.
“Disney and Netflix have shared a long and mutually beneficial relationship and this deal will bring to our subscribers, in the first pay TV window, some of the highest-quality, most imaginative family films being made today,” said Ted Sarandos, Chief Content Officer at Netflix in a release. “It’s a bold leap forward for Internet television and we are incredibly pleased and proud this iconic family brand is teaming with Netflix to make it happen.”
Ian Sherr of Down Jones was quoted in the Wall Street Journal as saying the deal helps Netflix stay relevant in the content wars, particularly vs. Amazon (NASDAQ:AMZN).
Amazon.com got a lot of attention back in September when it added content from Epix to its nascent arsenal of movies and TV shows available to its movie-streaming subscribers. Now, Netflix is striking back, being the only pay-TV entity to show all Disney theatrical releases starting in 2016. That initial window typically lasts for 18 months; then, movies are generally able to appear on other cable-TV channels and eventually network TV. The deal heats up the battle between Netflix and Amazon, which have been gobbling up rights to popular movies such as “The Hunger Games” and “Iron Man” in attempts to become the premier video-streaming provider.
Sure, I’ll admit that it puts some pressure on Amazon. But I have to wonder if it’s enough for Netflix in and of itself to change some perceptions that it only offers yesterday’s — or more aptly, last year’s — programming.
I subscribe to Netflix myself so I am very familiar with the service. In fact, I don’t have cable — because TV largely bores me and most of my viewing is kids shows with my daughters. NFLX is a great option that is cheaper and more flexible for my household thanks to loads of Blue’s Clues and Thomas the Tank Engine archives. I know other parents who feel the same.
This Disney news will be thrilling to my girls… but I also have friends who have quit NFLX because they feel like there’s nothing new and nothing they want to watch. Does the Disney deal really speak to them at all?
Investors should think seriously about what DIS programming adds beyond simply the brand. Adding Dumbo, released in 1941, hardly counteracts that. And seeing as Netflix already has gone heavy with its marketing for families — it has a special “Netflix for Kids” interface to sequester appropriate content for parents — how does this do anything other than simply cement that existing viewership?
It’s true that users are feeling better about Netflix. In early October, a Citigroup (NYSE:C) report showed customer satisfaction is clearly on the mend. Trouble with keeping subscribers happy has been persistent since the 2011 Qwikster debacle, so this was an important development.
Maybe Disney will help with that by bringing some new content with cache … and maybe it will keep Netflix relevant in the war for content. But maybe it will simply keep the company in the same mode it has been in for a while — with users settling for older TV and movie releases, and parents relying on a wealth of content for their kids.
Read my full bearish take on Netflix stock here.
Jeff Reeves is the editor of InvestorPlace.com and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” Write him at firstname.lastname@example.org or follow him on Twitter via @JeffReevesIP. As of this writing he did not own a position in any of the stocks named here.
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