Netflix cuts original TV deal with DreamWorks

Netflix to run 300 hours of original TV series from DreamWorks Animation in multi-year deal

Associated Press
Netflix cuts original TV deal with DreamWorks
.

View photo

FILE - In this Oct. 1, 2011 file photo, a Netflix DVD envelope and Netflix on-screen television menu are shown in Surfside, Fla. Netflix is going to start running original television series from Dreamworks Animation, the company announced Monday, June 17, 2013. Financial terms were not disclosed. Netflix Inc. says the multi-year agreement is its biggest deal ever for original first-run content and includes more than 300 hours of new programming. It expands on an existing relationship between the companies. (AP Photo/Wilfredo Lee, File)

LOS ANGELES (AP) -- Netflix's deal to air original television programming from Dreamworks Animation is a major coup for both companies.

Though financial details were not disclosed, Netflix Inc. says the multi-year agreement announced on Monday is its biggest deal ever for original first-run content. It includes more than 300 hours of new TV episodes in a multi-year deal starting in 2014.

The transaction helps Netflix compete with pay TV channels such as HBO and Showtime, and it gives Dreamworks a potentially lucrative outlet for its shows as it tries to shed its reliance on two or three big-budget movies each year.

Netflix Inc. doubled down on original children's programming, hoping to strengthen its push to become a family entertainment brand. The new content should ease some of the pain of losing a range of kids shows from Viacom Inc.'s Nickelodeon network, including future episodes of "Dora the Explorer," which Amazon.com Inc. snapped up for its streaming service in early June.

"This is arguably a groundbreaking deal," said Tuna Amobi, a Standard & Poor's equity analyst who covers both Netflix and DreamWorks Animation.

While concerns remain about how much the deal will cost Netflix in the end, the company said it is a global deal that will allow it to debut the original series in the 40 countries where Netflix operates. That could help spread the costs over more territories and more subscribers if Netflix continues to grow overseas.

"The big question is if this is going to be an international catalyst in terms of subscriber growth," Amobi said.

Investors hailed the deal as a win-win. Netflix shares rose $15.70, or 7.3 percent, to close at $229.69 on Monday, while DreamWorks shares rose 92 cents, or 4 percent, to close at $23.73.

The deal suggests DreamWorks will significantly ramp up its production of TV shows. Currently, it only produces "Dragons: Riders of Berk" for Cartoon Network, which completed a run of 20 episodes at 23 minutes each — less than 8 hours of content in all — in March.

A second season of "Dragons" is set for release in the fall, and Netflix had already contracted with DreamWorks for a series based on its upcoming film, "Turbo." But the deal suggests that several new series will have to debut each year to fulfill the industry standard deal length of five to seven years.

New series will be based on characters either from future film hits, past franchises like "Shrek," or even older hits, including the hundreds of characters like "Casper the Friendly Ghost," which DreamWorks acquired when it bought Classic Media last July for $155 million.

The new DreamWorks shows aren't likely to tread on ground already covered under its existing TV shows, according to DreamWorks spokeswoman Allison Rawlings.

DreamWorks already licenses characters from "Kung Fu Panda," ''Madagascar" and "Monsters vs. Aliens" to Viacom's Nickelodeon, which has been producing original animated TV shows based on those movies since 2008.

The multi-year agreement tops the undisclosed amount Netflix spent on "House of Cards," the political drama starring Kevin Spacey that debuted to rave reviews on Netflix in February.

Netflix has been adding original programming to its roster of older movies and TV show reruns, and is set to launch the Jenji Kohan-created "Orange Is the New Black" next month. The company has said that for the next several years, it will contain original content spending to within 10 percent of its $2 billion in annual content costs.

Netflix's increased focus on children's programming is seen as a departure from the tactics of traditional premium pay TV channels such as HBO, Starz and Showtime, whose original shows tend to be tailored to adults. It also ramps up the competition for children viewers with Amazon, which said last month it will produce three new original kids shows for members of its Amazon Prime subscription plan.

Netflix has said it has 29.2 million streaming video subscribers in the U.S. and 7.1 million internationally as of the end of March. Those figures are up 5.8 million and 4.1 million respectively from a year ago.

In December, Netflix announced it will offer Disney movies, starting with films released in 2016. It declined to make a similar deal for the rights to Sony movies starting in 2016, which was kept by Starz.

Investor reaction wasn't uniformly positive. Analyst Rich Tullo of brokerage Albert Fried & Co. said he doubts that DreamWorks has the capacity to produce more than one or two new series a year.

"It's physically impossible without this content being spread out over 10 years," he said.

Hit TV shows aren't guaranteed, and it's not clear that this will make up for Netflix's loss of Nickelodeon content, he said.

"Are they going to lose 2 million subscribers off losing Nickelodeon content? That's possible too," he said.

Rates

View Comments (6)

Recommended for You

  • Tycoon buys 30 Rolls-Royces for Macau hotel

    A Hong Kong tycoon has placed the biggest ever order for Rolls-Royce cars, agreeing to buy 30 Phantoms to chauffeur guests at a luxury resort he's building in the global gambling capital of Macau. Stephen Hung's $20 million purchase surpasses the 14 Phantoms bought by Hong Kong's Peninsula Hotel in…

    Associated Press
  • Enjoy this refreshing Triple Play offer!

    Get FIOS TV Mundo starting at $79.99/mo. w/ no annual contract + 2-yr. price guarantee. Or sign for 2 yrs. & get a $300 prepaid Visa. Click here.

    AdChoicesVerizon FiOS ®Sponsored
  • Before You Buy Alibaba, Check Out 4 Top China Stocks

    Before You Buy Alibaba, Check Out 4 Top China Stocks While investors gear up for Alibaba Group 's (BABA) hotly anticipated initial public offering, don't forget about other Chinese stocks that are worth keeping an eye on. Today's Young Guns Screen of

    Investor's Business Daily
  • Tycoon's arrest sends shock wave through Russia

    Tycoon's arrest sends shock wave through Russia MOSCOW (AP) — The arrest of a Russian telecoms and oil tycoon has sent shock waves through the country's business community, with some fearing a return to the dark days of a decade ago, when the Kremlin asserted its power by imprisoning the country's…

    Associated Press
  • As Fed takes baby steps, Cramer's trick for profit

    In turn, Cramer says making money in the market, involves looking at the environment through the lens of the Fed. "The trick is to remember that they speak for the common person," Cramer said. "The Fed wants the common person to make money." With that backdrop always in mind, Cramer says it becomes…

    CNBC
  • Play

    Citi, Bank of America Offer Discounted Mortgages

    Citigroup and Bank of America will offer mortgages at discounted interest rates to help borrowers with low incomes or subprime credit. AnnaMaria Andriotis joins MoneyBeat. Photo: Getty.

    WSJ Live
  • "The Retiree Next Door": How successful retirees stretch their savings

    "The Retiree Next Door": How successful retirees stretch their savingsBy the time she hit her late 40s, Toni Eugenia wasn’t sure she would ever be able to retire. Eugenia, 56, a pharmacy technician who lived in Houston, was nearly $200,000 in debt and

    Yahoo Finance
  • Costco Stores in Canada to Stop Taking American Express

    “The credit card relationship between American Express and Costco Wholesale Canada will not be renewed when it expires” on Dec. 31, the company said today in an e-mail to Canadian customers. The message was attributed to Lorelle Gilpin, vice president of marketing and membership for Costco…

    Bloomberg
  • 1 Tip To Lose Belly Fat

    It's Hollywood's Hottest Diet And Gets Rid Of Stubborn Fat Areas Like Nothing Else.

    AdChoicesagoodcooksSponsored
  • CNBC Anchor Calls Out Fed-Hater Bill Fleckenstein In Startling Shouting Match

    CNBC Bill Fleckenstein of Fleckenstein Capital appeared on CNBC's Futures Now program on Tuesday. Futures Now host Jackie DeAngelis came out swinging, asking Fleckenstein right at the top if he was willing to admit that he had misunderstood monetary policy. Sounding taken aback, Fleckenstein…

    Business Insider
  • Beanie Babies creator's sentence debated in court

    Beanie Babies creator's sentence debated in court CHICAGO (AP) — Federal prosecutors seeking to put the billionaire creator of Beanie Babies in prison for hiding millions in Swiss bank accounts told appellate court judges Wednesday that the toymaker's sentence of probation threatens to erode the…

    Associated Press
  • Apple to unveil new iPads, operating system on Oct. 21 : report

    The company plans to unveil the sixth generation of its iPad and the third edition of the iPad mini, as well as its operating system OS X Yosemite, which has undergone a complete visual overhaul, the Internet news website said. Trudy Muller, a spokeswoman for Apple, declined to comment. The iPad is…

    Reuters
  • Gilead Stock Is Falling On These Drug Setbacks

    Gilead Stock Is Falling On These Drug Setbacks Gilead Sciences (GILD) shares are backsliding Wednesday on news that the patient drop-out rate for hepatitis C drug Sovaldi is quadruple that of clinical trials. In addition, the biotech's Phase 2 study results

    Investor's Business Daily
  • Margaritaville casino owners seek bankruptcy

    The owner of Biloxi's Margaritaville casino has filed for Chapter 11 bankruptcy protection Tuesday, only hours before a hearing where the landlord aimed to seize the property. The filing by MVB Holding LLC in U.S. Don Dornan, a lawyer for landlord Clay Point LLC, said the company had planned to ask…

    Associated Press
  • Play

    Tues., Sept. 16: Watch Humana Stock

    Humana, Global X Social Media Index ETF and Majesco Entertainment are among stocks to watch. WSJ's Chris Dieterich discusses the details with Michael Casey. Photo: Humana

    WSJ Live
  • Master's Degree in Nursing

    CCNE accredited MS in nursing in as few as 18 months online. Learn more today!

    AdChoicesNorwich UniversitySponsored
  • Don't care about Alibaba? Here's why it may matter

    When the Alibaba Group Holding prices its initial public offering Thursday, small businesses in particular will be watching. Founder Jack Ma -the former English-teacher-turned-dot-com billionaire-has touted his e-commerce platform as a way for smaller merchants to expand their international…

    CNBC
  • Here's What Mark Cuban Wishes He Knew About Money In His 20s

    Cuban is the owner of the Dallas Mavericks basketball team. Billionaire investor and entrepreneur Mark Cuban is generous with his advice. When we asked him what he wishes he'd known about money in his 20s, he said:

    Business Insider
  • Embraer to sell 50 E-175 jets to Republic in $2.1 billion deal

    Brazil's Embraer SA, the world's third largest commercial planemaker, said on Wednesday it booked a firm order from U.S. The deal, which will be included in Embraer's order book for the third quarter, is valued at $2.1 billion, the planemaker said in a securities filing. The planes will be operated…

    Reuters
  • SHOE COMPANY: Our CEO Just Disappeared And Most Of The Money Is Gone

    "and like that: he's gone." This is an actual headline from a company press release: "CEO and COO disappeared, most of the company's cash missing." (Via FastFT) In a statement, German-based shoe company Ultrasonic said its CFO,  Chi Kwong Clifford Chan, has been unable to reach the company's CEO,…

    Business Insider
  • Top Analyst Upgrades and Downgrades: AEP, BHP, GE, Incyte, 3M, Tyco, Under Armour and More

    Top Analyst Upgrades and Downgrades: AEP, BHP, GE, Incyte, 3M, Tyco, Under Armour and More Stocks were firm on Wednesday morning ahead of the FOMC meeting outcome. Tuesday’s rally may have sparked higher interest again, and investors are looking for bargains

    24/7 Wall St.
  • 10 rock-solid stocks for conservative investors

    10 rock-solid stocks for conservative investors Shares with low volatility can beat their indexes with less risk Bloomberg News/Landov U.S. Bancorp is the cheapest S&P 500 stock

    MarketWatch
  • Billionaire Investor Says Chinese People Work Harder And Western Companies Could Face Deep Trouble After Alibaba IPO

    Michael Moritz, the chairman of VC firm Sequoia Capital, is a huge fan of Chinese internet companies and reiterated his enthusiasm for the Chinese market in an interview with The Wall Street Journal Wednesday. The billionaire investor described the Alibaba IPO as a “major landmark event” that is as…

    Business Insider