Home By Signing With Netflix, DreamWorks Bets Big on the Web

By Signing With Netflix, DreamWorks Bets Big on the Web

DreamWorks Animation is betting big on the future of the Web’s popularity for consuming premium video content. The major Hollywood animation studio has signed a deal with Netflix to stream its library of content exclusively to Netflix subscribers, the New York Times reported.

The deal, which covers such popular film series as Shrek and Madagascar is expected to net DreamWorks Animation $30 million per movie for the duration of the agreement. What makes this deal significant isn’t so much its price tag or the content involved. Its significance lies in the fact that this is the first time such a major Hollywood content provider has inked a deal that skips over pay TV distribution in favor of the Web.

The partnership, which will go into effect in 2013, is an exclusive one, and it replaces a prior agreement DreamWorks Animation had with HBO. It also moves Netflix further into what’s called the “pay TV window,” which helps it compete with traditional players. Explains the Times:

“The so-called pay TV window is one of the entertainment industry’s most important business tools. In the past, HBO has paid steep licensing fees of about $20 million per picture for exclusive rights a few months after films arrive on DVD. But Netflix – capitalizing on a consumer shift to streaming content on computers, tablets and Internet-connected televisions – has been making similar deals, albeit mostly with smaller suppliers.”

The two companies are touting the deal as a major achievement, but not everybody is convinced. CNet’s Greg Sandoval wonders whether Netflix is “desperate to generate positive news” after several weeks of customer and shareholder disappointment.

The company has had a rocky September, which it kicked off by implementing a highly unpopular increase in their subscription fees. In the weeks that followed, more customer frustration followed as they spun off their DVD business into a service that’s entirely separate from their streaming business. Meanwhile, the company is now expected to lose 1 million customers and has seen its stock price tumble.

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