Netflix Strengthened Its Relationship with Disney in 2015
A Look at Major Events that Impacted Netflix in 2015
Content deal with Disney
Netflix (NFLX) considers its original content deal with The Walt Disney Company (DIS) as a valuable asset. Netflix struck an original content deal with Disney’s ABC Studios in fall 2013.
As part of this deal, Disney’s ABC Studios is producing four live-action series for Netflix, leveraging characters from the Marvel Universe. The first of these series was Daredevil, which had good audience engagement. Netflix also released the second of this live-action series, Jessica Jones, in late 2015.
Netflix has also entered into an exclusive syndication arrangement with Disney for the Pay 1 and Pay 2 windows for films released through the 2018 calendar year. It means that Netflix can stream new Disney movies released from 2016 onward.
However, because Star Wars: The Force Awakens was released in late 2015, it will go to Starz. Netflix has become an important customer for Disney regarding Disney’s licensing and distribution revenues. However, Netflix has ruled out any significant output deals with studios in the US other than its deal with Disney.
Why is Netflix reluctant to enter into large studio output deals?
Netflix sees value in its studio output deal with Disney primarily because it believes that Disney has vast intellectual property resources and holds some key franchises like Star Wars. Netflix views Disney as a “differentiated brand among movie studios.” Netflix has stated that it considers its deal with Disney to be more valuable than its deal with Viacom’s (VIAB) Paramount Studios.
Generally, Netflix believes that large-scale studio output deals in the US do not work out in the long term for Netflix due to the licensing costs involved and especially because Netflix is producing its own original movies.
Disney makes up 1.38% of the iShares S&P 100 Index ETF (OEF). OEF also holds 3.9% of Microsoft (MSFT). For an investor interested in getting exposure to the Communications Services sector, OEF makes up 3.51% of that sector.
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