POSTED: 01:30 a.m. HST, Jun 18, 2013
LOS ANGELES » Netflix said Monday that it would offer new TV shows from DreamWorks Animation starting in 2014 in what the company described as its biggest transaction ever for original first-run content.
Though financial details were not disclosed, Netflix Inc. said the agreement includes more than 300 hours of new TV episodes in a multiyear deal. Analysts estimated the contract could be worth several hundred million dollars over time.
The transaction is a major coup for both companies. It 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.
"This is arguably a groundbreaking deal," said Tuna Amobi, a Standard & Poor's equity analyst who covers both Netflix and DreamWorks Animation SKG Inc.
While concerns remain about how much the deal will cost Netflix in the end, the company said it can 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 $15.24, or 7.1 percent, to close at $229.23 on Monday, while DreamWorks shares rose 93 cents, or 4 percent, to close at $23.74.
Netflix is doubling 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.
The deal suggests DreamWorks will significantly increase its production of TV shows.