This image released by Netflix shows Kevin Spacey in a scene from the Netflix original series, "House of Cards," an adaptation of a British classic. (AP Photo/Netflix, Melinda Sue Gordon)
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This image released by Netflix shows Kevin Spacey in a scene from the Netflix original series, "House of Cards," an adaptation of a British classic. (AP Photo/Netflix, Melinda Sue Gordon)
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FILE - In this July 11, 2012 file photo, Netflix CEO Reed Hastings attends the Allen & Company Sun Valley Conference in Sun Valley, Idaho. Netflix Inc. is facing scrutiny from government regulators for a Facebook post by Hastings in July that may have boosted the online video company’s stock price. Neflix said Thursday, Dec. 6, 2012, that the Securities and Exchange Commission informed it that its staff is recommending civil action be brought against the company and Hastings. The reason: Hastings’ July 3 post in which he said Netflix’s online video viewing “exceeded 1 billion hours for the first time ever in June.” (AP Photo/Paul Sakuma, File)
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In this Tuesday, Oct. 23, 2012, photo, a woman holds up a Netflix envelope to be photographed in front of a Netflix application on a television in East Derry, N.H. Netflix slashed its prediction of how many U.S. video streaming subscribers it would add this year after subpar third-quarter results, causing a sharp sell-off in its stock in after-hours trading. The Los Gatos, California-based video streaming company said Tuesday it added 1.2 million net subscribers in the U.S. in the three months through September, which was on the low end of its previous forecast of gains between 1 million to 1.8 million. (AP Photo/Charles Krupa, File)
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FILE - This publicity file photo released by Warner Bros., shows the character Gollum voiced by Andy Serkis in a scene from the fantasy adventure "The Hobbit: An Unexpected Journey." (AP Photo/Warner Bros., File)
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FILE - This undated handout file photo released by Columbia Pictures shows Daniel Craig as James Bond in the action adventure film, "Skyfall." According to studio estimates Sunday, Dec. 9, 2012, "Skyfall" took in $11 million to move back to No. 1 in its fifth weekend. That puts it narrowly ahead of "Rise of the Guardians," the animated adventure of Santa, the Easter Bunny and other mythological heroes that pulled in $10.5 million.(AP Photo/Sony Pictures, Francois Duhamel, File)
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FILE - This publicity film image released by Columbia Pictures shows Daniel Craig as James Bond in the action adventure film, "Skyfall." (AP Photo/Sony Pictures, Francois Duhamel, File)
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In this undated publicity photo released by Lionsgate, Natasha Calis stars as Em in the film, "The Possession." (AP Photo/Lionsgate, Diyah Pera)
On the Call: Disney CEO Robert Iger
BURBANK, Calif. (
AP) — The
Walt Disney Co. broke the pay-TV mold late last year when it announced it is selling the rights to show its recent theatrical releases to
Netflix Inc. beginning in 2016. The decision represented a major endorsement of
Netflix's Internet video service, which is wresting the Disney rights away from the
Starz cable channel.
Although financial terms haven't been disclosed, analysts believe Netflix will be paying Disney at least $350 million annually once the deal kicks in.
Disney's movies will remain on Starz until late 2016, but analysts are already starting to mull the possible consequences of the change. One concern is whether the switch will cause more young viewers to spend more time on Netflix, already a popular outlet for children's programming, instead of Disney's own cable channel.
Disney CEO Robert Iger discussed the rationale for switching to Netflix in response to a question posed during a Tuesday conference call held to discuss the company's fiscal first-quarter earnings.
QUESTION: Just wondering if you can talk a little bit about the pay-TV output deal that Disney signed with Netflix? What got you comfortable with doing that deal from a branding perspective for Disney in light of the potential substitution effect for kids' TV viewing, and of course, in light of the relationships you have with your traditional multi-channel distributors?
ANSWER: First of all, we are impressed with the platform and the user interface. We thought from an environment perspective, it was a perfect place for our product to be distributed. They stepped up and paid the right price which was also extremely important.
We carefully considered the impact of selling to Netflix versus a more traditional pay cable channel. We have been with Starz, as you know, and we will continue with Starz for a few more years. And (we) felt, that given the volume of product that we would flow through the Netflix deal, and given the strength of our channel programming, notably the Disney Channel ... that this was not a step in the direction of encouraging people to not subscribe to multi-channel services.
We thought long and hard about it, talked about it at length and believed in the end that this is a movie play. There are limitations in terms of when the movies are available and how many they are in terms of how many we make and the size of our library and felt that it is a completely different product than Disney Channel product. And given the popularity of the shows that we have, the demand to see those shows relatively quickly remains pretty high and we believe we will be able to maintain that. So you have to subscribe to a multi-channel service to see them.
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