DreamWorks dumps HBO for streaming deal with Netflix

Netflix (Nasdaq: NFLX) subscribers may no longer be seeing Starz, but the video distributor Monday said it made a dream of a deal with DreamWorks, the studio behind Shrek and Madagascar; in the process, it scored a major coup over one of its biggest competitors.

Madagascar - Dreamworks

Netflix will have access to DreamWorks' content including Shrek and  Madagascar (pictured).

The deal with DreamWorks could be worth up to $30 million a picture to the studio, which said it had gone with Netflix instead of pay-TV channel HBO because, as DreamWorks CEO Jeffrey Katzenberg said, "We are really starting to see a long-term road map of where the industry is headed. This is a game-changing deal."

The multi-year agreement is the first time a content provider has walked away from a pay TV deal in favor of streaming content over the Internet. Starting in 2013, Netflix not only gets exclusive access to DreamWorks movies and TV content, but also moves up into the pay-TV window. Netflix will be allowed to stream the content to TVs, tablets, mobile phones and computers.

Netflix will have access to DreamWorks' content as its deal with Starz draws to a close, filling a pretty substantial void. And, although the content is coming at a significantly higher price than Netflix enjoyed with Starz, it's a bullet Netflix had to bite, said Janney Montgomery Scott analyst Tony Wible.

"Netflix is in the penalty box and needs DreamWorks more than ever," Wible said. "They need the positive spin that they're investing in content, and they want to make the claim they can bypass pay-TV networks and go to the root source."

Meanwhile, the increasing popularity of streaming video on the Web is also driving content prices up, as more outlets, like Google (Nasdaq: GOOG), Apple (Nasdaq: AAPL) and Amazon (Nasdaq: AMZN) look for deals with content owners.

That's a trend that's unlikely to stop any time in the near future.

For more:
- see this NY Times article
- see this Wall Street Journal article

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