Netflix (Nasdaq: NFLX) announced Tuesday that it had signed a licensing contract with Walt Disney Co. (NYSE: DIS), giving it the exclusive streaming video rights to Disney's catalog of movies.
Since Disney announced earlier this year it was shutting down its own online video streaming service, Disney Movies Online, due to lack of interest and funds, this will be a good way for the company to maintain its presence in the video streaming industry.
Another advantage of the deal, from Disney's perspective, is Netflix's name brand recognition, experience and senior position in the market. These characteristics will no doubt help Disney promote its library to fans who might not have known Disney Movies Online even existed but who are nevertheless interested in the content Disney offers.
The migration of these fans to Netflix, and exclusively Netflix, was surely one of the primary incentives for the online streaming giant to enter into the contract.
This agreement does not only apply to already released Disney titles but also extends into the future: Netflix will hold streaming rights to all Disney films shown in theaters in 2016, the year Disney's contract with Liberty Media-owned Starz expires. If all goes as planned, the two companies should be able to give each other a helping hand in a time when the online streaming industry is growing at an exponential rate.
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