Breaking Analysis: Netflix Wins the Crown Jewel of Streaming Content

Yesterday Netflix entered into a multi-year deal with Walt Disney studios that makes them the only online video distributor in the U.S. with licensing to show first-run live-action and animated films from the studio. Why is this such a huge deal for Netflix? CEO and Founder of “Are You Watching This?!” Mark Phillip simplifies it in two words: “It’s Disney.” He explains that the demographics show that Netflix is very focused on families. “If there’s any brand that you could drop your kids in front of the TV and say watch as much as you want and entertain yourself, it’s Disney.” In Phillip’s eyes, this makes Disney the crown jewel.

The key piece of the deal for Netflix is that it gives them the ability to show those titles as soon as they’re available for anyone to watch in the first pay window, not just those with video on demand. Phillip expanded on this by saying that there are actually eight pay windows in play, in terms of movies. Since the streaming industry is all about getting the content to subscribers as quickly as possible, Phillip said the further up the funnel Netflix can move, the better.

Unfortunately, new releases from Disney won’t be available in Netflix until 2016. While this is disappointing for subscribers, investors must be excited to see the stock price jump around 15% over the past few days.

When Netflix’s contract with Starz ended back in February, they lost a significant amount of Disney content, making this deal a bit of sweet revenge for Netflix on Starz. Phillip speculated on how Netflix was able to wrestle the Disney deal away from Starz. He said, “When you look at the timing . . . you have to think that it played a role in negotiations with Netflix and Starz earlier this year.” Overall, Netflix is dominating the streaming market. Phillip pointed out that although almost one-third of the video market is going to Netflix, and with its closest competitor not even in sight, Netflix has yet to turn a profit. He brought up the $64,000 question of “What does this company have to do to get to profitability?” See the entire segment with Kristin Feledy and Mark Phillip on the Morning NewsDesk Show.