Market Watch

Netflix Signs Warner TV for Streaming Service



Netflix has signed a deal with Warner Bros. that will add more TV shows to the Netflix library as well as extending movie title licensing from the studio through 2011. This is the first time Warner Bros. has made its TV content available on the Netflix digital service. As part of the deal, Netflix has acquired streaming rights for the next four years to all 100 episodes of the FX drama Nip/Tuck, which will also run simultaneously on cable network Logo as part of a syndication deal with Warner TV. Also included in the agreement are other TV series, including Veronica Mars, Pushing Daisies & Terminator: The Sarah Connor Chronicles.

This follows the separate "28-day delay" distribution deal Netflix signed with Warner in January 2010 for physical discs, which still remains in place, and which also made Warner Bros. movies available for streaming on Netflix Watch Instantly.

Analysis
Netflix continues to transition its customers to online streaming, and playing down its popular, but more costly, DVD-by-mail business. While many companies in the physical media business have struggled in their attempts to transition to digital distribution (e.g. Blockbuster), Netflix has kept momentum by bolstering its streaming business. Screen Digest predicts that in 2010 Netflix will serve 270m streams to its subscribers, and its license fees to already be generating over $130m per year for studios and networks. 
Warner is the latest studio to strike a digital distribution deal with Netflix for TV shows, following on from long-term deals signed for post-season shows by other major studios and networks such as NBC, ABC and Fox. Netflix's streaming service is driven by a growing list of living room and portable consumer electronics devices that subscribers can use to watch streaming movies and TV shows away from the PC, with the company increasingly coming to resemble an internet-delivered pay-TV service provider in this context. In this respect, Netflix Watch Instantly is now competing directly with the subscription ambitions of Hulu, and its Hulu Plus proposition.

This deal, as well as the one recently announced with Relativity Media for movies, are significant steps in addressing what is currently Watch Instantly's biggest weakness: the size of its library and availability of titles. As Netflix continues to improve its streaming lineup, the 28-day new release window for physical discs will be of less and less concern to the company.  While DVD rentals continue to be the foundation of their business, Netflix executives have made it clear that they believe streaming will eventually replace it. Screen Digest anticipates the emphasis on newer titles to also characterize Netflix's streaming TV shows, as networks and studios warm to the prospect of simultaneous availability of network shows the day after broadcast on a wide number of platforms and business models.

Find Out More > iSuppli | Screen Digest Broadband Media Intelligence Service