Online video service Netflix has signed an exclusive first pay TV window deal in the Netherlands with Walt Disney Studios, one of the six US major studios. Netflix will add new and library Disney titles from all Walt Disney Studios, Disney Pixar and Marvel from early 2014. Titles include Monsters University, The Lone Ranger, and The Avengers; library titles include classic titles such as Mary Poppins, and Lady and the Tramp, with more recent library titles like Ratatouille, Wall-E and The Muppets as well as TV series from ABC (including Lost).
Netflix launched in the Netherlands in September 2013 priced at €7.99 and is available on a number connected devices including PCs, iOS/Android/Windows tablets and smartphones, games consoles, and connected TVs.
The deal is not the first exclusive partnership between Netflix and Disney. In December 2012 Netflix signed an exclusive deal with Disney in the USA. Starting from 2016, US-based Netflix customers will be able to view first run Disney titles after the studio's current deal with Starz expires.
The Dutch deal is part of a small but significant trend which has seen major studios choose an online video service rather than pay TV providers for an exclusive partnership when the circumstances are right (e.g. in 2011 Netflix acquired the exclusive first run pay TV rights to Paramount titles in Canada). The acquisition of exclusive rights comes as Netflix aims to gain a competitive advantage in the Dutch market. Within the Netherlands Netflix has few paid-for online competitors: with niche local video-on-demand (VoD) players; multiscreen services from the premium cable channels Chellomedia's Film Go and HBO's HBO Go; and transactional services from Apple and Microsoft. By adding exclusive first pay TV window rights to its original TV productions (House of Cards, Arrested Development) Netflix is building a library of content that is only available in Netherlands on its platform. In doing so Netflix is positioning itself as a legitimate competitor to the premium cable channels. However, exclusive partnerships create additional costs for the company.
Netflix experienced stable growth of the number of subscribers internationally reaching seven million paying customers in Q2 2013 with nearly 700,000 additions during the quarter. These subscribers generated nearly $166 million in revenue versus almost $65 million in the same quarter of last year. However, the international streaming business generated a loss of nearly $66 million. This was driven by $183 million cost of revenues and a $49 million marketing costs in Q3, largely due to expenses relating to content acquisition across the wider international customer base. Increased international competition from local OTT providers and pay TV operators expanding their content catalogues has forced Netflix to respond in a way that will inevitably drive up its costs.