Last Call

Score one for Netflix...albeit an expensive one.

At a cost of nearly one billion dollars, Netflix on Tuesday said it would add films from Paramount Pictures, Lions Gate and MGM to its online subscription service.


It was a coup — albeit a costly one — for Netflix, which knows its needs to lock up the digital rights to films as customers stop receiving DVDs by mail and start receiving streams via the Internet. The deal will commence Sept. 1.

Ted Sarandos, the chief content officer for Netflix, said he is essentially taking the “huge pile of money” that Netflix pays in postage for DVDs by mail — about $600 million this year — “and starting to pay it to the studios and networks.”

Wall Street analysts estimated that Netflix would pay about $900 million over the course of five years to Epix, a fledgling competitor to HBO that holds the rights to the film output of Paramount, Lions Gate and MGM. Those payments are expected to help the money-losing Epix break even in the next fiscal year.

The Epix deal will add new releases like “Iron Man” and “The Curious Case of Benjamin Button” to Netflix’s catalog, greatly enhancing the “Watch Instantly” streaming service that the company markets to subscribers as part of an $8.99 package that also includes DVD deliveries. It was the second film deal for Netflix this summer, coming a month after a pact with Relativity Media, the firm run by Ryan Kavanaugh.

Smart move I think on both sides.  The more movies Netflix can stream, the more they become the 900 pound gorilla as the DVD/Blu-ray market gives way to the internet streaming on-demand field.

We'll see how this works out.   Still, billion with a B is real money, even these days.  Was the cost worth it?