Analyst: DreamWorks Animation Losing 'Mojo' With Netflix Streaming Deal

DreamWorks Paramount/Everett Collection

Janney's Tony Wible also suggests that the streaming video service may not be a big winner, but the "buyer of last resort."

NEW YORK - DreamWorks Animation's expected streaming video rights deal with Netflix is a sign that the studio is "losing its mojo," Janney Montgomery Scott analyst Tony Wible said in an investor note Monday.
But the company's stock rose on Monday.

As reported over the weekend, DreamWorks Animation and Netflix have been putting the finishing touches on a streaming rights deal for DWA films that could be announced in the coming days as both firms are set to report their quarterly earnings.

"We believe DWA's position in the market is slipping as every major
studio is now doing animation, which allows HBO to now get animation from all its other major studios," Wible wrote. "If a deal is not priced right, it could also be seen as a major threat to DWA's DVD, pay TV and catalog sales, as we doubt Netflix would be willing to pay enough ($100 million to $200 million per year) to offset the cannibalization of these revenue streams. This would be a steep price for only two to three new films per year."

However, Wible also cautioned investors against interpreting a DWA deal as a major Netflix win against premium TV providers. Highlighting that the current HBO-DWA deal expires in 2014, he said: "Any earlier deal would clearly need HBO's consent, which it would obviously not provide unless there was a financial benefit."
He added: "Any early deal would beg the question of whether Netflix won a DWA deal or was the buyer of last resort."

As reported over the weekend, HBO has offered DWA to end their output deal two years early.
 "For HBO, there is a lot of cost savings and an early exit earn-out," Wible said.

DWA shares closed up 4.7 percent at $22.03.


Twitter: @georgszalai