New Deal Means Disney Movies Will Stream Again on Netflix

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UPDATED: Companies announce pact for live action and animated features – missing from the streaming service since Starz' deal expired in February 2012.

Netflix streaming users can watch some Disney movies again.

A deal announced Tuesday by the streaming and DVD-by-mail service and Walt Disney studios means select animated library titles such as Dumbo and Pocahontas will be available to Netflix's streaming service for the first time beginning late Tuesday, but users will have to wait for newer movies.

Disney's recent films have been missing from the streaming service since Starz, which owns pay cable rights to those films, declined to renew its Netflix deal in February. But starting in 2016, new Disney titles -- including Marvel and Pixar movies -- will be available on Netflix in the pay TV window, according to the terms of the new deal.

While Starz has rights to Disney titles until 2017, their deal only includes titles that are released theatrically prior to 2016, so Netflix will get streaming rights to Disney movies that come out that year and beyond.

"Starz will continue to be the exclusive home of all Disney movies, including the Lucasfilm, Marvel and Pixar releases, and their accompanying digital streaming rights into 2017," Starz said in a statement emailed to The Hollywood Reporter. "Our decision not to extend the agreement for Disney output past that time allows us the opportunity to implement our plan to dramatically ramp up our investment in exclusive, premium-quality original series."

The new Netflix deal also covers Disney's direct-to-video releases starting in 2013, though  Netflix will not be allowed to stream the titles day-and-date with the DVD release. An insider said there would be a "short window" applied.

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The announcement does not mention Lucasfilm titles, but Disney's acquisition of George Lucas' company has not yet closed.

With the deal, Disney becomes the first major studio to sign a streaming output deal directly with Netflix, following deals the service signed with the Weinstein Co. and DreamWorks Animation, and analysts see the relationship as a needed boost to studios that have seen DVD revenue sink in recent years.

"The output deal is a positive for film studios as they now regain some leverage," Susquehanna Financial Group analyst Vasily Karasyov said Tuesday.

Financial terms of the deal were not disclosed, but those close to the situation say Netflix will be paying $100 million-plus more to Disney than Starz was paying each year, putting the price tag near $350 million annually.

"We estimate the current Starz/Disney deal at roughly $250 million a year, variable depending on the volume and box office of the Disney slate in a given year," Barclays said in a research note.

"We won't know if it was a good move for Netflix -- or shareholders -- until we learn just how much they paid," said Jason Moser of the Motley Fool. "Netflix already has considerable obligations you won't see on the balance sheet, and if they overpaid, this could spell trouble for the company long term.

On Tuesday, though, investors were enthusiastic over the deal, bidding Netflix shares 14 percent higher to $86.82. Shares of Disney were unchanged, which didn't surprise analysts.

"We do not expect this deal to be a needle mover for the company," Drew Crum of Stifel Nicolaus said Tuesday. "If we assume Disney is able to generate $200 million a year in revenue from this deal … it would represent less than 1 percent of the company's overall annual revenue and, we estimate, would add about a penny to annual results."

Netflix chief content officer Ted Sarandos said in a release: "Disney and Netflix have shared a long and mutually beneficial relationship, and this deal will bring to our subscribers, in the first pay TV window, some of the highest-quality, most imaginative family films being made today. It’s a bold leap forward for Internet television, and we are incredibly pleased and proud this iconic family brand is teaming with Netflix to make it happen.”

Janice Marinelli, president of Disney-ABC's domestic television unit, said in the release: “With this cutting-edge agreement, we are thrilled to take our highly valued relationship with Netflix to the next level by adding Disney’s premier films to their programming lineup. Netflix continues to meet the demands of its subscribers in today’s rapidly evolving digital landscape, and we are delighted that they will have much earlier access to our top-quality and entertaining slate."