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You are here: Home / Personal Tech / Netflix Challenges Pay-TV Business
Netflix Challenges Pay-TV Model with Relativity Deal
Netflix Challenges Pay-TV Model with Relativity Deal
By Jennifer LeClaire / CRM Daily Like this on Facebook Tweet this Link thison Linkedin Link this on Google Plus
In a move to better position itself against cable television, Netflix on Tuesday announced a long-term agreement with Relativity Media that lets subscribers stream newly released DVDs during the pay-TV window. Until now, these new movies were only available to Relativity's partners for broadcast on premium TV channels.

The deal marks the beginning of a shift in the distribution paradigm for major motion pictures as Netflix subscribers will get access to blockbuster movies months, instead of years, after their DVD release. Put another way, this is the first time theatrical feature films will be available for streaming via Netflix instead of through traditional cable-TV providers.

"Our continued goal is to expand the breadth and timeliness of films and TV shows available to stream on Netflix," said Ted Sarandos, chief content officer for Netflix. "Historically, the rights to distribute these films are pre-sold to pay TV for as long as nine years after their theatrical release. Through our partnership with Relativity, these films will start to become available to our members just months after their DVD release."

The Evolution of Movies

Relativity has financed, cofinanced or produced more than 200 feature films generating more than $13 billion in worldwide box-office revenue. Fifty Relativity films have become Top 10 box-office releases during the past two years. Current Relativity releases include Robin Hood, Get Him to the Greek, and Grown Ups.

Two of the first films Netflix subscribers will see through the Relativity deal are The Fighter and Skyline. Both are scheduled for theatrical release later this year and will stream to Netflix subscribers in early 2011. Also on tap for Netflix are Rogue Pictures' Nicolas Cage action/thriller Season of the Witch and Movie 43. Both films will also hit theaters this year.

"We have always been about finding new ways to grow and monetize our business," said Ryan Kavanaugh, Relativity's CEO. "This clearly is a natural step in the evolution of the movie business and opens up a whole new world of revenue and marketing opportunities."

Reshaping Pay-TV Deals?

Financial terms of the deal were not disclosed, nor were any potential price changes for subscribers. But Netflix brings Relativity more than 13 million subscribers. Michael J. Joe, Relativity's president, said the opportunity has great promise for the motion-picture industry, "reshaping pay-TV deals going forward."

Phil Leigh, senior analyst at Inside Digital Media, said the significance of the Netflix tie-up with Relativity is that it's the first of its kind. He added that Relativity is a minor player, an independent operation without the depth of titles its competitors have.

"We'll have to watch and see if some of the major studios go along with this, and I think they will, but I don't know that we'll see much progress this year," Leigh said, noting the deal with Relativity probably won't much ruffle the feathers of pay-TV companies at this stage in the evolution of digital media.

"HBO has produced more original programming and is therefore much less dependent on original programming than they used to be," Leigh said. "It would be a bigger blow to the pay-TV companies if the major studios stepped in and formed similar deals with Netflix. I would expect the studios to try things like premium Hulu subscriptions before they are willing to risk alienating HBO and Showtime and others."

Read more on: Netflix, Movies, DVD, Pay TV, Cable TV
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