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The Future of TV? Netflix Scores Massive Disney Deal

Reed Hastings, CEO of Netflix
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Reed Hastings, CEO of Netflix

Netflix shares skyrocketed on Tuesday after the streaming video service announced it scored an exclusive deal with Disney to stream its movies.

This is a huge deal for Netflix—giving it the same kind of access to content that was previously reserved for pay-TV channels like Starz, Showtime, HBO, and Epix.

It also shows that Netflix is willing to pay up for premium content in order to compete with premium cable TV channels, and it must have paid up, otherwise Disney would have gone with one of its many other options.

(Read More: Netflix Poison Pill Aims to Thwart Icahn Takeover.)

Beginning in 2016, Netflix members will be available to instantly stream Disney's first-run and animated features. Direct-to-video new releases, like those in the popular "Fairies" franchise, will be available on Netflix starting next year. And films from Disney's valuable library, like "Dumbo" and "Alice in Wonderland" will also be available for streaming.

In February, in a move that worried Wall Street, Netflix failed to renew its deal with Starz, which included valuable Disney films, along with Sony movies. (Read More: Netflix Losing Starz Play: Over 1,000 Starz Movies, TV Shows to Be Cut.)

By aligning itself directly with Disney, along with its Marvel and Pixar brands, Netflix is now giving itself a real advantage over competitors like Amazon, which is pushing into streaming video with Amazon Prime. (Read More: Disney's Iger 'Feels Good' About Year Ahead.)

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The move also gives Netflix a key foothold in the valuable children's market. With Netflix's exclusive deal with Dreamworks Animation starting next year and its deep catalog of children's television programming, it's distinguishing itself from rivals with a huge variety of on-demand kids content. And as families evaluate whether to keep or drop the service, all that exclusive access will certainly help.

Has Netflix turned a corner? Will other studios follow suit when their TV deals expire?

—By CNBC's Julia Boorstin; Follow her on Twitter: @JBoorstin

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  • Working from Los Angeles, Boorstin is CNBC's media and entertainment reporter and editor of CNBC.com's Media Money section.