Securing the rights to first-run Walt Disney movies starting in 2016 is a big deal for Netflix — it sent Netflix shares soaring. It's the first time the streaming video service has acquired the rights to a major studio films in the 'premium TV' window, beating HBO, Showtime and Starz.
Analysts say it will help Netflix add domestic streaming subscribers. Now Netflix is really distinguished by its exclusive kids' content — it has a similar deal with Dreamworks Animation. And it certainly bolsters Netflix in the face of growing competition from Amazon.com's streaming service.
But at what cost? Sources tell me Disney will definitely bring in more from the Netflix deal than it did from Starz, a deal estimated at around $225 million in annual revenue.
But there's no official number, and it's complicated by the fact that there are three separate deals — new movies starting in 2016, direct to video films starting next year, and Disney's catalog. Michael Pachter, from Wedbush Securities tells me he expects Netflix to pay Disney around $300 million annually.
Although there's some concern about the dramatic jump in Netflix shares on the news, analysts are generally bullish on the impact on Netflix. Morgan Stanley's Scott Devitt says the deal is a key "endorsement" of Netflix's longevity by Disney. Cantor's Youssef Squali says it could prompt other major studios to follow suit.
The company that looks likely to really suffer from this new partnership is Starz, which is losing that first run Disney content in early 2016. Tony Wible says this makes Starz, which was already troubled, look worse, and could put a wrinkle in the planned spin-off from Liberty Media.
Both Disney's CFO Jay Rasullo and Netflix's Content Chief Ted Sarandos are speaking at UBS Media conference in New York City Wednesday. We can certainly expect them to field many questions about the terms of the deal and its implications.
—By CNBC's Julia Boorstin; Follow her on Twitter: @JBoorstin