According to McKinsey Global Institute, mobile Internet is one of the 12 disruptive technologies. Mobile Internet is about enhancing service delivery, boosting productivity, and delivering better and easier life experiences. Mobile Internet is progressing constantly, and Netflix, Inc. (NASDAQ:NFLX) is well positioned to ride this trend.
The deal with DreamWorks
Netflix, Inc. (NASDAQ:NFLX) just signed an original programming deal with Dreamworks Animation Skg Inc (NASDAQ:DWA). This multi-year agreement is the largest deal ever signed by Netflix, Inc. (NASDAQ:NFLX) for original content, and it allows Netflix, Inc. (NASDAQ:NFLX) to access new series from the creators of franchises such as “Shrek” and “Madagascar.” According to the report from Fox Business, Netflix, Inc. (NASDAQ:NFLX) will have first-run rights while Dreamworks Animation Skg Inc (NASDAQ:DWA) will retain other rights such as DVD sales and distribution to television networks in countries where Netflix, Inc. (NASDAQ:NFLX) doesn’t operate. This deal signals the new win-win model between alternative-content producers and online distribution channels, whereas smaller studios can now reach consumers in new ways.
What’s this deal about?
This deal is about boosting content for children. Netflix will get more than 300 hours of new, original programming from DreamWorks. Netflix quickly signed this deal shortly after its content agreement with Viacom, Inc. (NASDAQ:VIAB) expired. On the other hand, Netflix’s strong rival, Amazon.com, Inc. (NASDAQ:AMZN) immediately reached an exclusive-content agreement with Viacom, Inc. (NASDAQ:VIAB) to carry the programming on its Amazon.com, Inc. (NASDAQ:AMZN) Prime video services after Netflix departed with Viacom.
While kids’ shows are one of the most watched TV genres on Prime Instant Video, Bill Carr, Amazon’s vice president of Digital Video and Music, says Amazon and Netflix continue to battle for content for children. Amazon is trying to take advantage of Viacom’s “Dora” and “SpongeBob.” Netflix, however, is taking a different approach.
What now?
Strategically, Netflix is focusing on becoming an “expert programmer” and shifting its resources toward exclusive content, aiming for less non-exclusive content, such as the the programming offered by Viacom. Although there will be short-term pains in losing popular kids’ shows due to the expiration of Viacom’s agreement, the success of “House of Cards” demonstrates that Netflix is shifting in the right direction to differentiate itself from other online and mobile video providers.
DreamWorks is a perfect match for Netflix. DreamWorks bought the AwesomenessTV YouTube channel for $33 million in February and is trying hard to enter the online content market. By working with Netflix, DreamWorks can maximize its online exposure while continuing to retain other rights such as DVD sales and non-competitive TV distribution.
