Netflix, Inc. (NASDAQ:NFLX)’s chief content officer Ted Sarandos said that the online streaming company will not raise its subscription fees after striking a multi-year agreement with The Walt Disney Company (NYSE:DIS) to become the exclusive subscription TV service provider for new movies produced by the entertainment giant, according to the report from Reuters.
In an interview with filmmaker Harvey Weinstein during the UBS Global Media Communications Conference in New York, Sarandos said, “We are not contemplating” raising the $8-a-month subscription fee for unlimited online viewing.”
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Under its agreement with The Walt Disney Company (NYSE:DIS), the online video streaming company has the rights to stream all the new movies produced by live-action and animation studios of the entertainment giant, including Pixar, Marvel, and Lucas film.
Tony Wible, an analyst with Janney Montgomery Scott estimated that Netflix, Inc (NASDAQ:NFLX) paid $350 million a year for its exclusive rights to stream the Disney movies starting 2016. Some analysts expressed concerns that the company paid too much for the rights.
Sarandos also expressed during the conference that Netflix, Inc. (NASDAQ:NFLX)’s agreement with The Walt Disney Company (NYSE:DIS) is a game changer. He also said, the entertainment giant’s decision to transfer the rights from Liberty Media’s Starz network was extremely valuable for the online video streaming company because it has a very large family audience.
Sarandos said, “When we looked at the data of when we used to have Starz, the ones that constantly performed for us were those big animated features, lots of repeat viewing. It’s a nice, safe brand halo when you put your kid in front of an iPad.”
Furthermore, Sarandos told Weinstein that Netflix hasn’t heard any reaction from activist investor, Carl Icahn, who owns nearly a 10 percent stake in Netflix, Inc. (NASDAQ:NFLX). He said Icahn is “publicly and privately very supportive” of Netflix. The board of directors of Netflix adopted a poison-pill plan against Icahn after his proposing the sale of the company.
On the other hand, Jay Rasulo, chief financial officer for The Walt Disney Company, said they “broadly surveyed the market” before deciding to ink a deal with Netflix, Inc. (NASDAQ:NFLX).
Rasulo said, “There are a lot of factors we put into the calculus of how we … decided to do this deal. At the end of the day, we thought for the content we create, value and windowing chain we create. This was the highest value deal for us to do. We are thrilled to do it with them.”
Michael Pachter, analyst at Wedbush Securities opined that the positive reaction of investors to Netflix agreement with Disney was unwarranted, citing the amount paid by the online video streaming company for the rights.
In his research note to investors, Pachter wrote, “Ultimately, we think that deals such as the Disney deal could spell doom for Netflix. Perhaps most importantly, a long-term and expensive content deal makes Netflix less attractive to potential acquirers.”