TDG: Netflix “betting the farm” on Disney
By Jamie Beach December 6th, 2012

US research firm The Diffusion Group (TDG) has gone on record as saying that the deal announced yesterday between Disney and online video service Netflix is an all-or-nothing roll of the dice for Netflix.

The multi-year agreement makes Netflix the exclusive US distributor of Disney’s new releases in the pay-TV window from 2016, and is the first time that an over-the-top (OTT) video service has won such valuable rights from its pay-TV peers.

These rights cannot have come cheap however: Colin Dixon, senior partner at The Diffusion Group, comments that the deal is sure to “substantially” increase the amount of content-related debt that Netflix has thus far accumulated (rumoured to already be in the region of US$ 5bn).

For its part, Disney is likely to have been swayed by the fact that Netflix has over 25mn subscribers in the US and is available on nearly every connected device going. However, the Mouse House has already been making good progress with its own online distribution initiatives recently, including its ‘Keychest’ VOD service and ‘Watch Disney’ apps.

“Today, much of Netflix content is available on other services including pay-TV on-demand,” says Mr. Dixon. “Being the only place that consumers can find movies such as National Treasure, Pirates of the Caribbean, and Star Wars should help reignite subscriber growth.

“While the company may be able to increase prices somewhat in the short term, the only reliable way to remain healthy in the long run is through strong growth. “Can Disney content deliver that growth? I would say that [CEO] Reed Hastings is betting the company on it.”