What Netflix’s Disney Deal Means For The Future Of The Company

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"What Netflix’s Disney Deal Means For The Future Of The Company"

Netflix’s attempts to develop original content has frequently been puzzling to me, given its focus on resurrecting dead masterpieces like Arrested Development, remaking masterpieces that don’t necessarily translate to new settings like House of Cards, keeping alive shows that no one really believed needed to be kept alive like Terra Nova. But its latest move, to outbid other competitors for Disney’s back and future catalogue, actually makes perfect sense to me:

The agreement is the first time one of Hollywood’s big studios has chosen Web streaming over pay television. Netflix has made similar “output” deals with smaller movie suppliers like DreamWorks Animation and the Weinstein Company. But all of the majors — Disney, Paramount, Universal, Warner Brothers, Sony and 20th Century Fox — have stayed with Starz, HBO or Showtime until now.

Library titles like “Dumbo,” “Alice in Wonderland” and “Pocahontas” will become available on Netflix immediately, Disney said. Netflix will begin streaming new release Disney films starting in late 2016, when the current accord with Starz expires. The deal announced on Tuesday includes direct-to-DVD movies…With the Disney deal, Netflix will be able to offer customers exclusive access to a pipeline of films that are reliably some of the year’s biggest box-office successes. Netflix has also made it a priority to strengthen its children’s and family offerings.

What’s smart about this is that it’s Netflix identifying an actual niche in the market. Hulu’s done this already in a lot of ways, doubling down on content that will appeal to serious television and film fans, whether it’s streaming foreign and foreign-language content like Hatufim, historical shows like Ironside, or even films from the Criterion collection. It’s true that Hulu is building its audience with a lot of tiny Legos, but the bricks in that wall don’t cost them a lot either, and it means they can easily adjust should one of those investments fail to pay off.

Investing in children’s and family programming is an unsexy way to build a firewall, but it’s an important one. Parents who want access to content for their children, but are worried about their youngesters wandering elsewhere in the cable lineup, or who don’t want to shell out cable prices when they only want some of the content, are a perfect audience for Netflix. And they’re a much clearer audience than whoever Netflix thought it was aiming Lillyhammer at. I don’t think it’s dumb for Netflix to experiment with original content. But until it figures out an actual successful strategy there, it makes much more sense to me for the company to spend $300 million a year on Disney content than for it to spend $100 million on 26 episodes of House of Cards

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