Netflix, the DVD and online video subscription service, will this week try to bounce back from a torrid few months in which its shares have halved in value as it unveils a new streaming deal with DreamWorks Animation, the company behind the Shrek films.
The deal could be announced as early as Monday, according to people familiar with the situation. DreamWorks Animation is under contract with HBO, the Time Warner-owned cable channel, until the end of 2013 but has struck an agreement with Netflix that will allow the company’s streaming service to show some of its films before that time. Netflix will replace HBO as the company’s output partner when the HBO deal expires.
Netflix is keen to bolster its content library before February, when its contract ends with Starz, the cable channel that owns rights to stream movies by Walt Disney and Sony Pictures. Negotiations between Netflix and Starz broke down recently when the two sides could not agree a new price.
Netflix is aggressively pursuing other licensing agreements and is also in discussion with Warner Brothers about putting its television programming on the streaming service, according to people briefed on the situation.
Warner Bros, which is part of Time Warner, is the largest producer of TV programming in the US. The talks with Netflix cover teen-oriented shows such as Gossip Girl and Vampire Diaries, people familiar with the situation said. Warner Bros declined to comment.
Netflix last week struck a deal with Discovery Communications which gives it older programming from Animal Planet and the Discovery Channel. More deals are expected in the next few months as it seeks to restock its service before the Starz deal ends in February.
Netflix shares have tumbled since July, when it announced a 60 per cent price increase. The move angered many of its customers who began to cancel their subscriptions in higher numbers than Netflix had anticipated.
Investors were further spooked when Netflix adjusted its third-quarter guidance, saying it had underestimated by 1m the number of subscribers it expected to quit the service.
The anger intensified again last week when Netflix unveiled plans to split its business into two distinct entities, each with a separate management team. It has renamed its DVD business “Qwikster” and will operate it as a standalone business. Customers that want both the DVD and the streaming service will require two separate accounts.
Analysts have suggested that the separation could presage a sale of the DVD business but the company is adamant that it intends to keep it. However, its new investment in content is aimed at the streaming business, in a sign of the company’s confidence in its potential in the US and in international markets.
Netflix recently unveiled plans to launch the streaming service in 43 countries across Latin America and the Caribbean and plans eventually to take it to Europe.
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