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Netflix says it won't raise prices after Disney deal

NEW YORK (Reuters) - Netflix Inc doesn't plan to pass along the cost of the rights to Walt Disney Co movies to subscribers, a senior Netflix executive said on Wednesday.
/ Source: Reuters

NEW YORK (Reuters) - Netflix Inc doesn't plan to pass along the cost of the rights to Walt Disney Co movies to subscribers, a senior Netflix executive said on Wednesday.

Netflix, which analysts estimate paid more than $350 million for the exclusive rights to stream Disney movies to TV beginning in 2016, is not considering a price increase to help finance the deal, said Ted Sarandos, the company's chief content officer, at the UBS Global Media and Communications Conference.

"We are not contemplating" raising the $8-a-month subscription fee for unlimited online viewing," Sarandos said during an interview with filmmaker Harvey Weinstein.

The deal gives Netflix streaming rights to movies from Disney's live-action and animation studios, including those from Pixar, Marvel, and Lucasfilm.

Netflix suffered from a consumer backlash and stock plunge after it announced an unpopular price increase in July 2011.

But Netflix's rising content costs have raised worries on Wall Street, with some analysts concerned that Netflix paid too much to get Disney's movies. Tony Wible, an analyst with Janney Montgomery Scott, estimated in a report that Netflix paid more than $350 million a year to secure the deal.

Sarandos called the arrangement with Disney a "game changer" that for the first time will bring new movies from a major Hollywood studio to an Internet-streaming service rather than a cable channel such as HBO or Showtime. Calling Disney a "near-perfect" media company, he said the two began discussing a deal before Disney acquired Lucasfilm and announced plans for new "Star Wars" movies.

Disney's movies will bolster one of Netflix's most popular types of content - animated children's movies, Sarandos said. Netflix had a previous deal to stream Disney movies through an agreement with Liberty Media's Starz network, which currently holds the exclusive rights to distribute new Disney films on TV.

"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," Sarandos said. "It's a nice, safe brand halo when you put your kid in front of an iPad."

Netflix would like to bring more, fresher content from other studios to its service, Sarandos said.

The agreement received applause from Weinstein, who called it "probably the biggest content deal in the history of our business." He joked he had used Netflix as a "babysitter" at times with his two-and-a-half year old child. "Moving into the family area is a very smart play in terms of you almost cornering the market," Weinstein said.

Sarandos said he had not heard any response to the deal from Carl Icahn, the activist investor who recently purchased a 10 percent stake in the company. Netflix adopted a poison pill defense to prevent a takeover.

"This relationship is pretty new," Sarandos said of Icahn. But he said Icahn has been "publicly and privately very supportive" of Netflix.

Netflix shares, which rose 14 percent when the deal was unveiled on Tuesday, gave some of those gains back in Wednesday trading. Its shares were down 2.8 percent, or $2.44, to $84.21 in early afternoon trading on the Nasdaq. Disney shares were up 35 cents, or less than 1 percent, to $49.63 on the New York Stock Exchange.

(Reporting By Lisa Richwine; Editing by Peter Lauria)