"Though money seems to have been the prime factor in Walt Disney Co.’s DIS pact to make Netflix Inc. NFLX +3.78% its pay-TV provider for first-run theatrical films starting in 2016, the move is radical enough to make observers wonder if the deal has broader implications for premium cable channels.
The Los Angeles Times, citing an unnamed source close to the situation, reported that Netflix could be paying as much as $300 million per year under the terms of the deal, a price tag that was apparently too high for Starz LMCA +0.15% .
In an interview Wednesday, S&P Equity Research analyst Tuna Amobi said the Disney-Netflix agreement was a surprise. “Anytime you have a major studio doing something that ‘s a major departure like this, it’s significant. Especially with Pixar and Marvel in the mix. But then again, you’re talking about a company that has blazed trails in many digital areas, so if anyone was going to do it, it would be Disney.”
It is too soon to assume that Disney’s decision stemmed from concerns that significant numbers of cable customers will have chosen to ditch traditional pay-TV services over the next three years, Amobi said. It is valid to note, however, that the audience for premium channels like Starz, Encore, Cinemax and others has probably “plateaued.””