HBO renews Universal film deal, one less studio for Netflix

HBO locks up the studio's movies well into the next decade. Anyone hoping Netflix might offer films from more of the top studios during the pay-TV window should probably lower expectations.

Time Warner isn't about to let Netflix do to HBO what it did to Starz and grab away one of it's pay-TV deals with a major film studio. Photographed is the Time Warner Center in New York. Greg Sandoval/CNET

HBO has locked up the pay-TV rights for films from Universal Pictures, one of the top six Hollywood film studios, the company's said today.

HBO, owned by Time Warner, and Comcast-controlled Universal, said they extended their licensing agreement into the next decade. HBO will continue to own exclusive access to the movies during the pay-TV window -- the period that begins after movies are made available for sale on download and discs.

The deal limits Netflix's ability to land another big licensing agreement similar to the one it entered into with Disney late last year. A month ago, Netflix announced its most significant content deal in years when it acquired the exclusive pay-TV rights to Disney's films beginning in 2016. Netflix became the first Internet-subscription video service to get those kind of rights.

A Netflix spokesman declined to comment for this story.

The Disney pact not only gave Netflix instant credibility as a serious challenger to HBO and the power players in pay-TV, but it also lent credence to the notion that Netflix can still turn the home-video market on its head.

Netflix is selling a dream to subscribers and Wall Street. The company offers unlimited Internet streaming of tens of thousands of movies and TV shows for the monthly price of $8. Nobody offers as much video for as little money. The result is that Netflix could force cable-TV providers to lower their fees. Scores of consumers have already replaced their cable with Netflix. Netflix's strategy hinges on whether the company can obtain enough of what subscribers what to watch.

But Netflix's chances of landing another major film deal in the pay-TV window are falling. Here's a tally of where the top studios promised their movies: HBO has Warner Bros., NBC Universal, and Fox, which represents about 50 percent of the market. Netflix gets Disney in years. Epix, another pay-TV service, has a deal with Paramount but licenses Internet rights on a non-exclusive basis to Netflix and Amazon .

That leaves Sony Pictures. That studio is still committed for a couple years to Starz, the pay-TV service that once licensed Internet rights from Sony Pictures and Disney to Netflix. The Netflix-Starz agreement ran out last year and now that Netflix snatched Disney it's likely that Starz is not going to let Sony Pictures go easily. Some analysts have questioned whether can even afford to sign another major studio. These deals are not cheap.

What's the value of all these films? Ever since losing the Starz deal, Netflix has downplayed the importance of movies to its service. The company has suggested that subscribers were more inclined to watch TV shows but for HBO the opposite is true. The company said today that feature films from Hollywood make up 84 percent of viewing.

That's a surprising statistic considering all the serials and films HBO produces itself. Call me crazy but I suspect that after losing Starz, Netflix was doing damage control. The estimates are that CEO Reed Hastings paid dearly for Disney's movies. Why do that if nobody wants to watch them?

 

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