Disney Made a Horrible Mistake
I haven't said a whole lot about the implications for Disney. That doesn't mean they're not interesting.
Even though the groundbreaking part doesn't begin until 2016 -- who knows what type of shape Netflix will be in at that point -- this is still big. Disney will provide first-run motion pictures to Netflix, an online streaming company, not a traditional premium pay-cable service.
In one respect, you can say it's all about Disney seeing the future: An on-demand world where "everybody" has Netflix streaming on their smartphones, tablets, computers and, maybe more importantly, their Internet-connected television sets. Sales of televisions that link with services such as Netflix continue to increase alongside streaming players like Apple (AAPL) TV and Roku.
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And there's no question that Disney fleeced Netflix on this deal. It depends who you believe, but the estimates range between $200 million and $300 million per year. They could be higher.
To this point, content providers -- big companies such as CBS (CBS) -- bragged about padding revenue and juicing profits by only licensing Netflix (and Amazon.com (AMZN) ) content scraps. In other words, small, leftover portions of their catalogs they could not monetize through advertising or other worthwhile means.
That started to change just a little as Netflix became a more important outlet for popular cable series such as Mad Men. Put a notch on the bedpost for the company here -- Netflix established itself as a driver of ratings for cable. You discover past seasons of a show through your streaming plan and start watching fresh episodes as they air on cable.
Disney takes Netflix to a whole 'nother level. If Netflix can duplicate this type of deal multiple times -- and stay solvent -- look out.