Netflix Outperformance Affirms Harvey Weinstein's Vision of Hollywood
NEW YORK (TheStreet) -- It is only fitting that in a year when the formula for generic summer blockbusters failed and led to losses at studios like Sony Entertainment
After striking an exclusive licensing deal on Tuesday, Netflix and The Weinstein Company are building businesses and alliances that champion hand-selected content and tailored experiences for a sophisticated media audience. The deal comes as large motion picture studios and near-monopolistic cable companies work to defend a status quo where formulaic movies are shoved down consumers' throats and resold to rent-seeking cable channels that profit from inefficient and expensive pay-TV packages.
It has been a surefire investment, as cable companies like Time Warner Cable
Netflix, as it builds new movie industry habits and relationships, has left the old guard in the dust this year.
Harvey Weinstein, co-founder of The Weinstein Company (TWC), predicted such an outcome. It is no surprise that his independent and Oscar-winning studio, burned many times in the past by Hollywood's old guard, is now allying its fortunes with a media industry insurgent like Reed Hastings of Netflix.
Investors should take notice. The ground may quietly be shifting in Hollywood.
On Tuesday, TWC said it will make Netflix the exclusive carrier of its first-run films in the U.S. beginning in 2016. New films will be made available for Netflix members to watch instantly on the streaming service.
For Netflix, the deal may bolster its offering of high-quality movie content for adults, after the company's recent deals with Disney and DreamWorks Animation
Netflix shares currently stand at $271.68, a gain of nearly 200% in 2013, and within reach of the company's record highs hit in mid-2011.
Around December of 2012, Netflix, one of the most loved and hated stocks in the S&P 500, may have finally proved skeptics of the company's business model wrong.
Shares in the company were toiling near multi-year lows even after billionaire activist investor Carl C. Icahn took a 10% stake in the company. Netflix's stock had sold off sharply after it ended a content agreement with Starz
Some analysts and Wall Street commentators took both failed deals as an indication that Netflix was getting outbid on content and couldn't afford to maintain its streaming library. Would Netflix lose subscribers and fall into a death spiral, many wondered, even after Icahn took his stake in October of 2012?
Then on Dec. 4, Netflix reached an exclusive deal with Disney to stream the company's first-run movie offerings, which now contain traditional Disney movies, along with Pixar, Marvell and Lucasfilms movies.
In came Harvey Weinstein.
At a media conference put on by Swiss banking conglomerate UBS at the Grand Hyatt in Manhattan on Dec. 5, Weinstein hosted a panel with Ted Sarandos , Netflix's Chief Content Officer, where he pressed for an explanation on Netflix's content strategy.
"Host" may actually be the wrong word. Weinstein spent much of the panel sounding off to an audience of Wall Street analysts and investors, telling them they had completely misunderstood Netflix.
Investors who sold the company's shares when it terminated relationships with content intermediaries like Starz and Epix were now sitting in a hotel ballroom listening to Sarandos explain a new path forward for Netflix in its relationship with motion picture and TV studios. Netflix had bagged the biggest streaming content deal in the history of over-the-top media and its shares were rising more than double digits.
"That Starz deal, when you didn't renew