Netflix has reportedly landed a deal to stream DreamWorks films in 2013, but the deal is just a small down payment on content library buildout.
The New York Times reported that Netflix has signed up Dreamworks away from HBO. But the deal doesn't start until 2013. As CNET News' Greg Sandoval noted the Netflix-Dreamworks combination is more spin than anything.
Rest assured you'll be hearing a lot more about Netflix deals whether they ultimately turn out to be spin or not. When it comes to content deals, Netflix may have to resort to that tech tradition of preannouncing products.
Why? Netflix has to keep you in the fold. The company is already struggling with its content library and needs to build it out. The problem is simple: The streaming service lacks the selection of the now separated DVD-by-mail offering, dubbed Quikster. Toss in a Starz deal that's about to run out and Netflix needs to add content fast---even if some of these licensing arrangements may be more than a year away.
All of these moving parts add up to an interesting sprint into 2012. Netflix has a customer crisis and needs to keep announcing content deals so you think there's a value. Content companies now that Netflix is in the corner and stand ready to collect royalties as the streaming movie service is forced to pay up.
Netflix CFO David Wells said last week that content costs will go higher. He said:
The terms of the deals that we're making are not in 10 and 15 years, they're two, three, four-year deals. So, to the extent that we grow, we fully expect to pay more to the content owner if we've doubled in size from what we originally did the deal. I mean, they deserve some participation upside in that and we fully expect that.