Shares of Netflix (NASDAQ:NFLX) are moving higher after another content deal that won't kick in for several more years.
Starting with its 2016 releases, Netflix will be the exclusive stateside U.S. subscription service to stream first-run titles by TWC and Dimension Films during the pay TV window, when movies become available to the premium movie channels.
Netflix is already the streaming home for the studio's foreign films and documentaries, so it isn't a surprise to see this relationship expand.
Netflix is buying the invisible here, naturally, but there's no denying that the Weinstein brothers have a knack for putting out magnetic and critically acclaimed fare. The only question mark here would be why we have to wait three years for this deal to kick in, but that's the nature of these multi-year deals that are negotiated years in advance.
In the past, one could have argued that locking up content early was in Netflix's best interest. The now-expired Starz (NASDAQ:STRZA) deal was great for Netflix, because it was drawn up when Netflix was much smaller. It put Netflix on the map as a streaming hub for first-run movies from three major studios. When it came time to renew, Starz presumably wanted more than Netflix was willing to pay.
Locking up what should be a solid slate of content now would seem to be cheaper now than it will be when Netflix is much bigger in a few years. However, at what point will the tables turn? At what point will it get cheaper for Netflix to wait?
Right now, Netflix doesn't really have a lot of competition on the premium streaming end. Amazon.com (NASDAQ:AMZN) is as close as one can get, but it's not as feisty and aggressive with its Prime Instant platform as it is elsewhere in its cutthroat operations. Would a studio really hook up with Amazon -- or anyone other than Netflix -- on a multi-year streaming deal that involved exclusivity?
However, it may also now be in Netflix's best interest to wait. The same studios that wanted more money because Netflix was reaching a larger audience may now need Netflix more than ever because it is the only way to reach that kind of sizable audience for a streaming product. This is becoming more important when it comes to television shows, especially current ones, where availability through Netflix results in a spike in viewer ratings. However, there will come a time when content providers will have to settle for less to reach Netflix's growing base instead of forcing the streaming giant to shell out more for licensing rights.