Netflix, Relativity Media Bypass Pay-TV with New OTT Movies Deal

DVD rental/OTT video company, Netflix, and Relativity Media, the financing and production company behind such current-release movies as "Get Him to the Greek" and "Grown Ups," said Tuesday that they have signed a long-term agreement, under which major theatrically released films owned by Relativity will be licensed exclusively to Netflix for streaming to its subscribers on its "Watch Instantly" service during the pay-TV window (note: Netflix subscriptions that include the "Watch Instantly" service are priced from $8.99 per month). Until now, such films have been distributed via Relativity's studio releasing partners to premium TV channels such as HBO, Showtime and Starz.

Netflix is billing the deal as emblematic of "a continued shift in the distribution of major motion pictures in the US," adding that it means that "an increasing amount of popular contemporary movies previously encumbered by pay-TV agreements with premium channels such as HBO, Showtime and Starz will become available to be streamed from Netflix months--and not years--after their release on DVD." The company says that the deal marks the first time that studio-quality theatrical feature films will be streamed via its subscription-based service, instead of being broadcast by traditional pay-TV providers, and that it opens up a "new revenue stream" for such movies. "Our continued goal is to expand the breadth and timeliness of films and TV shows available to stream on Netflix," Netflix's chief content officer, Ted Sarandos, said in a prepared statement. "Historically, the rights to distribute these films are pre-sold to pay-TV for as long as nine years after their theatrical release. Through our partnership with Relativity, these films will start to become available to our members just months after their DVD release."

According to Netflix and Relativity, the first batch of movies covered by the deal includes "The Fighter," starring Christian Bale, Mark Wahlberg and Amy Adams, and distributed by Paramount Pictures, and "Skyline," co-directed by the Brothers Strause and released by Rogue Pictures and Universal Studios. Both films are scheduled for theatrical release later this year and for availability on Netflix early next year. Relativity claims to have financed, co-financed or produced over 200 features, which between them have generated over $13 billion in worldwide box office revenues. The company produces or finances 20 to 30 films a year and says that 10 or so "single picture" movies (i.e. movies that it is financing and producing on its own) are scheduled to be released over the coming year. "We have always been about finding new ways to grow and monetize our business," Relativity CEO, Ryan Kavanaugh, said in a prepared statement. "This clearly is a natural step in the evolution of the movie business and opens up a whole new world of revenue and marketing opportunities. Netflix has certainly made its mark, with a service that reaches over 13 million people and allows consumers to have what they want, when they want it. We have a shared vision, and this deal marks a significant change in our industry." Added Relativity president, Michael J. Joe: "Consumer demand and interest in new platforms are evolving nearly as quickly as the technology. The growing number of Netflix subscribers streaming first run movies is very exciting and presents another viable option for us to maximize the long-term business behind our properties. We're delighted to partner with them on this incredible new opportunity, which has great promise for our industry-reshaping pay-TV deals going forward."

According to the companies, the deal was negotiated by Relativity's president, Michael J. Joe, and its COO, Andrew Marcus, and by Netflix's VP of content acquisition, Robert Kyncl. (Note: The Wrap's Sharon Waxman, Deadline.com's Nikki Finke, and All Things Digital's Peter Kafka have different takes on how important the Netflix-Relativity deal is.)

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