Full stream ahead as Netflix and Disney give a vision of the future

Multi-year deal will see online movie provider become exclusive US subscription service for the legendary studio. By Tim Walker
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The Independent Online

According to screenwriter Beau Willimon – whose new $100m drama series House of Cards will appear not on HBO or AMC, but on the web streaming service Netflix – "Streaming is the future. TV will not be TV in five years from now… everyone will be streaming."

Online viewing poses a growing threat to traditional US pay-per-view TV channels such as HBO, Starz and Showtime, home of Homeland.

And, in a new blow to those established outlets, Netflix has just cut a multi-year deal with Disney to become "the exclusive US subscription service" for the studio's movies, allowing it to distribute the Disney catalogue to the small screen as soon as seven months after cinema release.

The TV "pay window" is a crucial money-making moment for the movie industry, in which it can squeeze yet more dollars out of its box office successes – or flops – by broadcasting them to paying TV customers.

This marks the first time any major studio has side-stepped the premium TV channels in favour of subscription web streaming and Netflix bid big to unseat its traditional rivals: the size of the deal remains undisclosed, but analysts agree it is likely to set Netflix back at least $300m per year.

As the arrangement was announced on Tuesday, the firm's chief content officer Ted Sarandos called it "a bold leap forward for Internet television". Netflix, which claims 30m users worldwide, 25m of them in the US, already enjoys similar deals with smaller film studios such as Dreamworks and the Weinstein Company.

It will begin streaming classic Disney titles such as Dumbo and Alice in Wonderland as early as next week. From 2016, Netflix customers will have access to new features from not only the Disney slate, but also from those of Disney subsidiaries including Pixar and Marvel Studios, both of which have a record of rock-solid box office. Pixar's Finding Nemo 2, and Marvel's Dr. Strange, are both expected in cinemas that year.

In the future, the deal may even include future Star Wars instalments, given that Disney recently agreed to buy Lucasfilm for $4bn.

Like YouTube, whose selection of homegrown streaming channels grows apace, Netflix has turned to producing its own content.

Of the $2.1bn it expects to spend on content in the coming year, five per cent is earmarked for original programming. House of Cards, a glossy US remake of the BBC's 1990 mini-series, is being produced and part-directed by David Fincher, and stars Kevin Spacey as devious Washington power-broker Francis Underwood.

All 13 episodes will be made available for streaming on the same date, 1 February 2013, to satisfy the public appetite for binge viewing.Among the other original projects coming to Netflix are Hemlock Grove, a murder mystery serial by top horror director Eli Roth; a second run of Lilyhammer, Netflix's first homemade show, a black comedy about a New York mobster starting a new life in Norway; and a new series of the cult sitcom Arrested Development, which was cancelled by Fox in 2006.

Shares in Netflix rocketed 15 per cent on Tuesday after the Disney deal was unveiled. Launched in 1998 as an online DVD rental service, the California firm is one of the biggest successes of the dot-com era, but its recent fortunes have been mixed. In summer 2011, CEO Reed Hastings announced plans to separate the DVD rental business from Netflix's subscription streaming services, by launching a new DVD-by-mail subsidiary, Qwikster.

After bad press and a negative response from customers, who complained online in their thousands – including on the Netflix Facebook page – Hastings scrapped the plans, causing his company's stock to slump.

Netflix also failed to reach its stated goal of 7m new US subscribers for 2012, signing up less than half that number in the year's first three quarters.

In October, billionaire "corporate raider" Carl Icahn acquired 10 per cent of Netflix, and suggested it would be a prime target for a takeover by one of the major Silicon Valley firms – Microsoft, Amazon, Verizon – all of whom have launched their own, less popular streaming services.