Netflix Said to Be in Talks on Streaming Rights With DreamWorks Animation

DreamWorks Animation SKG Inc. (DWA) is in talks to offer Netflix Inc. (NFLX) exclusive streaming rights to its films, replacing a pay-TV accord with HBO, a person with knowledge of the situation said.

An agreement may be reached as soon as this week, said the person, who declined to be identified because the discussions are continuing. Both companies plan to report quarterly results this week and have scheduled conference calls with investors.

An exclusive accord would underscore the growing importance of Internet streaming to studios, which have seen U.S. DVD sales tumble. Netflix has signed digital distribution deals giving its streaming service films from Viacom Inc.’s Paramount Pictures, Lions Gate Entertainment Corp. (LGF) and Miramax.

DreamWorks Animation, maker of the “Shrek” films, has a contract to deliver movies to Time Warner Inc. (TWX)’s HBO through 2014, according to a Feb. 25 regulatory filing by the Glendale, California-based company.

HBO, which has added Summit Entertainment films to its premium-cable programming, has agreed to allow DreamWorks out of the contract two years early, said a person with knowledge of the situation who wasn’t authorized to speak publicly. This would give Netflix access to DreamWorks releases from the beginning of 2013. The Hollywood Reporter reported the HBO development earlier.

Shannon Olivas, a spokeswoman for DreamWorks Animation, declined to comment, as did Steve Swasey, a spokesman for Netflix.

‘Shrek,’ ‘Madagascar’

Netflix, based in Los Gatos, California, raised prices by 60 percent this month for U.S. subscribers who want both mail- order and streaming services, citing the costs to acquire and deliver films and TV shows. The company’s more than 23 million subscribers will pay $15.98 monthly beginning Sept. 1 if they choose both options or $7.99 for just one.

DreamWorks Animation, led by Chief Executive Officer Jeffrey Katzenberg, announced in March its release plans for films scheduled through 2014. They include “Puss In Boots” in November, “Madagascar 3 and ‘‘Rise of the Guardians’’ next year, three films in 2013 and two in 2014.

Since 2007, Netflix CEO Reed Hastings has increasingly focused on delivering movies and television shows via the Web to televisions, set-top boxes and mobile devices. Those include Microsoft Corp.’s Xbox player and directly to some TV sets.

DreamWorks Animation rose 18 cents to $21.05 on July 22 in Nasdaq Stock Market trading. The shares have declined 29 percent this year. Netflix rose 77 cents to $276.58 and has gained 57 percent in 2011.

To contact the reporter on this story: Ronald Grover in Los Angeles at rgrover5@bloomberg.net

To contact the editor responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net

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