Netflix Deal With DreamWorks Shows Shift in Distribution

Netflix Inc. (NFLX)’s deal to obtain original programming from DreamWorks Animation SKG (DWA) signals the rising power of alternatives to major networks and studios for the distribution of movies and television shows, according to executives and investors in the media industry.

“The answers to Hollywood’s problems are not going to come from Hollywood,” Beth Comstock, chief marketing officer at General Electric Co. (GE), said at the Bloomberg Next Big Thing Summit in Half Moon Bay, California.

Comstock, who was previously president of integrated media at NBC Universal, was joined on stage by Barry Schuler, a partner at DFJ Growth Fund and former AOL Inc. chief executive officer, and Roger McNamee, co-founder of private equity firm Elevation Partners. All three agreed that traditional distribution channels like cable and satellite are being disrupted by on-demand services such as Netflix that are available on a variety of mobile devices.

The multiyear agreement with DreamWorks is the biggest deal Los Gatos, California-based Netflix has ever signed for original content, the company said. It gives Netflix access to new series from the creators of franchises such as “Shrek” and “Madagascar,” adding to a growing stockpile of exclusive video with more than 300 hours of new programming.

`Disrupted Rapidly'

Advancements in technology and distribution are beneficial to smaller studios, which can reach consumers in new ways, said Schuler. They still have to figure out how to make money though, he said.

“We are in a period where we are seeing the traditional media model being disrupted rapidly,” said Schuler.

McNamee, who previously helped start investment firm Silver Lake Partners, said that the sports networks, namely ESPN, are losing exclusive rights to top sports as more consumers turn away from cable and purchase the games to watch on smartphones and tablets.

“Instead of wasting money on cable, you just buy the ones you really want,” McNamee said. He acknowledged that cable isn’t going away because it remains “the pipeline for the Internet.”

To contact the reporter on this story: Ari Levy in San Francisco at alevy5@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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