If you're a Disney fan trying to fill your Netflix streaming queue, you don't have many exciting choices. Marvel's The Avengers movie rolled off the service last year. That leaves mostly catalog movie content available to stream. Sure, Disney'sDumbo is a real classic. But it doesn't have the same appeal as when it premiered back in 1941.
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That stale selection will start to change in a big way on April 10. That's when Disney and Netflix take their relationship to the next level with the launch of Marvel's Daredevil series. Daredevil is the first piece of exclusive Disney content to hit Netflix's servers. And it's just the start of a huge partnership between the world's biggest streaming service and The House of Mouse.
Let's make a dealIt's been almost four years since the companies announced a pact that made Netflix the exclusive streaming outlet for movies from all of Disney's content studios (Pixar, Marvel, Disney, Disney Nature, LucasFilm, and Disney Animation) starting in 2016. The deal ramps up over a period of three years. Netflix got catalog Disney movies in 2013 and an exclusive season of the animated series Star Wars: The Clone Wars in 2014. This year, members are treated to Daredevil, which is the first of four Marvel character TV series coming to Netflix.
And then the fireworks really get started. Beginning next year, Disney theatrical releases are headed to Netflix during the "Pay 1" window. That means the films will hit that streaming service, exclusively, just a few weeks after finishing their runs at the box office.
How things have changedWhen the deal was announced in late 2012, Netflix had 30 million streaming subscribers, compared to 60 million today. Its global footprint consisted of just 5 million members outside of the U.S. It has 20 million international subscribers now.
And Netflix had $750 million in cash on the books back then, which would represent just over twice the rumored $300 million that the Disney deal cost. Netflix has a more comfortable $1.6 billion of cash right now.
And Disney's studio business has grown substantially since this deal was inked. The biggest surprise has been Frozen, which trounced 1994's The Lion King and is the highest-grossing animated film of all time. Disney's studios are firing on all cylinders. We can expect two Pixar movies in 2015, multiple Marvel blockbusters, and Star Wars: Episode VII in December. Those hits won't be covered under this deal, but the next crop will. And Frozen fans can hold out hope that the film's sequel will be premiering on Netflix shortly after it cleans up at the box office.
More than a distributorDisney CEO Bob Iger said when the deal was announced that Netflix was "a perfect place for our product to be distributed." One reason was that the streaming giant was willing to write a huge check. "They stepped up and paid the right price," Iger said.
Now the question is whether Netflix can get enough value from the new Disney content to justify the cash commitment. That value will come in the form of a faster-growing member base and a bounce in average streaming hours for existing members. Closing in on 40 million subscribers, Netflix is close to saturating the U.S. market. So it needs exclusive deals like these to keep the member base marching higher.
As for Disney, it will see a Netflix-funded sales boost starting next year, with the biggest inflows coming in 2018 and beyond. But the company is also hoping the Netflix platform can launch a few unknown properties into real global franchises. If this deal plays out anything like that, then investors can expect Disney and Netflix to get even closer in the future.
The article Why April 10 is Huge for Netflix Inc. and Walt Disney Co Investors originally appeared on Fool.com.
Demitrios Kalogeropoulos owns shares of Netflix and Walt Disney. The Motley Fool recommends Netflix and Walt Disney. The Motley Fool owns shares of Netflix and Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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