Bloomberg News

Netflix Acquires CW Network Programming From Warner, CBS

October 13, 2011

(Adds Warner Bros. comment after online rights subhead)

Oct. 13 (Bloomberg) -- Netflix Inc., the online and mail- order video service, acquired streaming rights to TV shows from CBS Corp. and Time Warner Inc. that air on the CW Network, adding serialized programs that appeal to younger audiences.

The accord covers shows made through the 2014-2015 TV season, the companies said today in a statement. Netflix gets older programs and newer ones after they air. Financial terms weren’t disclosed. Mike Morris, an analyst at Davenport & Co., estimated CBS and Warner Bros. Television would each receive $30 million in the first year.

CBS Chief Executive Officer Les Moonves said CW’s “Gossip Girl” and “One Tree Hill” draw younger viewers who are more likely to watch on Netflix. The online service is adding shows as rights to newer films get harder to obtain. Starz LLC last month ended talks to provide Netflix with continued online access to movies from Sony Corp. and Walt Disney Co.

“The business of TV studios and networks has changed drastically in the past few years,” Moonves said in an interview. “In the business plan for CW, Netflix has become a significant piece.”

Netflix, based in Los Gatos, California, gained 3 percent to $117.01 at the close in New York. The shares have slid 33 percent this year. CBS, owner of the most-watched TV network, added 0.3 percent to $23.50 and New York-based Time Warner rose 0.2 percent to $32.98.

CW, owned by CBS and Time Warner, draws a smaller audience and advertiser base than larger networks, making reruns, DVDs, streaming and other revenue more important, Moonves said.

Program Revenue

The added revenue will lead to lower program amortization for the two companies and reduced losses at CW, boosting CBS’s 2012 profit by 5 cents a share and Time Warner’s by 3 cents, Morris wrote.

Netflix is gaining more than 700 hours of past seasons of CW shows in addition to the future programs, according to the statement. The company will have continued access to shows for four years after they end their broadcast run, according to the statement.

Netflix said last month it’s seeking to expand the number of TV shows available for streaming. The company is battling a subscriber backlash after raising prices by 60 percent for some customers, in part to fund more online content, and cut its third-quarter user forecast on Sept. 15.

Online Rights

Demand for online rights is increasing the value of TV libraries, Bruce Rosenblum, president of Warner Bros. Television, said in an interview.

“The value of our current product has increased because there are more buyers,” Rosenblum said. “When you are a studio like ours, with a vast library of content, the value only continues to grow along with these new distribution outlets.”

The CW shows are mostly serialized, making repeats less appealing to cable networks, Moonves said. Netflix will expose the shows to new viewers and allow fans to catch up on missed episodes, he said.

“This is part of ongoing relationship we hope to have with Netflix for many years,” Moonves said.

--Editors: Rob Golum, Anthony Palazzo

To contact the reporter on this story: Andy Fixmer in Los Angeles at afixmer@bloomberg.net

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


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