Netflix and Relativity Media Announce Groundbreaking Deal to Stream First Run, Studio Quality Theatrical Movies to Netflix Subscribers

Agreement Marks Big Shift in Film Distribution - First Time Content is Made Available for Subscription Streaming, Bypassing 'Pay TV'

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Netflix, Inc.

Jul 06, 2010, 03:01 ET

LOS ANGELES, July 6 /PRNewswire-FirstCall/ -- Netflix, Inc. (Nasdaq: NFLX) and Relativity Media, LLC today announced a long term agreement through which major theatrically released films owned by Relativity will be licensed directly and exclusively to Netflix for streaming to its subscribers during the "pay TV window." Traditionally, these films have flowed through Relativity's studio releasing partners to output deals with premium TV channels.

The deal marks a continued shift in the distribution of major motion pictures in the U.S. Under the agreement, an increasing amount of popular contemporary movies previously encumbered by pay TV agreements with premium channels such as HBO, Showtime and Starz will become available to be streamed from Netflix months – and not years – after their release on DVD. It will be the first time that studio quality theatrical feature films will be streamed via subscription by Netflix instead of being broadcast by the traditional pay providers, and it opens up a new revenue stream for such movies.

Among the first wave of films covered under the Netflix-Relativity deal are "The Fighter," starring Christian Bale, Mark Wahlberg and Amy Adams and distributed by Paramount Pictures, and "Skyline," co-directed by the Brothers Strause and released by Rogue Pictures and Universal Studios. Both films are scheduled for theatrical release later this year and to be available at Netflix in early 2011. Also on tap for Netflix are Rogue Pictures' Nicolas Cage action/thriller "Season of the Witch" and "Movie 43," written and directed by Peter Farley. Both are set to hit theaters this year as well.

Relativity has financed, co-financed or produced more than 200 features, generating more than $13 billion in worldwide box office revenue. Fifty Relativity films have become "Top 10" box office releases during the past two years. Current Relativity theatrical releases include "Robin Hood," "Get Him to the Greek" and "Grown Ups." Relativity produces and/or finances between 20 and 30 pictures a year, and it has more than 10 "single picture" movies – films it is financing and producing fully – that are scheduled to be released over the next 12 months.

Broadening the range and appeal of content available for Netflix members to watch instantly is among the company's top priorities, and the agreement with Relativity is a meaningful step in building the company's streaming offer.

"Our continued goal is to expand the breadth and timeliness of films and TV shows available to stream on Netflix," said Ted Sarandos, chief content officer for Netflix. "Historically, the rights to distribute these films are pre-sold to pay TV for as long as nine years after their theatrical release. Through our partnership with Relativity, these films will start to become available to our members just months after their DVD release."

Added Mr. Sarandos: "Relativity has produced and financed some of the biggest and best films released in the last few years. We are thrilled to partner with them on their exciting upcoming slate of films and to be part of each other's ongoing success."

"We have always been about finding new ways to grow and monetize our business," said Ryan Kavanaugh, Relativity's CEO. "This clearly is a natural step in the evolution of the movie business and opens up a whole new world of revenue and marketing opportunities. Netflix has certainly made its mark, with a service that reaches over 13 million people and allows consumers to have what they want, when they want it. We have a shared vision, and this deal marks a significant change in our industry."

"Consumer demand and interest in new platforms are evolving nearly as quickly as the technology," said Michael J. Joe, Relativity's president. "The growing number of Netflix subscribers streaming first run movies is very exciting and presents another viable option for us to maximize the long-term business behind our properties. We're delighted to partner with them on this incredible new opportunity, which has great promise for our industry-reshaping Pay TV deals going forward."

The deal was negotiated on Relativity's behalf by Mr. Joe and Andrew Marcus, the company's chief operating officer, and on behalf of Netflix by Robert Kyncl, the company's vice president of content acquisition.

About Netflix

With more than 13 million members, Netflix, Inc. (Nasdaq: NFLX) is the world's largest subscription service streaming movies and TV episodes over the Internet and sending DVDs by mail. For $8.99 a month, Netflix members can instantly watch unlimited TV episodes and movies streamed to their TVs and computers and can receive unlimited DVDs delivered quickly to their homes. With Netflix, there are never any due dates or late fees. Members can select from a growing library of titles that can be watched instantly and a vast array of titles on DVD. Among the large and expanding base of devices that can stream movies and TV episodes from Netflix right to members' TVs are Microsoft's Xbox 360, Sony's PS3 and Nintendo's Wii consoles; Blu-ray disc players from Samsung, LG and Insignia; Internet TVs from LG, Sony and VIZIO; the Roku digital video player and TiVo digital video recorders, and Apple's iPad tablet. For more information, visit http://www.netflix.com.

About Relativity Media, LLC

Relativity Media, LLC is a media and entertainment company that focuses on creating, financing and distributing first class, studio-quality entertainment content and intellectual property across multiple platforms, as well as making strategic partnerships with, and opportunistic investments in, media and entertainment-related companies and assets. Relativity owns and operates Rogue, a company that specializes in the production and distribution of lower-budget genre films, which has had particular success within the horror genre with films including The Unborn and The Strangers. Building upon its foundation of financing and producing films, Relativity has grown to include music, sports and television divisions and the next-generation social network iamrogue.com. Relativity also owns and operates RelativityREAL, Relativity's television arm, which has become one of the leading suppliers of reality television with more than 20 shows in episodic or pilot. RelativityREAL is run by Tom Foreman; his past successes include Extreme Makeover: Home Edition and Kid Nation.

To date, Relativity has committed to, produced and/or financed more than 200 studio-quality motion pictures through 2014. Released films have accumulated more than $13.0 billion in worldwide box office revenue. Relativity's recent films include Dear John, Brothers, The Wolfman, It's Complicated, Zombieland, Couples Retreat, The Bounty Hunter and, most recently, Get Him to the Greek, Robin Hood and Grown Ups. Upcoming films for Relativity include The Fighter, Despicable Me, Charlie St. Cloud, Salt, Nanny McPhee 2, The Social Network as well as James Cameron's Sanctum in 3D and Wes Craven's My Soul To Take in 3D. Twenty-nine of the company's films have opened at No. 1 at the box office. Relativity films have earned 43 Oscar® nominations, including nods for Nine, A Serious Man, Frost/Nixon, Atonement, American Gangster and 3:10 to Yuma. Forty-eight of Relativity's films have each generated more than $100 million in worldwide box-office receipts.