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Disney's ABC reaches $200 million streaming deal with Netflix [Updated]

December 8, 2010 | 10:01 am

The Walt Disney Co. has reached an agreement with Netflix Inc. that allows the rapidly growing subscription service to stream television shows from the ABC network, Disney Channel and ABC Family, signaling Netflix's growing clout as a distributor of programming over the Internet.

The deal is worth an estimated $200 million, according to one person with familiar with the matter.[Update, 3:25 p.m.: The deal is for one year and will be worth between $150 million and $200 million, the person added. It includes an option to extend the license.]

The Disney licensing arrangement would significantly broaden the entertainment options available to Netflix subscribers, allowing them for the first time to watch previous seasons of a number of ABC shows including "Grey's Anatomy," "Brothers & Sisters," and "Ugly Betty." In addition, Netflix will add the final season of "Lost," for which it previously streamed the first six seasons.

The video service will also have shows from the ABC Family and Disney Channel networks, including some shows that initially aired as recently as 15 days prior.

“Television content is continuing to grow for us and is now equally popular with our customers in terms of hours watched as movies,” said Ted Sarandos, Netflix’s chief content officer.

The ABC/Disney deal comes after prior deals for television content struck by Netflix this year with NBC Universal and Warner Bros.

The agreement would appear to heighten the rivalry between Netflix and Hulu, the online streaming service in which Disney is a part owner.  Both services are vying for subscribers who want the flexibility to watch television shows and movies on a variety of devices, whenever the mood strikes them.

Netflix is increasingly looking like a mainstream cable network willing to pay syndication fees for rights to distribute content. It paid $50,000 to $150,000 per episode to distribute ABC and cable television shows, the person familiar with the situation said.

The deal is bound to increase anxiety among cable, satellite and telecommunications companies, which pay a premium for ABC and cable shows. These traditional TV distributors are privately worried about the threat of so-called "over-the-top" services, which allow viewers to pay nominal sums to watch mainstream programming. 

Netflix, once best known for distributing DVDs by mail in its trademark red envelopes, is attracting a growing number of paying customers to its online streaming service. These subscribers pay as little as $7.99 a month for unlimited access to movies and TV shows. It currently has 16 million customers.

-- Dawn C. Chmielewski and Ben Fritz

[Updated at 11:16 a.m. to include information on what shows will be available and when via Netflix and to add Sarandos' quote. A previous version of this post incorrectly said that new "Grey's Anatomy" episodes would stream on Netflix within 15 days of airing.]

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