Netflix to Stream Minor First-Run Movies

Netflix has signed a long-term agreement with the small movie studio Relativity Media to stream first-run films such as "Get him to the Greek" and "Grown Ups." The studio produces or finances 20 to 30 movies each year. The first of the films to be made available through Netflix streaming will be "The Fighter" (Christian Bale, Mark Wahlberg) and "Season of the Witch" (Nicholas Cage), both of which are set to release in theaters the first quarter of 2011.

The arrangement just allows Netflix subscribers to stream the movies online within a few months after the DVD release. This time period, when streaming is traditionally locked out, is known as the 'Pay TV Window.'

It's unknown whether or not this is entirely a big deal, especially given the limited nature of the agreement. Relativity Media is a relatively obscure film company in comparison to the big names and the majors studios don't seem all that interested in sidestepping their rather lucrative pay-TV deals. If the reported numbers we've seen are true, Netflix is supposedly paying Relativity up to $100 million per year for the rights to around 15 films. That seems almost ludicrous to us and certainly not anything that can be sustained at the higher levels required to handle content from the larger studios.

Netflix currently has over 10 million subscribers. At an average rate (our educated guess, not official figures) of $12/month, that brings about $1.44 billion per year in revenues. Based on what we've read in financial reports, the real number is a lot closer to $1.75 billion or more at present.

Since, typically, movies follow a DVD -> Pay TV -> Netflix progression, and pay TV companies offer big money for these extended time licenses to show newer films, Netflix has traditionally been left largely in the cold. Those who have used Netflix' streaming services for long realize that they mostly feature older movies and TV shows. Netflix does, however, pays Starz to stream films from studios like Disney and Sony throughout the pay-TV licensing period. The difference their deal with Relativity makes is that they replace the pay TV middleman altogether.

Given the existing model, it seems that Netflix has a big hill to climb before it will be viewed as a true streaming contender for current movies. Until then, companies like VUDU hold the lead with the pay-per view and cloud-storage "ownership" models. Once the industry moves further towards streaming and on-demand being the norm, something made more popular by the introduction of Hulu Plus and the upcoming GoogleTV, we may see these pricing models blink and companies like Netflix will, I'm sure, be there to pounce on any available opportunities.