Netflix Buys Pay-TV Rights to Sony Animated Films

Starz's agreement with studio carved out animated pics, which will come to Netflix starting with 'Cloudy with a Chance of Meatballs 2' now and 'Smurfs 2' later in 2014

Cloudy with a Chance of Meatballs

Netflix has reached a multiyear deal with Sony Pictures Television for U.S. pay-TV window rights to the studio’s animated films, starting with “Cloudy With a Chance of Meatballs 2,” while Sony’s other feature films will remain with Starz through at least 2021.

Starz renewed its output deal with Sony last year, and under that agreement, the premium cabler agreed to carve out the animated films for distribution to another platform. Starz remains the exclusive pay-TV home of Sony Pictures Entertainment feature titles through 2021, the companies said.

Netflix’s addition of “Cloudy With a Chance of Meatballs 2” to its streaming service was pointed out in a research note by Janney Capital Markets analyst Tony Wible. The development is “an incremental positive for Netflix and incremental negative for Starz,” he wrote, because his assumption had been that Starz would have rights to the animated features until the new output deal with Sony commenced in 2016.

Sony Animation Pictures’ “Smurfs 2” will be added to the Netflix SVOD service later in 2014. Starz retains rights to previous Sony animated pics, including “Hotel Transylvania” (which debuted on Starz in May 2013 and is currently in rotation on the programmer’s Encore services).

The studio’s upcoming animation slate includes a third, as-yet-untitled Smurfs movie, expected in theaters August 2015; “Hotel Transylvania 2,” scheduled for September 2015; and a CG version of “Popeye.”

For Netflix, the deal for Sony’s animated titles will add just one or two films per year. On the kids’ front, the SVOD service also has exclusive deals for programming from Disney — including future theatrical releases from Pixar and Disney Animation starting in 2016 — and DreamWorks Animation. Previously, Netflix had access to Disney and Sony content under its 2008 licensing deal with Starz, which rolled off in 2011.

“We believe the younger demographic is an important element of Netflix’s long-term strategy as they condition future generations to use the platform as they mature,” Wible wrote.

Starz has been increasingly emphasizing original series, such as “Black Sails,” “Da Vinci’s Demons,” “Outlander” and “Flesh and Bone.”

Sony’s animation deal with Netflix “marks another loss (for Starz) but shows that the network is firmly committed to its new growth strategy around niche content and originals,” Wible wrote. The carve-out for Sony animated films may give Starz up to $35 million per year the cabler could reinvest into a new original series, the analyst estimated.