Netflix cuts a deal to run CW episodes

The embattled company is still spending, despite angering customers with some bizarre business decisions recently.

By Kim Peterson Oct 13, 2011 4:34PM
Cash flow problems? Ha! Netflix (NFLX) doesn't see it that way.

The company has struck another pricey deal to add more shows to its video-streaming library. This time, Netflix gets more than 700 hours of old episodes that ran on The CW Network.

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The cost? Netflix could pay more than $1 billion over the next decade to the CW's co-owners: CBS(CBS) and Time Warner (TWX). Netflix will pay for each episode, and the price will range from $150,000 to more than $700,000, reports The Wall Street Journal. "Gossip Girl" will cost a little more than $700,000 because it's in its fifth season.

Shows from the CW are not available on Hulu.com. Netflix shares rose nearly 3% Thursday to close at $117.01.

But even in this deal, Netflix runs up against a wall that has frustrated customers: Current-season episodes won't be available right away. Everything running on the CW this season will only be available in fall of 2012.

And for future seasons -- Netflix gets the rights through the end of the 2015 season -- subscribers still must wait until the end of the season to see episodes.

This is one of Netflix's most expensive deals. Last year, the company agreed to shell out $900 million over five years for films from Paramount, Lions Gate and MGM. But since the CW agreement spans 10 years, it is cheaper on a per-year basis.

So is the CW crowd really worth $1 billion to Netflix? The company has been furiously grabbing the rights to some of the hottest shows on television, including "Mad Men," "Breaking Bad" and "Walking Dead." CW skews to younger viewers, which are a major advertising demographic.

The CW deal comes after a miserable few months for Netflix. The company enraged customers with pricing changes and with a now-reversed plan to split off the by-mail DVD business into a separate entity called Qwikster.

About 1 million of the 25 million subscribers fled the service -- more than some analysts expected. Investors have lost their faith in Netflix, as evidenced by the stock's deep dive.

Can Netflix rebuild? The company clearly has no problem cutting big deals in the middle of all this turmoil. Netflix is moving full speed ahead -- with or without shareholder support.

Tags: cbsNFLX
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