Analyst: Netflix Content Costs to Top $1.9B by 2012

Netflix's streaming content license fees are projected to increase at least $500 million this year from $180 million in 2010 - more than wiping out much-ballyhooed savings from reduced disc postage and distribution costs, an analyst said. Michael Pachter, with Wedbush Securities in Los Angeles, said the exponential rise in Netflix's license fees revolve around recent benchmark content deals completed with pay-TV channel Epix and The Walt Disney Co. He estimates Netflix will pay Epix $190 million annually during five years for repurposed movies from Epix co-owners MGM, Lionsgate and Paramount - available 90 days after initial broadcast. Pachter expects Netflix to shell out $150 million to $200 million annually for a renewed deal with Starz Entertainment - with the current $30 million per year agreement set to expire in this fall. The analyst believes Netflix will pay on average more than $107 million per year per studio for repurposed movies from Walt Disney Studios Home Entertainment, 20th Century Fox Home Entertainment, Universal Studios Home Entertainment, Warner Home Video and Sony Pictures Home Entertainment. He says Netflix will pay even more for TV content, with separate studio deals ranging from $100 million to $200 million per year. Pachter says Netflix will realize about $200 million in reduced postal fees after 2012.

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