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Netflix acquires streaming rights to Disney films

Netflix, the online video service, signed a multiyear accord to carry Walt Disney films, marking the first time a major studio has bypassed traditional cable-TV outlets.

The agreement starts with movies released in 2016, the companies said Tuesday, without disclosing terms. Netflix will replace Liberty Media's Starz Entertainment when its output deal with Disney expires in 2015. Netflix surged the most since January while Liberty Class A tumbled.

The deal is a coup for Netflix Chief Executive Officer Reed Hastings, who faces emerging competition in online video and pressure for a sale of the company from activist investor Carl Icahn. U.S. subscribers of Netflix will get access to movies from Disney, including its Pixar and Marvel releases, as soon as seven months after they open in theaters, a time frame traditionally reserved for premium pay-TV channels like Starz.

"It was a long slog, but ultimately we displayed enough sustainability that Netflix became a real and viable option for the pay-TV window," Ted Sarandos, the video service's chief content officer, said in an interview.

Netflix, based in Los Gatos, Calif., surged 14 percent to $86.65 at the close in New York, more than doubling its year-to-date gain. Liberty Media, based in Englewood, Colorado, slid 4.9 percent, the most since May 17, to $105.56. Disney, the world's biggest entertainment company, was little changed at $49.30.

The Disney accord separately gives Netflix immediate access to older classics such as "Dumbo," and new direct-to-video releases in 2013. The company doesn't gain movies from "Star Wars" creator Lucasfilm Ltd., which Disney is buying for $4.05 billion and doesn't yet own, according to Jonathan Friedland, a Netflix spokesman. He declined to say whether they would be included later.

Netflix probably agreed to pay in excess of $350 million a year for Disney's movies, estimates Tony Wible, an analyst with Janney Montgomery Scott in Philadelphia.

For Netflix, with 30 million users worldwide, the Disney agreement extends its lead over competing video services from and Verizon Communications Inc. and Coinstar's Redbox Instant, which is set to begin public testing this month.

Netflix is adding exclusive programs such as "Lilyhammer" and "House of Cards" as it seeks earlier and fuller home-video access to studio movies for its customers.

"This is a big win for Netflix," Jaison Blair, an analyst with Telsey Advisory Group in New York, said in a telephone interview.

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