Netflix teams up with DreamWorks for animated partnership

Parents with Netflix rejoice—your kids’ favorite DreamWorks characters will soon be on demand. Yesterday, Netflix announced that beginning in 2014 it will offer new TV shows from DreamWorks Animation, describing the transaction as the biggest ever for original first-run content.

The multi-year agreement includes more than 300 hours of new TV episodes that could be worth several hundred million dollars over time. The deal is a win-win for both companies, helping Netflix compete with paid TV channels such as HBO and Showtime, and giving DreamWorks a potentially lucrative outlet for its shows as it relies less on some of its annual big-budget films.

Netflix is doubling down on original children's programming, hoping to strengthen its push to become a family entertainment brand. Viacom, the owner of Nickelodeon, dropped Netflix earlier this year. The new content should ease some of the pain of losing popular kids shows, including future episodes of Dora the Explorer, which Amazon.com snapped up for its streaming service in early June.

While premium paid TV channels such as HBO, Starz, and Showtime have historically tailored original shows to adults, Netflix has departed from the norm and focused on children’s programming. Netflix may be onto something: Family friendly movies fill up the top-50-highest-grossing films list, with few exceptions.

Netflix has 29.2 million streaming video subscribers in the U.S. and 7.1 million internationally as of the end of March—those figures are up 5.8 million and 4.1 million from a year ago. Netflix will continue to expand its children’s content by streaming Disney movies, starting with films released in 2016.

Tuna Amobi, a Standard & Poor’s equity analyst who covers both Netflix and DreamWorks Animation SKG Inc. said, “This is arguably a groundbreaking deal.” Many investors are in high hopes that this deal will help Netflix’s attempts to grow internationally. The partnership caused Netflix’s shares to rise 7.1 percent Monday. DreamWorks rose 4 percent.

Still, some investors expressed concern over the animated deal. Analyst Rich Tullo of brokerage firm Albert Fried & Co. said Netflix could lose 2 million subscribers from the loss of Nickelodeon. He said hit TV shows aren’t guaranteed, and it’s not clear that the DreamWorks transaction will make up for Netflix’s loss of Nickelodeon content or that DreamWorks has the capacity to produce more than one or two new series a year.

The longterm success of the DreamWorks-Netflix partnership depends on whether kids and parents like Casper the Friendly Ghost and Shrek as much as they like Dora the Explorer.

The Associated Press contributed to this report.