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Netflix outbids pay TV for rights to Disney movies

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SAN FRANCISCO — Netflix's video subscription service has trumped pay-TV channels and grabbed the rights to show Disney movies shortly after they finish their runs in theaters.

The multiyear licensing agreement announced Tuesday represents a breakthrough for Netflix as it tries to add more recent movies to a popular service that streams video over high-speed Internet connections.

Netflix will have exclusive U.S. rights to offer the first-run movies through its streaming service during the period normally reserved for premium TV networks such as HBO, Starz and Showtime. That period starts about seven months after movies leave theaters. The exclusivity does not extend to DVDs, a service Netflix is trying to phase out.

Investors applauded Netflix's coup, lifting the company's stock by $8.86, or nearly 12 percent, to $84.86 in afternoon trading.

Starz currently holds the rights to the Walt Disney Co.'s movies under a deal that expires in 2015. Beginning in 2016, Netflix will get the movies instead. Direct-to-video movies will come to Netflix sooner, as will older movies such as "Dumbo" and "Alice in Wonderland."

In Tuesday's news release, the Los-Gatos, Calif.-based Netflix didn't disclose how much it is paying Disney.

The Disney deal gives Netflix a measure of revenge against Starz, which had been demanding a price that Netflix refused to pay when their licensing agreement expired earlier this year. The Starz rights had included Disney movies, so losing that access had been seen as a blow to Netflix.

It's the first time that one of Hollywood's major studios has sold the coveted rights to Netflix Inc. instead of a premium TV network. DreamWorks Animation SKG Inc. licensed the pay-TV rights to its movies to Netflix last year under a deal that begins in 2013, but those movies don't wield the same box-office appeal as Disney, whose stable, which had already included Pixar Animation and Marvel, has now added Lucasfilm, the filmmaking empire behind the "Star Wars" franchise .

Federal antitrust regulators cleared Disney's $4 billion deal to buy Lucasfilm on Tuesday. Representatives for Disney and Lucasfilm did not immediately respond to requests for comment. When the deal was announced in October, no formal closing date was announced.

The purchase stoked "Star Wars" fans because along with the surprise announcement, Disney said it would make sequels to the six-part series with plans to release the first in the next trilogy, Episode 7, in 2015.

Lucasfilm founder George Lucas is to receive about half of the $4.05 billion purchase price in cash and half in newly issued Disney shares. He has said he'd donate much of it to charity.

The stock price of Liberty Media Corp., Starz' owner, dropped $7.08, or 6.4 percent, to $103.97 in afternoon trading Tuesday. Shares of Disney, which is based in Burbank, Calif., lost 3 cents to $49.26.

Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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