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Harvey Weinstein on Netflix: Buy Icahn, Sell Wall Street

NEW YORK (TheStreet) -- Academy Award winning producer Harvey Weinstein is ready to buy Carl Icahn and sell Wall Street when it comes to understanding the prospects of Netflix (NFLX).

After the streaming movie pioneer pulled what Weinstein called an industry "game changer" by agreeing to a multi-year content exclusivity agreement with Disney (DIS), the co-founder of Miramax Films and current co-chair of The Weinstein Company is ready call winners and losers on Wall Street when it comes to assessing Netflix.

In a Wednesday panel discussion at the UBS Global Media Conference with Netflix Chief Content Officer Ted Sarandos, Weinstein was ready to forgive Carl Icahn on previous losing media industry bets after the activist investor took a near a 10% stake in Netflix this fall, which has gained sharply with the company's improving prospects.

Weinstein appeared less forgiving to Wall Street investors, who he said badly misread Netflix's potential earlier in the year.

Icahn won praise from Weinstein for backing Netflix ahead of the company's announcement of a major content agreement with Disney. In contrast, Weinstein indicated selloffs in Netflix shares when the company didn't renew exclusive content agreements with Liberty Media (LMCA)-controlled Starz and Epix reflected the short-term thinking of some investors.

"That Starz deal, when you didn't renew [it], you paid a price," said Weinstein to Netflix CCO Sarandos, in a discussion the famed producer led. "With Disney, does Wall Street realize you became Starz plus Netflix?" added Weinstein of Tuesday's exclusivity agreement.

CCO Sarandos said Netflix's hesitance to cut new deals with Starz and Epix had to do with a lack of exclusivity or weak demand for their content.

In the case of Disney, Sarandos said at the conference it marks a shift in Netflix's business model to focus spending on exclusive content.

In fact, Sarandos indicated that Netflix could eventually make self-produced original content, when asked by Weinstein. Currently, Netflix is the only distributor of Arrested Development Season 4 and it is set to release House of Cards, an exclusive series, in Feb. 2013.

Weinstein was skeptical of Wall Street short-termism in over reading Netflix's decision not to continue with Starz; however, he was happy to give Icahn a pass on previous media industry missteps, such as exiting Lions Gate Films (LGF) just before the company's stock surged on the release of Hunger Games earlier in 2012.

"We used to say Carl Icahn is the lucky charm," Weinstein said of the activist's Lions Gate takeover flub. However, he gave praise to Icahn for getting into Netflix just ahead of the company's savvy Disney deal. CCO Sarandos declined to talk about whether Icahn had any role in Tuesday's Disney deal but said, "this relationship is very new, but it's been very positive."

The agreement makes Netflix the exclusive subscription television service for first-run Disney Studios' animated and live-action feature films in the U.S.

Beginning with its 2016 theatrically released feature films, all new Disney, Walt Disney Animation Studios, Pixar Animation Studios, Marvel Studios and Disney nature titles will be available for Netflix members to watch on multiple platforms, including television, tablets, computers and mobile phones.

New Disney direct-to-digital releases will be made available on Netflix starting next year.

Disney and Netflix have also reached an agreement on a multi-year catalog deal that brings Disney favorites like "Dumbo," "Pocahontas" and "Alice in Wonderland" to Netflix's U.S. subscribers.

On Wednesday, CCO Sarandos said he expects the deal will encompass Disney's Star Wars content, once the company completes its late October acquisition of George Lucas-owned Lucasfilm.

In a note to clients, Barclays analyst Anthony DiClemente said Netflix's exclusivity with Disney differentiates the service from competitors Hulu Plus and Amazon (AMZN) Prime.

The financial terms of the deal weren't disclosed; however, Janney Montgomery Scott analyst Tony Wible estimated Netflix paid over $350 million a year for Disney's content and indicated the company may need to raise capital to fund the agreement.

At the UBS conference on Tuesday, CBS (CBS) chief executive Leslie Moonves praised the network's non-exclusive licensing deal with Netflix and said he would likely exercise an option to extend a two-year Feb. 2011 deal. Moonves also indicated he's planning to deepen CBS's content relationship with Netflix in coming years, as the broadcast industry evolves with streaming, video on demand and cable providers.

-- Written by Antoine Gara in New York

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