Netflix Strengthens Hand in DreamWorks Partnership

Updated from 8:29 a.m. ET to reflect additional analyst comments and opening share prices.

NEW YORK ( TheStreet) -- Netflix ( NFLX) is teaming up with DreamWorks Animation ( DWA) to bring TV series and movies to the streaming video service, in a deal that strengthens the company's hand in winning original content and new subscribers.

DreamWorks Animation will create at least 300 hours of original Web-only movie and TV content, in a partnership that further underscores attempts by Netflix and its CEO Reed Hastings to take on the cable TV industry. Partnering with DreamWorks indicates Netflix will be taking a multi-faceted approach to its content library, as the company picks over Hollywood for the right formula to grow its subscriber base of nearly 30 million.

In the deal, Netflix will get exclusive rights to new shows from DreamWorks hit franchises such as Shrek, Madagascar and Kung Fu Panda and exclusive rights to movie releases from the Jeffrey Katzenberg-run company such as The Croods and Turbo, the companies said in a joint press release. In February, Netflix and DreamWorks cut a deal to have animated episodes of Turbo F.A.S.T run exclusively on the streaming network.

"This is an unprecedented commitment to original content in the internet television space," said Katzenberg, DreamWorks Animation CEO, in a statement.

Already, Netflix is turning to a burgeoning Hollywood power broker after signing a multi-year exclusive content agreement with Disney ( DIS) in December and embarking on a $100 million-plus commitment to create original shows such as House of Cards, Arrested Development and Hemlock Grove.

With DreamWorks Animation onboard, Netflix will significantly diversify the sources of its exclusive and original programming. Such partnerships also indicate the company may have an increasingly strong hand in negotiating content, after skipping out of a handful of non-exclusive relationships in recent years.

For instance, Netflix had a hole to fill in children's programming after it was unable to negotiate a renewal of its contract with Nickelodeon, a unit of cable TV giant Viacom ( VIAB).

"The content is expected to begin airing in 2014, and should, in part, help to offset the gap in Netflix's children's content schedule created when it decided not to renew its agreement for certain content from Viacom's Nickelodeon Network earlier this year," Michael Pachter, a Wedbush Securities analyst, wrote in a note to clients. Pachter, however, continues to question whether Netflix can make money from its push for original content.

Viacom took its Nickelodeon business to Netflix's primary competitor Amazon ( AMZN).

"This deal represents a major expansion of what's already a phenomenal relationship, allowing us to bring beloved DreamWorks characters to the 40 countries where Netflix operates and setting the stage for us to innovate together as we expand into new markets," Ted Sarandos, Netflix Chief Content Officer, said in a statement.

Sarandos and Netflix have often faced scrutiny when opting not to renew content deals, only to impress with new relationships such as Disney and DreamWorks.

The first DreamWorks created movie will hit Netflix in 2014.

For DreamWorks and its CEO Katzenberg, the Netflix partnership may be equally important to the company's growth and strategic positioning.

The company has been moving in the direction of more profitable serialized TV content from its traditional movies expertise, notes Michael Corty, a Morningstar analyst. DreamWorks acquisition of Classic Media, for instance brought in the intellectual property to build out TV shows that may soon run exclusively on Netflix.

Meanwhile, instead of brokering to have content run on cable channels or movie distributors, DreamWorks is moving in the direction of streaming services such as Netflix. The company also announced a content partnership with Amazon.

" We can see strategically that this deal could be a win for both parties," Corty, the Morningstar analyst, wrote.

Netflix shares were rising over 6% to $227.81 in Monday afternoon trading, while DreamWorks Animation shares gained over 4% to $23.78.

Financial terms for the partnership weren't disclosed.

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-- Written by Antoine Gara in New York