Netflix Tries to Even the Score With Disney

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Last week’s announcement by Walt Disney Co. (NYSE: DIS) that it would end its distribution agreement with Netflix Inc. (NASDAQ: NFLX) for Disney- and Pixar-branded movies set the streaming video firm’s share price back about 5%. This morning Netflix struck back, signing Shonda Rhimes, creator of two of ABC TV’s most successful shows, to a multiyear contract and ending Ms. Rhimes 15-year stint with the Disney-owned network.

Rhimes is the creator of “Grey’s Anatomy,” “Scandal” and “How to Get Away With Murder.” Her contract with Disney expires next June, but Disney agreed to allow her to exit early, although she will remain involved with the ABC shows, including a planned spin-off of “Grey’s Anatomy” and another TGIT (Thank God It’s Thursday) series, “For the People,” set to debut in midseason.

Rhimes will move her production company, Shondaland, to Netflix, but operations are expected to remain at the company’s current studio, Sunset Gower Studios.

Netflix has splashed out some serious cash in the past week, announcing a deal with Joel and Ethan Coen to make a Western series, a news show starring David Letterman and the acquisition of comic book publisher Millarworld with the intention of creating new franchises from its characters.

And Netflix is not alone. Amazon.com Inc. (NASDAQ: AMZN) announced a development deal last week with Robert Kirkman, the creative force behind AMC’s wildly popular “The Walking Dead” series.

The Rhimes deal with Disney paid more than $10 million a year, according to The Wall Street Journal, not including her profit points from reruns and international sales.

Financial details of Netflix’s recent spending spree have not been revealed, but investors are a little wary. The company’s stock traded down 0.6% in Monday’s premarket, at $170.35 in a 52-week range of $93.26 to $191.50. The 12-month consensus price target on the stock is $185.56.

Disney shares traded up about the same amount to $102.59, in a 52-week range of $90.32 to $116.10. The stock’s consensus price target is $117.11.