Netflix still wants out of its licensing deal with Relativity Media. The streaming video company said today it will appeal U.S. Bankruptcy Court Judge Michael Wiles’ ruling for the multi-year agreement to remain in force with Relativity out of Chapter 11 protection.
The case will go to the U.S. District Court in New York.
Netflix told the Bankruptcy Court that it should be let out of the pact because Relativity hadn’t demonstrated it would have the financial or production resources to fulfill its commitment to deliver an undisclosed number of movies each year.
“Since we have to pay tens or hundreds of millions of dollars for pictures, we have to reserve and allocate” resources, Netflix’s attorney told the court. “If we expect from one source, we can’t commit to another.”
But Wiles concluded — in his February 8 “Findings of Fact, Conclusions of Law And Order” confirming Relativity’s bankruptcy exit — that “there has been no default under such agreements.” What’s more, the studio had “provided adequate assurance of future performance.”
He told Netflix lawyers at a February 2 hearing that “so long as they have the movies, they have to give them to you or else they pay a penalty. If they only have 12 or 15 – whatever the minimum is – they have to give them to you or else they pay a penalty….It seems straightforward to me.”
Wiles added that Relativity’s agreement to turn the studio over to actor Kevin Spacey — who stars in Netflix’s series House Of Cards — showed that “they’re lining up people you have working relationships with and gone out of their way to offer you what they can.”
The ruling was important. Netflix has paid Relativity $283 million since 2010 and the financial models CEO Ryan Kavanaugh built to persuade investors to back the studio assumed that it would continue to collect licensing fees from Netflix.
If the judge had allowed Netflix to back out, then investors might have deemed Relativity to be too risky a bet.