Netflix is to air original television programming from Dreamworks Animation in a deal described as a major coup for both companies.
Financial details were not disclosed but Netflix said the multi-year agreement is its biggest deal for original first-run content. It includes more than 300 hours of new TV episodes in a deal starting in 2014.
The transaction helps Netflix compete with pay TV channels such as HBO and Showtime, and it gives Dreamworks a potentially lucrative outlet for its shows as it tries to shed its reliance on two or three big-budget movies each year.
Netflix doubled down on original children's programming, hoping to strengthen its push to become a family entertainment brand. The new content should ease some of the pain of losing a range of children's shows from Viacom's Nickelodeon network, including future episodes of Dora The Explorer, which Amazon snapped up for its streaming service in early June.
"This is arguably a groundbreaking deal," said Tuna Amobi, a Standard & Poor's equity analyst who covers both Netflix and DreamWorks Animation.
While concerns remain about how much the deal will cost Netflix in the end, the company said it is a global deal that will allow it to debut the original series in the 40 countries where Netflix operates. That could help spread the costs over more territories and more subscribers if Netflix continues to grow overseas.
"The big question is if this is going to be an international catalyst in terms of subscriber growth," Mr Amobi said.
Investors hailed the deal as a win-win. Netflix shares rose 7.3%, while DreamWorks was up 4%.
The deal suggests DreamWorks will significantly ramp up its production of TV shows. Currently, it only produces Dragons: Riders Of Berk for Cartoon Network, which completed a run of 20 episodes at 23 minutes each - less than eight hours of content in all - in March.
A second season of Dragons is set for release in the autumn, and Netflix had already contracted with DreamWorks for a series based on its upcoming film Turbo. But the deal suggests that several new series will have to debut each year to fulfil the industry standard deal length of five to seven years.
New series will be based on characters either from future film hits, past franchises like Shrek, or even older hits, including the hundreds of characters like Casper The Friendly Ghost, which DreamWorks acquired when it bought Classic Media last July.
The new DreamWorks shows are not likely to tread on ground already covered under its existing TV shows, according to DreamWorks spokeswoman Allison Rawlings.
DreamWorks already licenses characters from Kung Fu Panda, Madagascar and Monsters vs. Aliens to Viacom's Nickelodeon, which has been producing original animated TV shows based on those movies since 2008.
The multi-year agreement tops the undisclosed amount Netflix spent on House Of Cards, the political drama starring Kevin Spacey that debuted to rave reviews on Netflix in February.
Netflix has been adding original programming to its roster of older movies and TV show reruns, and is set to launch the Jenji Kohan-created Orange Is the New Black next month. The company has said that for the next several years, it will contain original content spending to within 10% of its 2 billion dollars in annual content costs.
Netflix's increased focus on children's programming is seen as a departure from the tactics of traditional premium pay TV channels such as HBO, Starz and Showtime, whose original shows tend to be tailored to adults. It also ramps up the competition for children viewers with Amazon, which said last month it will produce three new original children's shows for members of its Amazon Prime subscription plan.
Netflix has said it had 29.2 million streaming video subscribers in the US and 7.1 million internationally at the end of March. Those figures are up 5.8 million and 4.1 million respectively from a year ago.
In December, Netflix announced it will offer Disney movies, starting with films released in 2016. It declined to make a similar deal for the rights to Sony movies starting in 2016, which was kept by Starz.