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Netflix Loses Appeal to End Relativity Distribution Deal

Streaming giant was seeking to overturn judge’s decision over lucrative licensing contract

Last Updated: June 2, 2016 @ 5:23 PM

Netflix lost an appeal to void their output deal with Relativity Studios on Thursday, TheWrap has learned.

The lucrative licensing agreement guarantees Ryan Kavanaugh‘s company millions of dollars to stream the studio’s films — and the battle over the longtime contract has been raging for months.

“District Court finds Netflix likelihood of success on merits of its appeal ‘exceedingly low,'” the court ruled.

Netflix’s legal strategy has been varied throughout the fight, which gained momentum when the studio emerged from bankruptcy earlier this year.

At first, the Reed Hastings-led company claimed Relativity had not fulfilled its obligation in delivering films on time for streaming, thus voiding the deal. U.S. Bankruptcy Court Judge Michael Wiles disagreed, citing the bankruptcy process as responsible for delays in film delivery.

Attorneys for Netflix then changed course, and asked Judge Wiles to force Relativity to honor its original release schedule — which would have resulted in titles like Kate Beckinsale‘s “The Disappointments Room” and Kristen Wiig‘s “Masterminds” to premiere on Netflix before they hit theaters.

Relativity successfully argued that this would be fatal to the financial health of both films, as each was pegged to make $200 million over their respective lifetimes.

The Netflix output deal is a necessary component of Relativity’s reorganization. The studio, which is now under new creative leadership in the form of producer Dana Brunetti, can use the guaranteed millions in licensing fees as collateral for loans and as operating cash.