Today: Netflix (NFLX) inks a groundbreaking deal to stream Disney movies, sending its stock price flying higher. Also: Yahoo (YHOO) continues to use acquisitions to build a mobile team, Wall Street trades flat.

Netflix challenges pay-TV giants with Disney deal

After years of trying, video-on-demand company Netflix managed to sign a deal with a major movie studio for exclusive first-run broadcast rights to its films after they leave theaters, agreeing with Disney on a three-year contract that elevates the Los Gatos company to direct competition with HBO and Showtime.

Netflix did not announce how much it will pay Disney for the rights, which begins with films released to theaters in 2016, but the Los Angeles Times reported that it could be worth more than $300 million a year. It is the first time a major studio has agreed to such a deal with Netflix instead of a standard subscription-TV channel that contracts with cable and satellite providers, breaking a wall Netflix has been ramming its head against since it began streaming video.

"It was a long slog, but ultimately we displayed enough sustainability that Netflix became a real and viable option for the pay-TV window," Netflix Chief Content Officer Ted Sarandos told Bloomberg News.

Netflix has signed similar contracts with smaller studios, including DreamWorks Animation and the Weinstein Company, but the Disney deal gives Netflix exclusive access to a higher caliber of popular movies -- Disney owns the rights to movies from Emeryville's Pixar and Marvel's line of popular comic-book characters. In addition, Netflix will be able to offer classic Disney titles, beefing up its offering for children, and will begin to receive Disney's direct-to-video offerings next year.

"It's a bold leap forward for Internet television and we are incredibly pleased and proud this iconic family brand is teaming with Netflix to make it happen," Sarandos said in Tuesday's announcement.

The Netflix deal does not currently include movies from San Francisco-based LucasFilms', the "Star Wars" creator that was recently purchased by Disney in a $4 billion deal that is expected to bring new sequels to theaters in time to possibly give Netflix exclusive first-run rights, a Netflix spokesman told Bloomberg. Since the LucasFilms deal has not yet closed, that could change in the future.

Netflix even settled a score with the deal, taking the rights from former partner Starz. Starz contracted with Netflix on its streaming-video service for years, offering it Disney movies and other content until the pay-TV channel declined to renew their contract in February. Netflix may not be done swiping deals from Starz, either: Sarandos told Bloomberg that Netflix will bid aggressively for Sony films when that studio's deal with Starz ends.

Starz said in a statement that it is focusing its attention and cash more on exclusive content than deals such as these, but Netflix may have the pay-TV network beat there as well, as it is producing new episodes of cult favorite "Arrested Development" as well as the Kevin Spacey-helmed "House of Cards," both of which should reach subscribers in 2013.

With anticipated original programming and these types of exclusive deals, Netflix manages to separate itself from rival Internet streaming-video providers and officially enter the realm of traditional heavyweights such as HBO, experts said.

"An exclusive deal with Disney differentiates the Netflix content from Hulu Plus and Amazon Instant Video," Barclays Capital analyst Anthony DiClemente told Reuters.

Investors immediately jumped on Netflix stock after the deal was announced, pushing it higher in yet another spike for the company that has had a yo-yoing share price for the past two years. Netflix stock closed at $86.64, its highest level since April, after a 14 percent boost.

Apple pulls Wall Street lower, but Hewlett-Packard and Intel rise

Netflix's afternoon rise didn't help the major U.S. stock indexes, which all fell between 0.1 percent and 0.2 percent, nor the SV150 index of Silicon Valley's largest tech companies, which declined 0.3 percent on the day.

A fall in Apple's (AAPL) stock price, which has a weighty effect on the Nasdaq composite index and Standard & Poor's 500, as well as the SV150, may have contributed to Tuesday's weakness. The Cupertino tech giant -- the most valuable company in the world -- fell 1.8 percent despite analyst reports that noted decreased wait times for the iPhone 5 and increased projections for holiday iPad sales.

Two Silicon Valley stocks that have suffered of late turned around in Tuesday trading, however. Hewlett-Packard (HPQ), which continues to deal with the Autonomy controversy, rose 5.1 percent one day after the top PC manufacturer's nearest U.S. rival, Dell, had a similar bump. Intel (INTC), the world's top chipmaker, also rebounded from recent weakness in the PC sector, rising 2.2 percent as it announced it would sell debt to finance a stock buyback. Intel's Silicon Valley rival, Advanced Micro Devices, ended its run of big increases, however, dipping 4.2 percent.

Oakland streaming-radio company Pandora Media took a big hit after-hours following the release of its earnings report. While the company beat projections for earnings in its most recently completed quarter, projections for the its full-year performance came in well below analysts' expectations. After rising 5.5 percent in regular trading, Pandora plunged more than 20 percent in after-hours trading.

Yahoo's mobile-acquisition run, stock rise continue

Yahoo's strong run on Wall Street continued Tuesday, as the Sunnyvale Internet company rose 2 percent following its second acquisition under CEO Marissa Mayer.

Yahoo confirmed the purchase of San Francisco videoconferencing startup OnTheAir, which provides the company with five more workers who will be focused on mobile, as Mayer said was the company's top priority in an October conference call. The move follows last month's acquisition of Stamped, a New York mobile startup, that gave Yahoo leadership for its mobile efforts.

Yahoo shares, which have been trading at a two-year high, increased 2.1 percent on the day to $18.93, matching the highest closing price since 2010, set last week.

Silicon Valley tech stocks

Up: Netflix, HP, Palo Alto Networks, Nvidia, Intel, Yahoo, Applied Materials, Adobe (ADBE), Facebook, Zynga, Juniper, Cisco (CSCO), Intuit (INTU), Symantec, Oracle

Down: AMD, Tesla, Apple, Jive, LinkedIn, Yelp, Workday, SunPower (SPWRA), Splunk, Electronic Arts (ERTS), Google (GOOG), Gilead, VMware, NetApp

The tech-heavy Nasdaq composite index: Down 5.51, or 0.18 percent, to 2,996.69

The blue chip Dow Jones industrial average: Down 13.82, or 0.11 percent, to 12,951.78

And the widely watched Standard & Poor's 500 index: Down 2.41, or 0.17 percent, to 1,407.05

Check in weekday afternoons for the 60-Second Business Break, a summary of news from Mercury News staff writers, The Associated Press, Bloomberg News and other wire services. Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/mercbizbreak.