Starz Won't Renew Netflix Streaming Deal
UPDATED: "This decision is a result of our strategy to protect the premium nature of our brand by preserving the appropriate pricing and packaging of our exclusive and highly valuable content," Starz CEO Chris Albrecht says.
NEW YORK - Premium TV outfit Starz LLC said Thursday it has ended talks about a renewal of a streaming video deal with Netflix, which had been one of the most-discussed online content deals in the entertainment industry this year.
"Starz Entertainment has ended contract renewal negotiations with Netflix," Starz president and CEO Chris Albrecht said in a statement. "When the agreement expires on Feb. 28, 2012, Starz will cease to distribute its content on the Netflix streaming platform."
He added: "This decision is a result of our strategy to protect the premium nature of our brand by preserving the appropriate pricing and packaging of our exclusive and highly valuable content. With our current studio rights and growing original programming presence, the network is in an excellent position to evaluate new opportunities and expand its overall business."
Starz officials said they wouldn't comment on the issue further. Netflix, whose stock dropped more than 9 percent in after-hours, wasn't immediately available for comment. The streaming deal gave Netflix movies from output deals that Starz has with Walt Disney and Sony Corp.
A Wall Street observer said that the price of a contract renewal and relationships with other distributors were likely key factors in Starz's decision. Starz executives have said they were focusing on pricing and packaging issues in the renewal talks.
The news of Starz's decision to leave the negotiating table came on the day a much-discussed Netflix price increase hit.
Netflix CEO Reed Hastings earlier this year had signaled on Charlie Rose that he expects a potential new streaming deal in the $200 million-per-year range, up from what has been estimated to be around $30 million so far, while some analysts have talked of up to $300 million in the case of a renewal.
"We continue to look at the online video distribution market for opportunities to distribute our programming, while remaining mindful of historical relationships with our traditional distribution affiliates," Albrecht had said during an earnings conference call for Starz owner Liberty Media in late February. "We will approach new opportunities creatively yet prudently -- with an eye towards seeking agreements that specifically price and package our content in ways on par with that of our traditional distributors."
The low price of the Starz-Netflix deal has been widely criticized as undermining the value of content. Once Netflix's subscriber base reached 25 million, it was believed to be paying 10 cents a subscriber each month for Starz content - compared with the estimated $4 a sub that Starz gets for its premium movie service from Comcast, DirecTV and other TV distributors, according to BTIG analyst Richard Greenfield.
A fiver-year deal that Netflix struck with Epix last year, valued at an estimated $200 million per year, has created a key problem for the streaming video provider, a studio executive who spoke on the condition of anonymity told The Hollywood Reporter earlier this year. “Everybody knows that Netflix doesn’t have enough money to do deals that value content at anything comparable to what they paid Epix,” the executive said. “That Epix deal was actually a big problem for them. Now Starz [wanted] a deal that’s worth 150 percent of what the Epix deal was worth.”