Starz, Netflix And How Industry Jealousies Strangle A Golden Goose

from the we'll-see dept

In a somewhat surprising move, Starz has decided to not renew its contract with Netflix. Many other TV channels and movie studios are sure to follow as their current contracts end. Even though Netflix is somewhat braced for this, Starz was one of the few providers willing to supply newer titles, thanks to its deals with Disney and Sony Pictures. Not only that, but Netflix’s licensing deal with Starz was somewhat of a coup with its bargain-basement price tag ($30 million) which helped it get its streaming service off the ground. While this loss will probably adversely affect Netflix in the short term, in the long term it may have more of an effect on Starz.

According to Starz CEO Chris Albrecht:

Starz Entertainment has ended contract renewal negotiations with Netflix. When the agreement expires on February 28, 2012, Starz will cease to distribute its content on the Netflix streaming platform. 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.

In between all the jargon, there’s a message: Netflix isn’t willing to pay us what we think our content is worth. Unfortunately for Starz, it may soon find out that Netflix was actually paying what the content was worth. In Starz’ opinion, it can go elsewhere and make more. More accurately, Starz just has to go somewhere else.

Despite the fact that Netflix has offered $300 million for continued access to Starz content, it wasn’t enough for those swimming upstream of the cable channel. In all likelihood, $300 million would have been plenty except for the uncomfortable fact that Netflix is beating cable television at its own game. Pressure from Liberty Media (which owns Starz and invests in Time Warner Cable) to create a new, higher priced tier for Starz very likely killed the deal:

[R]epresentatives for the cable network owned by John Malone’s Liberty Media were insistent that Netflix create a new “tier” for subscribers who wanted its movies at a higher price than the $7.99 it currently charges for online video. That would have put Netflix more in line with the pricing of cable and satellite companies, a step the video company apparently wasn’t willing to take.

“Starz could have taken a check from Netflix, but there would have been pushback from cable and satellite operators and its studio partners,” said analyst Tony Wible of Janney Montgomery Scott.

Unfortunately for Netflix and its customers, the content providers seem to think that they can reset the clock back to a “simpler” time by withholding new releases in order to drum up plastic disc sales or, in the case of Liberty Media, turning its content into a “premium” in an effort to shore up its flagging subscriber base.

This all points to an incredible level of arrogance on the part of the content providers. First off, they assume the public cares about release dates, exclusive licensing deals and PPV windows. I can assure you that the public could not give less of a shit about when, where and how the content providers release their movies and TV shows. Secondly, they do everything in their power to turn back the clock to captive audiences, tied to a single television and handcuffed to a single cable box.

The public just wants access to the content in its most convenient (to them) form. The game has changed (thanks to Netflix and others) and no one feels compelled to deal with one service only for their entertainment. Liberty Media may think it can set the price for its content to whatever dollar amount is best for it, but consumers have given no indication that they like sudden price increases. In fact, consumers are finding cable to be less and less essential thanks to services like Netflix, but rather than learn from the past, content providers seem to think that new media has to play by old media’s rules and consquently, swiftly ruin everything they touch.

These members of the entertainment industry also seem to forget the file-sharing elephant in the room. (Perhaps it’s because Industry-Vision™ corrective lenses render this animal as a “scapegoat.”) If this short-sighted pursuit of DVD sales and PPV income continues, they’re going to find customers fleeing to “content providers” who can give them what they want when they want it, all at a price the entertainment industry can’t afford. And instead of being able to collect “too little,” they’ll be collecting nothing at all.

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Companies: liberty media, netflix, starz

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Comments on “Starz, Netflix And How Industry Jealousies Strangle A Golden Goose”

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PopeHilarius (profile) says:

Who are the strategy analysts at these places? These seems like a shot aimed directly at their own feet.

I want to watch any show or movie ever made, whenever I want to, and wherever I want to. This is in no way an unreasonable desire- it’s been technologically feasible for half a decade. To satisfy my want for a particular show or movie, I’m willing to pay with money to Netflix (or by sitting through ads on Hulu) in exchange for convenient delivery. Or less preferably, pay with my time by hunting down unauthorized versions. And if I can’t pay with money and I don’t have time, then I just don’t watch it all.

Those are my three ways of consuming media, only one results in money going to producers. Not everyone has cut their cord yet, but I know my behavior is not unique.

Anonymous Coward says:

Hey Starz, listen up; I will never subscribe to cable TV or buy plastic discs without a HUGE discount, and if I can’t pay for your content through Netflix, I’ll gladly grab it for free from the Internet. Are there even any comparable *legal* alternatives? You’ve made your choice I guess, should be interesting to see who it plays out.

Netflix has plans to license and produce their own content and I think they’ve been kind of slow to make it happen for fear of scaring the other guys away. It’ll also be interesting to see if this decision will speed up Netflix’s acquisition plans.

Aside; Tim, your writing continues to improve, keep it up!

Jeffhole (profile) says:


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.

I pay for Netflix. I’m going to keep paying for Netflix. I like pausing a movie on my TV and continuing to watch it on my phone whilst I drop a deuce.

Everything Netflix used to get from Starz that I wanted to watch or will want to watch will probably be obtained via torrents (I can do that on my phone, too), now. Going out of my way to exprerience their content isn’t necessary. So…in an effort to preserve their brand and the value of some other shit, they essentially just lost my business. What?

Anonymous Coward says:

Re: K...

Exactly. The best part is, I’m sure only the most die-hard movie and tv people could tell you what content came from Starz anyway. I’m not sure what “brand” they are hoping to protect here.

They sure are working to remove the “highly valuable” part of their content by making it extra “exclusive” too.

Lucas Shaw (profile) says:

Re: Re: Re: K...

Sci-Fi started to lose me when they killed Atlantis. Then it turned into SyFy. SyFy is nothing but crap movies, “reality” shows, and wrestling. When SGU and Caprica were killed prematurely, I was lost completely. I watch everything I want to of SyFy’s content streaming for free or on Netflix. Their efforts to rebrand themselves was a total failure. Starz is repeating the same failure minus the name change.

Anonymous Coward says:

You know, I’m good with this. I don’t use Netflix. In fact, I no longer have a tv.

One day I got to thinking about cutting expenses and looking around it dawned on me that I wasn’t getting the entertainment value I expected from pay for view.

It was a noise maker for background noise. There were not but maybe two or three shows tops per month I would look forward to. The rest of the time, with all those channels there was nothing worth watching.

I have no interest in reality shows that are anything but reality. I have no interest in soaps. Humor shows are geared to the lowest common denomination and an insult to intelligence. It’s really gotten bad when you have to have canned laughter to tell you where the punch line is. Don’t care for sports. No one needs to be filled in on the rerun practice where over 1/2 your paid for view time is filled with repeats.

In a nut shell, it wasn’t worth the money then. Crap that’s been near 10 years ago I cut the cord.

I did for a while rent movies but they too got expensive over time. Priced themselves right out of the market for me.

I have caps recently put in place by my provider. So watching movies streamed over the net is out.

One thing is for sure, I’m not going back to tv and I won’t be renting movies on the disk.

Most of my decisions were economically driven with a few exceptions.

Keroberos (profile) says:

It Almost Looks Like They Want Us to Pirate Their Content

#Hi ho, hi ho, it’s off to bit torrent we go.#

I mean seriously, I already dropped my Netflix down to streaming only after the price hike. Now they’re gonna start losing streaming content, I’ll just cancel my account altogether and get my content elsewhere.

$300 million wasn’t enough so now they’ll get $0? In what business school do they teach that as a sound business practice? Why do these media companies believe they can charge customers more to get what they already had?

out_of_the_blue says:

"all at a price the entertainment industry can't afford"

What’s this? Some slight glimmer that producing content COSTS and has possible LOSSES? — Is this the same writer who last week scoffed “Costs? Really?” — Have you wised up to practical economics or just find it convenient here to taunt that the industry will lose money?

What happened that overturned:
“Saying You Can?t Compete With Free Is Saying You Can?t Compete Period”?
Because you’ve just undercut Mike…

Capitalist Lion Tamer (profile) says:

Re: "all at a price the entertainment industry can't afford"

What’s this? Some slight glimmer that producing content COSTS and has possible LOSSES? — Is this the same writer who last week scoffed “Costs? Really?” — Have you wised up to practical economics or just find it convenient here to taunt that the industry will lose money?

I’m having a hard time following your argument here and a lot of that is due to cherry-picking. But… let’s go ahead and attempt to have a discussion.

Producing content carries costs. Agreed.
Piracy does not create more costs. Piracy may affect the content creator’s chances to recoup their costs. But! Piracy does not COST content creators a single dime. File-sharing does not create additional costs for the creators. A million people downloading a million files does NOT create additional costs for the producers. (I can keep restating the same thing, but for the sake of brevity [and redundancy], I won’t.)

You’re still trying to argue your original argument. I never stated anything about the CREATION of content being “cost-free.”

(An aside: I never miss a chance to taunt an industry that will lose money, especially when the industry insists on shooting itself in the foot/face/vital organs with each successive move. I don’t need to rearrange what I’ve said before to make this point.)

What happened that overturned:
“Saying You Can?t Compete With Free Is Saying You Can?t Compete Period”?
Because you’ve just undercut Mike…

Netflix competes (very successfully) with free because their service is actually simpler than the free alternative. This is why they’re doing well. A low price combined with tons of convenience and options.

Starz was competing with free, but thanks to meddling from its owners, will now be trying to compete with free by removing its content from a heavily-used (and successful) service and placing it in the very same hands that managed to fuck up a potential cash cow (read: Hulu, which was also doing well competing with free) with additional constraints as to when and how (and for how long) people could stream their content.

The industry continues to undercut itself. It could have competed with free but it got greedy. $300 million (20% of Starz’ yearly income) still isn’t enough.

Jay (profile) says:

Re: Re: "all at a price the entertainment industry can't afford"

This is the same problem with EA pulling away from Steam, believing their service can compete with it. Not only does the Origin system have more DRM and a soul binding TOS agreement, but it cuts out the people that have invested time into Steam. All your friends you want to play with? Get them on Origin. All the battles? Just Origin with no link up to Steam at all.

Steam is proven. Origin is a new comer that doesn’t play nice. If anything, I see the pirating of EA games making this a fiasco.

PaulT (profile) says:

Re: "all at a price the entertainment industry can't afford"

“Some slight glimmer that producing content COSTS and has possible LOSSES?”

I’ll not repeat what CLT has said already, but erm, yeah it does. That’s why being able to recoup said costs is so important. Unless I’ve misunderstood something, Netflix were offering $300 million for said content, and they are currently the number 1 platform for accessing said content online.

Explain to me again how ditching them is a good move for the content producers, because I’m not getting it.

taoareyou (profile) says:

No effect on me

I already have Starz on demand as part of my HBO package. But if Netflix doesn’t start getting a LOT better streaming selection (I too dropped the DVD side as they wished) I’m going to have to drop them altogether. Between Hulu, Crackle and the fact that I can watch full episodes of my favorite shows on SyFy and History Channel, there is less and less of an incentive to keep paying for Netflix.

Is it too early to say R.I.P. ?

brian says:

very short sided on Starz part

I tend to think this will hurt Starz more than Netflix, if it hurts Netflix at all… From the way the news about this read it seems that Starz wants to be something its not, HBO… Starz generally doesn’t cost extra when adding ‘premium’ channels to the cable/satellite programming. It just seems to be bundled in for ‘free’ or hidden in your monthly bill somewhere for the tier you purchase.

As for programming Starz doesn’t have to much in the way of original content except say Spartacus. So as Netflix starts expanding into original programming Starz will lose out there. All the other programming is generally on HBO or Showtime first and are running the same movies so paying for Starz again just isn’t worth it…

In the long run though I tend to think Starz needs Netflix, not the other way around.

Anonymous Coward says:

Young puppies hear me now!
Buy a terabyte drive every month and copy every rented movie you ever see and you shall never have to “buy” a rented movie ever again or pay to much for streaming those things.

For live action young puppies build your own autonomous blimps and fly them overhead of stadiums and start prodcasting those funny games to the world once they find thy stream they shou be free.

Anonymous Coward says:

bonus denied

Unrelated but it also seems that more and more providors are removing bonus features (whilst keeping in 435435 previews of other movies…) in rentals telling you that you need to purchace the DVD to get them. So what they are telling me is hey if you really want the bonus features then pirate the movie, because we believe so strongly in our product that you will rip the rental community off.

Anonymous Coward says:

I hope they either lose more of their studios or they raise the rates so high they have customers drop them.
best news i have heard in a long time.i hope to see more customers come back to my friend’s store as he struggles to get a few more years life out of his business.

Netflix keep on raising your rates and losing studios !!!!
Awesome News !!!

PaulT (profile) says:

Re: Re:

I love this attitude. “Hey, my friend decided to open a store in a dying industry so I hope a company that’s announced a service in over 35 countries fails! All those Canadians and Latin Americans will flock to my friends store!”. You even admit he’s not going to last out the decade even with increased business. He’s failed already.

There’s ways to compete with Netflix, so I’m sorry your friends hasn’t though about them. Killing an international company won’t bring them to his store, they’re far more likely to resort to Redbox or torrents.

LiveWithout says:

I will live with out it.

I don’t care if they want to overprice the market like they want to do. Netflix delivers a great product and with STARZ pulling out, I will learn to do with out and when it is released, head to the nearext redbox. This is the problem with business today, greedy, greedy, and more greedy. NETFLIX is trying to give the public the deal. I will live without it. No sweat off my back

Killer_Tofu (profile) says:

Netflix recognizes piracy

These members of the entertainment industry also seem to forget the file-sharing elephant in the room.

I recently canceled Netflix (because of the price hike and how they were disingenuous about it saying it was good for us). They ask for a small survey when you cancel and right there prominently on the list of reasons you are canceling is “because I intend to download via torrent”. Netflix lists it point blank as an option for why, and where you intend to get your entertainment now.

I would be rather interested to see how many of those canceling select that they intend to download / torrent shows from there on out.

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