Netflix and Starz Deal is Dead - Netflix Will Lose Starz Content

The same day that Netflix’s 60% price hike took effect Netflix lost Starz. “Starz to pull content from Netflix as talks fail” reports that the two companies were in talks to renew their current deal. The deal expires February 28.

Starz not only carries content from its channel, but also “exclusive rights to first-run Sony Corp and Walt Disney Co movies”. The bad news sent Netflix shares down in after-hours trading. The article states that a “source familiar with the negotiations” reported that Netflix offered $200 to $300 million and Starz was not pleased with the amount.   

Starz’ statement concerning the breakup:

“…a result of our strategy to protect the premium nature of our brand by preserving the appropriate pricing and packaging”

Starz was one of the first media companies to partner with Netflix. Their initial deal was remarkable: $25 million a year for Starz content, well below the price paid by the cable industry. The deal gave Netflix valuable content to attract subscribers and, as people were cutting the cable cord, turned the cable industry against Netflix. I previously wrote "Netflix vs.Cable/Media Industry", inspired by a NYtimes.com article in which Time Warner CEO Jeffrey Bewkes blatantly insulted and underestimated Netflix. His complaint was that the Starz - Netflix deal was unfair.

Netflix grew immensely and Starz began to realize they still had to compete with Netflix for subscribers. Netflix announced they would produce exclusive content and Starz decided to delay show premieres from Netflix.

Netflix got more competitors with more available cash able to outbid Netflix for content. There is a post about the concern that Netflix will not be able to renew deals because competition has inspired media companies to value their content better. When Starz and Netflix first partnered up, content streaming was not considered an industry. The cable industry thought content streaming wouldn’t last and, at that time, probably inspired Starz to offer a low price for their content. Now, Starz is smarter - they know streaming is a substantial industry and content is gold.