So much for Starz movies on Netflix. Negotiations between the two companies have fallen through, and Starz has announced that it’ll stop providing movies for Netflix’s streaming catalog on February 28, 2012.
Netflix had paid an estimated $30 million for Starz content in 2008, which in hindsight was a steal. Three years ago, Netflix had just started appearing on set-top boxes like the Xbox 360, and Hulu was still getting off the ground. To renew the deal with Starz, Netflix had earmarked $250 million, according to the AP.
UPDATE: Here’s a story by the L.A. Times’ Ben Fritz that says Netflix offered $300 million, but Starz wanted tiered pricing, which would charge subscribers a premium to view its content. Interesting, but not surprising, that Netflix didn’t want to go that route.
Starz said it wants to “protect the premium nature of our brand by preserving the appropriate pricing and packaging of our exclusive and highly valuable content.” Media companies have become nervous about Netflix’s grip on the streaming video business, and are hoping to drive up prices by shopping their content around.
This looks like a lose-lose-lose to me. Netflix users obviously lose a whole bunch of content. With less content, Netflix will have a harder time killing the DVD, which according to some pundits was the company’s true motivation for raising prices. Starz, meanwhile, just left up to $300 million on the table, with no guarantee that it’ll make that money back without Netflix.
Still, Netflix CEO Reed Hastings sees the up side: Starz content only accounted for 8 percent of Instant Watch viewing, and could account for 5 percent to 6 percent by year-end, as Netflix licenses more content. “We are confident we can take the money we had earmarked for Starz renewal next year, and spend it with other content providers to maintain or even improve the Netflix experience.”
That promise, of course, assumes other content providers won’t think like Starz and try to take their content elsewhere.