Saturday, September 3, 2011

Because Hollywood Wants You To BitTorrent Their Stuff More: Starz Ends Deal With Netflix

Javi here. Sadly, today's news post is an unfortunate one.  Starz has decided not to renew their deal with Netflix to distribute their movies through their Watch Instant service.  According to Variety, with the contract not being renewed, Netflix will be losing thousands of very popular movies February 2012. Statements from Netflix and Starz follow the jump.

The Starz press release from MarketWatch states:

"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."

Here's Netflix CEO Reed Hastings' response to Business Insider about the situation:

Starz has been a great content partner for many years and we are thankful for their support. While we regret their decision to let our agreement lapse next February, we are grateful to Chris and his team for the early notice of their decision, which will give us time to license other content before Starz expires.    

While Starz was a huge part of viewing on Netflix several years ago because it was some of the only mainstream content we offered, over the years we spent more and more licensing great TV shows from all four broadcast networks and many cable networks, and we have licensed 1st run movies from Relativity, MGM, Paramount, Lionsgate and others. 

Because we’ve licensed so much other great content,  Starz content is now down to about 8% of domestic Netflix subscribers’ viewing.  As we add more content in Q4, we expect Starz content to naturally drift down to 5-6% of domestic viewing in Q1. 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.

We have tremendous respect for the Starz creative team, and we look forward to someday licensing some of their original or licensed content. 

          Read more:

After reading Starz's release,  obviously they believe they're HBO with their "premium" content, which is not even close to the same caliber.  Regardless, from a business point of view, I can see why they want to not distribute their movies so cheaply.  If this were six years ago, I could see why they would think pulling out of Netflix could lure more people into subscribing to their channel.  But with things such as high unemployment rates, bad job reports, and people cutting back on their budget, do they really believe this is the best option?

Netflix's response on the other hand, just seems like an overly optimistic view.  After the price increase brought on bad press, the company can't handle more negative events like this.  It didn't seem to help much considering that their shares went down 8% in the after market trading Thursday after this announcement came out. 

To me, as a Netflix consumer and overall advocate of legally acquiring my media online, this is a very frustrating situation. Between Sony pulling out earlier this year, and now Starz, I'm pretty concerned about what the future of Netflix Watch Instantly will be. I know that Hastings' said that the Starz library was not used as much as the other content, but if you look at websites where they track which movies are being queued, such as the iPhone app InstantWatcher, you'll see that most of the popular movies are the ones that are offered with Starz.

I understand why it is important for each individual entity such as studios or Netflix to keep profits up for themselves. I've found that it has become a pattern where the companies wants to keep the most money to themselves and by doing so, they screw the consumers. Let's face it, ever since the Internet, Napster and all of those downloading services, pretty much anything and everything can be obtained for free.  This is the reality of the situation. What companies have to realize is that to an extent, they are at our mercy, and it's up to them to deliver a viable way of consuming media, especially digitally, in which consumers feel like they are getting their money's worth.

I hate to sound like a broken record, but iTunes is the prime example of getting people to pay for media they could otherwise download.  I have a feeling that Netflix, or in a very distant second Hulu, could have provided the same service for the movie industry.  But there's a few things that I've seen studios do that I find alarming and makes me feel that they are out of touch with how people consume media. Things like delaying the availability of TV shows online after their air time just feels silly. Then, there's the ridiculous window of 28 days that services like Netflix have to abide by.  I'm sure that worked out so great considering that DVD sales have gone up so much since they implemented that rule (they haven't).  But studios or in this case, Starz, not working out a deal because of the value of their content, seems to be a very short-sighted approach to handling a very fickle audience. In a very idealized world, there would be a Netflix-like service where you could do streaming and would not have to worry about expiring titles.

Studios and distributors don't seem to understand that people truly are CHOOSING to pay money, why make that harder on us?

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